GMO’s Managing Director, Graham O’Hehir found the below article, written by Peter Williams, founder of Australian Advisory Boards Institute very interesting. It discusses shopping centre giant, Westfield and the future of the retail industry.
The New Direction of Westfield Corporation and a Lesson for Buyers and Sellers of Businesses
When the news came out recently that Westfield Corporation founder Frank Lowy had sold his shopping centre empire for a massive $35 billion to French company Unibail-Rodamco, the internet was abuzz with what the deal meant for shopping centres and the future of retail, in general.
Although these are important aspects of the sale, what strikes me the most is what Frank Lowy is going to do now. As part of the deal, he will step down as chairman of the Westfield Corporation but still chair an advisory board for the new company.
It’s an incredibly smart move by both parties.
Buyers often want the seller’s help with the transition to reduce the risk and maximise the value of the business they just bought — the seller has a wealth of valuable information and experience that could be tapped. And yet, for the seller, the transition can often be quite difficult, changing from being in charge, to having no decision-making authority.
In this case, Frank Lowy will be able to assist on both sides of the table, sharing his years of large-scale commercial experience in the retail industry while still being an investor in the company to the tune of $1.5 billion. He will be uniquely motivated to ensure the success of the sale.
Unibail-Rodamco will benefit greatly not only from Lowy’s extensive know-how regarding retail but also from his strategic expertise around restructuring companies successfully for global consumption. And his advice will come with no legal or fiduciary responsibilities attached, as is the case with membership on a traditional board of directors.
As for Lowy, he will be able to give freely of his business wisdom and guide the new company in its decision making, still contributing but not being bound tightly by his former role as an executive. As a concerned investor, he will also be paying close attention to the details surrounding company financials and management.
It’s the best of both worlds for everyone.
It’s time the business world caught on to the great strategic benefits of an advisory board with an independent chairman. It’s my hope that more companies will follow in the footsteps of Frank Lowy and Unibail-Rodamco, making a good business deal even better with an advisory board as part of the payoff.
Peter Williams, founder of the Australian Advisory Boards Institute, is a board and governance specialist.