VNU: Whose Company is this anyway?

Case Questions

Please prepare your own answers to the following questions:

• What was the nature of VNU's position and role within Dutch market and society

up to the acquisition of Nielsen Media Research? Try to define its definition of success and its values.

• What sort of watershed did the period of divestitures and acquisitions from roughly 1999 through 2005 represent for that societal role of VNU, for its company culture?

• In that above-mention period of divestitures and acquisitions, what was the agenda of the Supervisory Board? How would you judge its performance?

• What were the main ”interest-constituencies” around VNU other than the Supervisory and Management Boards, and what was the agenda of each? How well did management align those separate agendas with one for the company as a whole?

• In line with its new ambitions, where does the company’s future competitive advantage lie, and what are the Key Success Factors necessary to reach it? Can you formulate the risk, performance and capability indicators you would use as a Board member to best monitor the company’s progress?

• In the case you’ll find several crucial moments that required Supervisory and Management Board decisions. Which were those, and what happened or should have happened at these pivotal moments?

In the Appendix you’ll find financial and stock-price data. What message(s) can you draw out of this information?

way?

VNU: Whose company is this any

VNU: Whose Company is this anyway?

In the grand ballroom of the Amsterdam Hilton, VNU CEO Rob van den Bergh paused briefly from reviewing his notes at the podium as he waited for members of the press, securities analysts, and other elements of the public to file in. They had come to attend yet another VNU public announcement, and that promised to be a low-key event as usual, for that was Van den Bergh's public style. Only the substance of what he had to say was dramatic: this day, 11 July 2005, marked the ultimate realization of the vision he had had for VNU over several years of transformation, the setting into place of the last, crowning piece. He would be announcing VNU's intention to acquire IMS Health, an American firm specializing in the gathering and reporting of drug sales information. Together with the company's earlier acquisitions – most notably Nielsen Media Research in 1999 and AC Nielsen in 2000 – IMS would give VNU both a worldwide and comprehensive presence in the market for business information and make its services indispensable for a wide range of consumer-goods and pharmaceutical companies.

Van den Bergh allowed himself a thin smile of satisfaction as he waited for the audience to file in. Bringing this deal to fruition through two years of tough negotiations had not been easy. And meeting the €5.8 billion price-tag had presented another challenge, not so much in raising the money (although it was true that it cost more than Nielsen Media Research and AC Nielsen combined) but rather in resisting pressures from some shareholders simply to return that accumulated cash back to them instead. But that sort of timid stifling of his own and his company's ambitions was not how Rob van den Bergh had learned to play the game. That would be the worst thing that could happen, now that VNU was competing in its markets internationally and at the highest levels, namely allowing the company's essential, aggressive entrepreneurial instincts to die out for lack of any more worlds to conquer. He was confident that the IMS Health acquisition was the next step his company needed to take; he looked forward to driving it through to completion at the VNU annual shareholder's meeting early next year, right past all the nay-sayers. And he would not allow the profound professional satisfaction he was now feeling to be disturbed either by the many empty seats he saw before him as he finally came forward to take the microphone. “I see that many people must be on vacation, because normally it's a bit busier here,” was his opening joke.

Professor Fred Lachotzki and research associate Michael A. Olson prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. They are particularly indebted to Messrs. Bert van Dijk and Joost van Mierloo, as this account is based substantially on their book on the VNU episode, Bestuur onder Vuur (Uitgeverij Business Contact, 2007).

Copyright © by Nyenrode University Press, Breukelen, The Netherlands.

