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The Ambani brothers are still snatching each other’s toys

Jul 25, 2008 Business Daily, Management

“A bitter rivalry between two Indian billionaire brothers has scuttled negotiations to combine two of the developing world’s largest mobile-phone carriers. South Africa’s MTN Group Ltd. and India’s Reliance Communications Ltd. called off talks Friday over a potential multibillion-dollar deal that would have created a wireless giant. Behind the collapse of the talks is the long-running feud between Mukesh and Anil Ambani, heirs to the Reliance empire of companies founded by their father. Since the father’s death six years ago, the two have been trying to best each other in the highest echelons of Indian business. That rivalry catapulted the brothers into the ranks of the world’s richest men. But it also turned nasty…”

Wall Street Journal (22 July 2008)

Ever since old Dhirubhai Ambani, intrepid entrepreneur, passed away in 2002, his sons have been at each other’s throats. They locked horns for three years trying to jointly run the gigantic Reliance Group. In 2005, a truce was brokered by mother Kokilaben which divided the group’s companies between the two feuding siblings. The two splinter groups created as a result have prospered – but the truce contained a clause forbidding either sibling from changing control in his group without giving the right of first refusal to the other.

That clause has scuppered the potential deal between Anil’s Reliance Communications and MTN, as Mukesh exercised it to throw a legal spanner into the works. And so, a deal that would have created a company with a combined value of about US$ 50 billion and 110 million customers in Asia and Africa, has been laid low by the egos of the brothers.

The brothers turned nasty some time ago, each using aides and proxies to spread rumours and whisper campaigns about the other. But now, immense value has been lost. And it may not end there: each will now find it very difficult to conclude the kind of international deals on which large industrial groups thrive.

The Reliance saga brings into sharp focus the problem with the family company: it’s a great way to start off in business, but sooner or later it loses its unique advantages. When the original patriarch is in charge, family businesses combine intense motivation with a great sense of unity. But eventually, and particularly when a generational change occurs, things can turn downright ugly.

Reliance’s other shareholders, customers, employees and other stakeholders are forced to gaze agog as the two brothers slug it out to be top dog. How intensely childish and shameful is that? This is a group that spans industries and borders, but is still beholden to the one-upmanship that probably began when Anil and Mukesh were squabbling in their back yard as toddlers. Today, aged 49 and 51, they are still trying to take each other’s toys.

There are huge lessons here for family owned companies, the dominant ownership model here and abroad. You will soon have exhausted the possibilities of using bloodlines as a source of talent, and must change the game. Once your company hits a certain level of complexity, professional management must replace kinship, and corporate governance must happen in the boardroom, not the bedroom.

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