The subject line on the Bear Stearns analyst's note from David Small said it all last month–"Christmas Comes Early For MMC Shareholders." The alleged "gift" was the announcement that Michael Cherkasky, the embattled CEO of Marsh & McLennan Companies, was on his way out–a move I suggested was inevitable on Dec. 17.
While I doubt my column was the last straw (especially since I didn't expect a change until midyear), complaints like mine echoed widespread dissatisfaction with the firm's management.
MMC's nonexecutive chairman, Stephen Hardis, rightfully praised Mr. Cherkasky for saving the company. Had it not been for the relationship Mike enjoyed with Eliot Spitzer, Marsh would have had a much more difficult time settling bid-rigging and contingency fee abuse charges.
"MMC is a venerable institution that might not be here today were it not for Mike Cherkasky," said Mr. Hardis. "His leadership and crisis management skills in the wake of the New York attorney general's action in 2004 enabled MMC to weather a perfect storm and positioned the company for future growth. We all owe Mike an enormous debt of gratitude for his invaluable contribution."
That said, it was all downhill from there.
So, now what?
Mr. Small criticized the timing of Mr. Cherkasky's ouster, suggesting MMC should have made its change before Mike named a new CEO at Marsh. The implication is Marsh CEO Daniel Glaser will be in a tough spot with a new corporate boss coming aboard who might want to put his own team in place.
I would cut MMC some slack. With Brian Storms dismissed months ago, Marsh could not limp along leaderless any longer. Mr. Glaser–given his prior experience at Marsh, along with major leadership roles at Willis and AIG–is a good choice to turn the troubled brokerage around.
That said, Mr. Glaser better move fast to achieve more positive results, and watch his back once the new top dog is unleashed. MMC's next CEO is not likely to be very patient, and he might be eager to put his own stamp on the firm's highest-profile facility.
Mr. Glaser has already initiated a senior management reorganization that was long overdue. But it won't be easy turning Marsh around in the middle of a softening market.
The other big question is whether MMC's new leader will have marching orders to break up the company to maximize shareholder value. That move was first suggested by a Canadian private equity firm, K.J. Harrison & Partners, back on Dec. 10.
Perhaps the whole MMC will be put on the block. An analyst with Bank of America, Alain Karaoglan, thinks the "potential sale of the company is now possible. We believe that new management and the board could be more open to unlocking shareholder value to investors through a sale of Marsh & McLennan or sale or spin-off of its operating units."
Talk of a sale–in whole or piece-by-piece–took on greater urgency with the announcement last week that Trian Partners LP had bought a small share in MMC. The fund is led by activist billionaire Nelson Peltz, who has earned a reputation for shaking up struggling, poorly-run companies. MMC board meetings will never be the same.
This could be a prime opportunity for a major European or even Asian player to acquire the world's biggest retail insurance distributor at a substantial discount, considering the exchange rate and cheap dollar. I wouldn't be surprised to see MMC sold before year-end 2008.
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