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Deutsche Börse's Strategy Derailed by the Hedge Funds - Version for Board Simulation

Published 24 Jan 2020
Reference 6568
Topic Strategy
Region Europe
Summary

The case describes the context faced by the Supervisory Board of Deutsche Boerse (DB), the German Stock Exchange, following its hostile bid to acquire the London Stock Exchange (LSE), notably the events that led to a confrontation with UK hedge funds (TCI, Atticus) seeking to derail DB’s plans. The Germans ultimately abandoned their takeover attempt when it became clear that the hedge funds were not afraid to make false statements about CEO Werner Seifert, attacking the DB board in the process. Participants are asked to prepare a role-play for a meeting of the Supervisory Board, to be chaired by the new CEO following Seifert’s resignation, which he tendered in the wake of the activists’ attack, showing just how personally he took it. The Board is now in crisis, having to respond to Seifert’s resignation and shareholders’ anger. Having initially refused to listen to the activists’ demands for a shareholder meeting, Seifert’s resignation now makes their position look untenable. Actual historical events serve as a benchmark for evaluating the outcome generated by the board simulation, allowing participants to consider the intriguing question of whether the outcome was a good one, let alone the best. Though the events are somewhat dated, the issue is not. Indeed, it has recently resurfaced with the advent of Brexit, prompting the LSE to approach DB with an offer to reopen discussions on linking the two exchanges. Whatever the circumstances, the case offers an ideal setting for a board simulation, particularly in a changing European and global context.

Teaching objectives

- Allow participants to role-play a board facing a crisis - Explore the main issues facing boards: CEO oversight and succession, strategy and risk, shareholder relations, corporate portfolio choices (since DB is both an exchange and an IT provider for exchanges) - Gain insight into the competitive dynamics affecting exchanges and the role played by hedge funds in stock markets.

Keywords
  • Corporate governance
  • Stock Exchange
  • Hedge Funds
  • Mergers
  • Activist Shareholders
  • Active ownership
  • Corporate Governance
  • Investors
  • Stakeholders and Accountability
  • Q12020