Those were the stakes. Now, a lot of outfits suddenly found themselves being bought by a mysterious Japanese entity named Dai Nippon, International. What were they going to do? At first of course everybody just assumed NDI was merely angling for a little greenmail. No such luck. After a couple of days went by and we hadn't returned anybody's phone call, they knew that wasn't it. Next, a few went looking for a white knight with more money than DNI (a tough assignment). Not surprisingly, however, most corporate managers very quickly decided to call a board meeting and ram through a poison pill.
I got more than a few phone calls at my downtown office from CEOs wanting to know if I could pitch in and help them stave off what looked like an unfriendly Japanese buy-up. I had to say, sorry fellows, I'm unavailable. But why not give it your best shot and try the old "pill"?
Most of them did. They had no option really.
Which suited me fine.
The time was late Friday--the afternoon was gorgeous, sunny and crisp-- and the place was Noda's office. Naturally he understood all about poison pills, so he knew the problem. What he wanted to hear was our solution.
"I'd like to try something that's never been done before. A different battle plan." I glanced out at the blue sky and wished I was already in St. Croix on holiday with Amy. "However, I think it's possibly just unconventional enough to fly."
"It has to be legal, Mr. Walton." Noda leaned back in his chair, waiting.
"It is. But in order to lay the groundwork, we'll first need to set up a string of dummy corporations."
"Any particular state?" He was listening closely now, his mind clicking away. I was never sure what the man was thinking, but I figured he'd probably seen it all before.
"That old standby Delaware should do fine, though you might want to consider going for some offshore tax-haven places, if only because the paperwork is minimal. In the Caribbean I'd recommend the Turks and Caicos Islands, maybe the Cayman Islands. Then there's Bermuda or the Bahamas or the Channel Islands. If you really want to get esoteric, why not Vanuatu--used to be the New Hebrides--in the South Pacific."
"I'm familiar with world geography, Mr. Walton." He was deadpan. A joke?
"Fair enough. These dummy corporations of course will have no assets."
"I understand." He smiled and ran his fingers through his silver hair, doubtless already miles ahead of me. "Absolutely no problem. Please proceed."
"While those corporations are being set up, you continue buying stock in whatever companies you need to control, making sure in all cases that you acquire just enough to deliberately trigger their poison-pill mechanism. We force them to issue their flip-over bonds. They can't stop the process, since it's always set up to be automatic after a certain percentage of stock has been acquired. Not even the boards of directors can revoke it."
"Yes, Mr. Walton. I'm aware of that." He didn't seem the slightest bit ruffled by my unorthodox opener.
"Well, let me elaborate. The reason we want to trigger their poison pill first is so that nobody can later come in as a white knight and save them. They're totally isolated. They'll have made themselves into sitting ducks."
"Very good." He leaned back. Was he really that far ahead of me?
"While that's happening, you 'sell' the stock acquired thus far to one of the dummy outfits we've set up, in return for debt paper. Which puts DNl at arm's length and untouchable. After that, you lend that dummy corporation the rest of the millions or billions necessary to acquire a controlling interest in the company, taking back as collateral more junk bonds at absurdly usurious rates. That makes it a financial leper, but you don't care: you're merely lending yourself the money. This paper corporation is all that can be touched when the acquired company's poison bonds flip over. So instead of being convertible into the stock of some cash-rich corporation, the way they were intended, those flip-bonds are going to give their holders a piece of some offshore phone booth with zero assets and enough debt to choke a horse. They're worthless paper. And you're in the clear."
He smiled. "Which means our program can proceed on schedule?"
"Dai Nippon will be totally insulated from their poison pills. Like the guy who sells his house and boat to his company and then lets it file Chapter 11 bankruptcy in order to protect his personal assets from creditors. Nobody can lay a glove on you."
"Mr. Walton"--he leaned back, a twinkle in his dark eyes--"that's exactly why I knew you were right for us. You have an intuitive grasp of tactics."
