Thursday, April 12, 2007

Dow Shenanigans

Dow Chemical, rumored to be the latest giant company to be swallowed up in a PE deal (for some $50B), fired two of its executives today over the rumors. The interesting part is that they weren’t canned for the pedestrian offense of leaking the potential deal to the media, but rather for having unauthorized discussions with potential buyers. What’s more, at least one of these guys - Romeo Kreinberg, a 30-year company veteran who currently heads Dow’s Sales & Marketing functions and its Performance Plastics division – is vehemently denying doing anything untoward.

Were Kreinberg and the other "traitor" (Pedro Reinhard, a member of Dow’s Board) really going behind the board’s back and talking to suitors, or were they thrown under the bus? While dealmakers in most organizations have (or at least should have) wide latitude to talk to potential targets and partners, there’s no question that things need to get tightly constrained when you’re talking with potential buyers. There are just too many sensitivities around relations with employees, customers and investors to let such discussions take place without the direction and oversight of the board. I’m guessing we’re going to get a good glimpse at how this works – or should have worked – at Dow as this little drama gets played out.

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