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Mini Case 8

Bull-Dog Sauce and Steel Partners

1. Why did Steel Partners fail to win its hostile takeover bid of Bull-Dog Sauce?

The most immediate reason is that it failed to convince the management team of Bull-Dog
Sauce, its shareholders, and the Japanese courts.

More fundamentally, Steel Partners represents an approach to doing business that is alien to
present-day Japan. Its main goal is to drive firms to maximize shareholder value (i.e., value
that Steel Partners can then appropriate). This clashes with the Japanese stakeholderoriented approach that tends to emphasize the interests of employees and society more
generally over those of shareholders.
This is most directly visible in the repertoire of tools hedge funds typically use to release
shareholder value. The prospect of headcount reductions, for instance, is diametrically
opposed to core values of Japanese business.

Steel Partners also represents the short-term profit orientation that has become typical of US
business. Japanese firms, by contrast, still tend to hold a long-term view, emphasizing
sustainability and survival over short-term profitability.

2. Could Steel Partners have won? If so, how?

Given its mentality, it is very difficult to see how Steel Partners could have won. A successful
approach would have required a fundamental change in mindset.

Assuming such cognitive flexibility, Steel Partners might have been more successful if it had
taken a less confrontational and more long-term approach. Instead of launching a hostile
takeover bid, it might have tried to establish a working relationship with management and to
establish a longer-term strategy to serve the aims of both sides.
It might also have tried to build good atmosphere among the other shareholders, explaining
its post-acquisition plans and thus establishing trust that it was not just out for short-term

3. What are the implications for foreign businesses in Japan? For foreign investors?

For foreign businesses, the main implication is with respect to cooperating with Japanese
firms, e.g., in joint ventures or in long-term supplier-buyer relationships. Here, it is important
to understand the underlying rationale and resultant objectives of the Japanese partner. The
larger the contrast, the more carefully these issues need to be managed.
In general, continental European companies will tend to face less of a problem because their
business rationale is reasonably similar to that held by Japanese companies. Anglo-Saxon
firms will tend to face the biggest challenges.

For foreign investors in Japan, the key message is that they should not expect the same
single-minded focus on shareholder value that one would find in the United States. This
obviously has implications for the attractiveness of investment opportunities. What may
look like value stock in the US (and can be highly profitable there) may never appreciate
substantially in Japan.