Monday, November 17, 2014

Now That's An Idea That Would Never Fly

 Former BB&T* CEO John Allison has written a book about, well, about his time at BB&T, during which it grew from $275 million in assets to $152 billion (profitably) and some lessons learned along the way.
 American Banker, one of the publications Warren Buffett reads every day, is publishing excerpts from the book, covering everything from how BB&T got into the subprime auto lending business to how it looks for acquisitions (100 and counting during Allison's 35 years at the bank).
 And while Warren Buffett has long lambasted American CEOs for not providing shareholders with honest post-mortems about acquisitions where big things were promised but not delivered, Allison makes Buffett look like a piker when it comes to the notion that deals ought to be scrutinized in hindsight.
 Here's what Allison says, and it's so logical you wonder why everybody doesn't do it.  Well, actually, you understand why they do not...

 Of course, the economics had to work from our shareholders' perspective...In this regard, the board members were told that for 10 years after an acquisition was effected, they would be provided with a report on how well the acquisition performed relative to our projections. It is tough to remind your board for 10 years that you made a significant mistake, so this discipline encouraged rational, objective analysis.


 *Your editor has an interest in BB&T, just for the record, but we would have published this even if we didn't.


Jack Straw said...

That is amazing. Do you take that to mean that for each acquisition, results are projected out for 10 years and evaluated every year against the projections for 10 years, or results are projected for whatever time period is necessary and are reviewed for 10 years? I'm just curious. Either way its a great discipline.

Unknown said...

Hello Jeff. Although I am an Internal Medicine physician, parent, and recently retired youth soccer coach, I have greatly enjoyed reading about and and studying the 2008 events. I too have been of the opinion that it was primarily a federal government problem. Thanks for the book rec, as I thought John Allison was interesting and enlightening and he provided a different perspective than the usual book on this debacle.
In addition, thanks for your blog and also for your three books on Buffett/Berkshire - all of which I have purchased and read. The books greatly enhanced my understanding of those phenomenons.
Please continue to write for your blog and those type books. I have no exposure to that world, so you provide a window for me.

Robert Stout
LaGrange Georgia.