Wednesday, December 18, 2013

The End of the Road for Dankner? 

I feel sure that yesterday will be marked as a milestone in the business and economic history of Israel. There is much talk among the chattering classes and politicos that regulation and politicians should save us from "tycoons."

Whilst the process has taken two years, and certainly banks and institutional shareholders have not always acted with speed and wisdom, the market and the legal process have made the difference in the battle to control IDB and its many subsidiaries.

This is great news for Israel on many fronts, but I would like to pick four highlights:

1) As mentioned above the market has removed Dankner from his control position at the head of the IDB pyramid. Nothing personal Dankner bet and lost. The excellent operating companies down the stack will survive and depending on the skill of the new owners, may even thrive. If they do not, they too will be removed!

2) We have 2 new names as major players on the business scene in Israel. One foreign coming with a long track record of success bringing his capital to Israel for the first time, and one local, who has mostly plowed foreign fields up to now.

3) Pyramid structures and uber-leverage is (IMHO) not the way to create a thriving economy. Building businesses through hard work and sensible financing is. If this allows the subsidiary businesses to thrive as more independent entities, then the entire economy will benefit, probably attracting additional new capital along the way.

4) The intervention of "smart" capital (Jeremy Blank and York) was one of the key catalysts for the radical change of direction at IDB. I hope that this will represent a new era of intelligent activism within the market!

Finally, I will end with a quote from Dankner himself from 2009 - Here is what he had to say when he was king of the country, four years ago,  in "Globes":

"I take care to ensure that IDB has large amounts of cash, and that we exploit business opportunities in moderation, cautiously, conservatively, and gradually. Despite the many business opportunities, we retain in our hands large cash reserves. I see them as an insurance policy. The strategy is to be prepared for changing situations that are hard to foresee."

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