AUTHENTIC LOWLANDS PUBLISHING

Verenigde Nederlandse Uitgeverijen (or “United Dutch Publishers”; in its early years it abbreviated

its name with periods after each letter - V.N.U.) came to exist in the first place back in 1965 as the product of a merger between two publishing firms, De Spaarnestad and Cebema. The result was an extensive publishing operation, which over its first twenty years or so developed various publications in many formats, but always in Dutch. Indeed, during those early decades researchers of Dutch culture could always do worse than to start their investigations surveying the material in VNU's broad collection of offerings: a wide portfolio of daily local newspapers (mostly “south of the great rivers”); children's books and weekly comic-strip albums with titles like Tina, Sjors en Sjimmie, Billy Turf, but also Donald Duck and Asterix; a similar collection of magazines mostly with a base in local content (e.g. Nieuwe Revu, Margriet, Katholieke Illustratie) but sometimes exploiting outside franchises (e.g. Cosmopolitan, Playboy); and extensive offerings of textbooks and other educational materials. All operations were run out of a nondescript 12-story concrete office building, of the classic Dutch utilitarian high-rise style of the 1970s, in a mixed-use outer suburb of that prototypical Dutch city, Haarlem (rather than the more-cosmopolitan national capital, Amsterdam, just 10km to the east). And the atmosphere was always rather gezellig – that characteristic Dutch trait meaning relaxed, comfortable, and really not too wound-up by competitive pressure. After all, the paper supplies arrived reliably in a constant stream, the writers wrote, the printing-plants printed, and the subscription-fees that readers paid for the lion's share of the company's output ensured steady and predictable revenue both for VNU's management and employees and for anyone who might want to invest in or lend the firm money.1 There weren't really any expectations for anything more than that, anyway; VNU was the “ugly duckling” among the large Dutch publishing companies, so that the market looked to one of the others (Reed-Elsevier or Wolters Kluwer) to bring out any innovations or make a marketing push beyond the country's borders.

One of the publications Rob van den Bergh was involved with in his VNU career was Intermediair, the employment-market and job-seeker publication within VNU's stable of home-grown magazines, where he served as publisher starting in 1980. While he did much to bring it up-to-date, in step with the Dutch job market of those years which itself began to grow more sophisticated with a particular increase number in IT positions, the magazine made him think larger thoughts because of the nature of the information it provided. There was ultimately an important qualitative difference between Intermediair's reading-audience and that of, say, Donald Duck: while the latter gained “nice to know” information from VNU, for the former it was “need to know,” so that advertisers in Intermediair could be expected to pay higher prices, and that on a more stable and predictable basis. (The magazine itself was free.) This experience planted in Rob van den Bergh a distinct preference for publications supplying businesses with the vital information they needed to compete – such as, for example, trade publications (in Dutch: vakbladen) which, whatever they lost in generalized appeal due to their highly-specialized nature (e.g. “Dry-Wall Quarterly”), more than made up for by the vital nature of the information they provided to the specialized audience that needed it.

Van den Bergh was soon put in a position to devote his considerable energies to broadening this “need to know” information aspect of VNU's publications, as he became head of the Business Publications Division in 1984.

1 On the other hand, it is true that advertising revenue did tend to fluctuate in step with general

economic conditions – something that caused the company a bit of financial pain during the recession-filled decade of the 1970s.

Then 1990 found him as director of the company's entire Magazines Group, which was the springboard from which he ascended to a position in Management Board in July of 1992. Naturally, it was during these periods that the stable of vakbladen in VNU's portfolio expanded rapidly, both by in-house start-up and by acquisition – and both in the Netherlands and in that huge, homogeneous, English-speaking market across the water, the USA.

That elevation to the Management Board, and thereby responsibility for the whole company's operations, also enabled Van den Bergh to pursue another idea, that of business focus. By the 1990s what was going out of favor was the old notion of building a conglomerate, that is, a company running many different businesses, of different natures, in the theoretical expectation that underperformance in one line would be compensated for by over performance in another. The pendulum was swinging to its opposite, namely to a preference for building companies composed of parts fitted around a single “core competence” and thus which tightly reinforced each other so that the company as a whole could achieve over performance always. Among the most prominent advocates of this focused approach were Jim Collins and Jerry Porras, authors of the book Built to Last: Successful Habits of Visionary Companies, which became one of Rob van den Bergh's favorite works, and a perfect present for his colleague Frans Cremers when the latter became VNU's CFO in 1997.