"If you do this, there're going to be a lot of unhappy, unemployed lawyers in this town."
"Most regrettable. Some of them might even have to go out and find productive work." He rose and shook my hand. "You've destroyed the prospect of years of legal roadblocks in a single stroke. It's elegant."
It was. Sun Tzu and Miyamoto Musashi would definitely have approved. But there still had to be more. An unexpected opening is not enough in itself; it needs an equally deft follow-up. Bushido, the Way of the Sword, teaches that you should first surprise your antagonist, and then you must confound him. Both the initial attack and the carry-through are crucial to success. Among other things, that meant Noda's mechanism for calling a board meeting of the companies he'd be acquiring had to be instantaneous, without the usual niceties.
"This setup should do the job, but only if it's used with finesse. Otherwise the whole system gets buried in paperwork."
"What do you mean?"
"You have to be fast, and flexible. Once you've taken ownership of a company, you've got to gain immediate control over its board of directors, in order to block any and all countermoves."
"I understand."
"Do you? I'm talking about the ability to call an executive session out of the blue. The _kesa_ stroke of the sword. The power to cut a CEO in half before he can blink. No time for consensus and the usual Japanese niceties."
He stood quietly, thinking. At last he spoke.
"In other words, I must be able to convene the board at a moment's notice. Is that the essence of what you are saying?"
"Nothing else is going to work."
"Very well. After we have a commanding stock position, we can institute the necessary changes."
"Good. Remember though, that's still merely half the battle. Besides being able to call board meetings, you need full authority to institute a shareholders' vote, which in this case will consist of nothing more than you signing your name."
"Perfectly reasonable."
"It is. But it also means you've got to be available to me at all times. Can I rely on that?"
He turned and strolled to the window, pensively. "That may not always be possible."
"Then you've got a potential problem."
He revolved back and studied me a second, finally taking the bait. "There is, of course, one very simple solution. I can merely assign you power of attorney, allowing you to act in my name if I cannot be reached."
"That would do it. But you'd be handing over a lot of authority."
"I envision no difficulty." He looked me over with the self- assurance of a tiger contemplating a haunch of beef. "I have every reason to believe you would always act in DNI's best interest, Mr. Walton."
It was possible he knew a few things I didn't. On the other hand, maybe Matsuo Noda had just overreached, taken too much for granted. Whichever it was, the maneuvering just completed had been one small step for Tam, and Matthew Walton. Should we ever need them, I'd just conned Matsuo Noda into giving me duplicates of the keys to his Kingdom. It was our protection and, in a way, my secret price for putting our heads into Dai Nippon's noose.
"Then it looks like we have everything we need to move forward." I nodded.
"Excellent."
Upon which I absented his office, safety net in place. The play was on.
Which brings us to Tam Richardson. If my approach to this new job was a little unconventional, what about the college prof who showed up in jeans as she readied to renovate corporate America? One thing, we suited each other. It was a tag team made in heaven. After I'd pried open the door to the companies DNI was buying, she was going to roll in, guns blazing, and shove everybody against the wall.
Let me add one important distinction, however. Whereas I may have been wary, even slightly skeptical, Tam was definitely the idealist. She was, by God, going to get this country moving again. America was once more going to lead, she declared, not follow. No defensive Fortress America claptrap. Hers would be nothing less than a full-scale assault, intended to win back and keep a solid manufacturing base here, toe-to- toe with the world.
Since no overall American program existed to rescue industries now being killed by foreign competition, she was going to do it herself, create a coordinated battle plan for our strategic sectors. Backed by Noda's Japanese billions, she was about to try and redeem this country's future, leading us back to number one. She also was quick to add she had no intention of merely copying Japan's famous management techniques. Japanese industry, she insisted, hadn't invented long-term planning, sound capital investment, dedication. What they did over there these days was what the U.S. used to do. The American work ethic was alive and well; it was just temporarily on the wrong side of the globe. She was about to bring it home again.