The Critical 'I'

Read. React. Repeat.

Monday, April 14, 2003

If you check both the above hyperlinks, you'll note they both take you to just one website: That's not a coincidence. WorldCom, which along with Enron is a posterboy company for the crooked accouting practices of the past few years, has revealed its plans for emerging from bankruptcy this year, the central components of which include changing its name to MCI (it's largest operating subsidiary) and moving corporate HQ from Clinton, Mississippi to the Washington, D.C. area.

The appearance of MCI, once a highly-coveted aquisition for WorldCom, swallowing up its former parent company is amusing to consider. Although the parallel isn't exact, the same sort of thing is going on at AOL Time Warner, as most of the execs of the former America Online Inc. have been forced out and replaced by former Time Warner guys (and some extreme critics of that company have even suggested eliminating the "AOL" part of the corporate name, thus completing the re-transformation).

This turn of events for WorldCom brings back some professional recollections. When I worked for a boutique investment banking firm, I produced a bi-weekly column on the mergers and acquisitions field. One column concentrated on the importance of due diligence, and I used the then-still-pending-but-imminent WorldCom-MCI deal as an example of how not to carry out the process. Basically, thanks to poor preparation and freewheeling negotiations, it took WorldCom about three times as long as it should have to close the deal for the long-distance provider, and competitors like British Telecom kept sniping right to the end.

Such a shaky start certainly didn't portend a promising future for the combined company. While the problems that eventually brought WorldCom down weren't directly related to the merger, they were certainly in line with how the whole thing was established. I can't say I saw the disaster coming, but then again, I wasn't too shocked when they were caught with their pants down.

Poor Mississippi. It's not like it's home to the headquarters of a bunch of world-class companies, and now it loses the only notable one.