VNU in the 1980s and 1990s did not really have much to recommend it in Van den Bergh's eyes as any sort of “focused” company in the Collins/Porras mold. And, indeed, he also found it a bit too Dutch, too gezellig. He preferred the American way of business, rather more serious, where people had to be more on-their-toes and, often, more internationally-oriented. Once he was on the company Management Board, he played an important role in the huge deal – the most money spent by VNU for acquisitions up to that time - which brought to the company the American trade-publications companies BPI Communications (famous for its music and show-business coverage in Billboard magazine) and Bill Communications. Combined, the two companies employed 1,100 people and had a yearly turnover of $195 million. Furthermore, the sheer scope of VNU's American interests now after these acquisitions moved Rob van den Bergh to an office in New York City2 , and these interests continued to expand with a string of additional American trade-publication acquisitions during the rest of the 1990s, which were generally folded under either BPI or Bill.

But this American expansion was not restricted to vakbladen. BPI itself included a “Broadcast Data Systems” division which reported on how often any given song was played on the radio in either the US or Canada., which fit well with another acquisition, “Bookscan” (which of course registered book sales) and other, smaller data-bank companies in VNU's possession that reported on such things as the location of stores and advertising expenditures. Further, the mid-to-late 1990s also saw considerable growth in the company's American activities involving the staging of trade-fairs and conferences. To some degree, this was simply a natural outgrowth of the many specialty-magazines that were filling out the VNU Business Information division's portfolio at the time, but there also occurred a number of explicit acquisitions of companies of this type, such as (in 1998) Shorre Varrone, organizer of seven trade-fairs (and, in fact, also publisher of 10 vakbladen). Things became so active along this line that the company organized a separate division, VNU Expositions, shortly after that Shorre Varrone take-over.

The year 1998 was also when Rob van den Bergh took VNU in yet another “business information” direction with the acquisition of World Directories.

2 He would shortly move back to Haarlem to become company CEO in 2000, only to return to a

permanent office in New York City after a few years in keeping with the company's growing emphasis on its American-based operations.

This was the publisher of the “Yellow Pages” directories – or Gelbe Seiten, or Pagine Gialle, or whatever other local name they had in a particular country, as they published these on a world-wide basis – and had recently been detached from the ITT conglomerate and somehow had ended up under the ownership of Starwood Lodging. Principally known for its Sheraton Hotels group, Starwood did not really know itself what to do with this new division. Van den Bergh quickly stepped forward to offer to relieve them of it. The deal ultimately was worth NLG 4.2 billion (= EUR 1.9 billion), which was then the largest acquisition VNU (or indeed, any other Dutch publishing company) had done up to that time. But the company could afford it and, more importantly, World Directories represented another asset valuable to the company in much the same way as was Intermediair. Under whichever local name, the Yellow Pages provided business information - useful for individual consumers, yes, but mainly constituting a selling-tool for businesses, where (if they had any competition) they just had to pay for an entry.

But Van den Bergh's efforts for VNU did not only involve acquisitions. The following year, 1999, he was the active force behind the sale of the newspaper division to Wegener, another Dutch publishing house, for NLG 1.8 billion (EUR 820 million). It seemed strange that VNU would sell its newspapers, which had been an important activity for the company from the very beginning and even to some extent made up part of its public identity. Plus, subscriptions and especially advertising revenue for the division were at record highs in the late-1990s high-tech boom prosperity. Behind the scenes, though, the newspapers were not very suitable for the VNU's new “business information” world. Quite the opposite, in fact; as printing technology advanced, too often the reluctance (verging sometimes on outright obstruction) on the part of the foremen and employees at VNU's printing plants to embrace it and enable the cost-savings it should have made possible had been a thorn in the side of company management. VNU had sold off back in 1993 its subsidiary Grafische Industrie, a printing company responsible for the production of the magazines, but the newspapers had kept their individual printing-plants. The regressive attitudes here among rank-and-file quickly put the entire division on the bad side of CEO Joep Brentjens and made him a solid supporter of Van den Bergh's eventually-successful efforts to sell it off. And the sale also brought in a considerable sum of money which could form a war-chest for further acquisitions.

Naturally, Rob van den Bergh had his eye on further acquisitions. The World Directories purchase had been an easy opportunity to identify, as Starwood was glad to have it taken off their hands. At the same time, there were certainly other interesting business divisions in a similar situation at other large companies.

Dun & Bradstreet, for one, was an American firm heavily involved in providing business information, but about to begin a transformation that would narrow its involvement to information about companies themselves – e.g. their financial information, their credit-worthiness, their internal structure – rather than about their customers. That transformation was spurred by the rather surprising results from an examination of his own company by an investment bank that CEO Robert Weissman had ordered in the mid- 1990s, according to which a number of Dun & Bradstreet's divisions were judged to have a greater stand-alone value than what they were collectively worth within the company. Weissman took that lesson to heart and, starting in January 1996, spun them out as independent companies, with independent listings on the securities markets. One of these was AC Nielsen, a firm specializing in collecting (using such means as data-links to supermarkets and consumer surveys), processing, and reporting retail purchasing data.

Once a virtual monopolist from having been a market first-mover, it now found its line of business shaken up again with the arrival of retail bar-code scanning technology that had created an opening for new competition from other firms (including, to a small extent in the US market, a division of VNU), and it clearly required considerable further investment in techniques and technology in order to defend its position.

Another spun-out Dunn & Bradstreet group was built around Nielsen Media Research, a different entity with a different situation. This was the company most Americans thought of when you said “Nielsen,” namely the one behind the viewer-surveys and (more recently) the automatic monitors that determined the number of viewers of TV programs and viewer behavior generally. This data played a central role in determining which agencies in the billions-of-dollars-yearly American advertising market could be charged how much for a given TV advertising spot.3 To add to all this, Nielsen did still hold an almost complete monopoly in this field, and so enjoyed tremendous margins of around 20%. The firm quickly made its way to the top of Van den Bergh's “to acquire” list.

By this time he had become Vice-Chairman of the Management Board, so that his status as the clear “crown prince” in line to succeed Brentjens CEO was clear. He had all the authority he needed to move swiftly. Shortly after Nielsen was split away from IMS Health in a further reorganization to form its own self-contained unit – which was also the very day, in September of 1999, that VNU publicly disclosed the sale of its newspaper division to Wegener – Rob van den Bergh was able to announce an agreement to purchase Nielsen Media Research for $2.7 billion. This deal brought 2,000 new employees over to VNU's ranks, as well as the 54% share Nielsen owned in NetRatings, which measured the visits, overall popularity, and advertising effectiveness of websites.

With this, Van den Bergh once again topped VNU's record for an acquisition purchase-price, one he had set only shortly before with World Directories. But it was no surprise that Nielsen would come with a steep price. With its brand-recognition and monopoly position it was certainly a “crown jewel,” and the high cost of the deal was also simply in keeping with the times. Seen retrospectively, the year 1999 marked the peak of the great “dot-com” bubble, when share-prices on most Western exchanges were at record highs. Nielsen Media Research itself had gone up in value more than four times the initial valuation it had had when first listed separately from Dun & Bradstreet back at the beginning of 1996.

3 Nielsen Media Research included within its own group the IMS Health division, involved in the

unique task of providing information on the prescribing and purchasing of medicines. Of course, it was evident that the core activities of these two divisions had little to do with each other – i.e. that, in effect, Weissman had created a conglomerate-type structure within one of his new spun-out groups. But he himself recognized that, remarking at one point “It is simpler to draw water on the moon than to find synergy between Nielsen and IMS Health,” and in 1998 he further separated these two businesses.

CHANGING SHAREHOLDER SENTIMENT

At least the hot securities markets also guaranteed that new shares could always be issued to

raise further cash, at high valuations. That, at least, was the notion that many at VNU relied upon for some comfort even as they contemplated the sky-high price they had just agreed to pay for Nielsen. Unfortunately, not long after 1999 turned into 2000 the “irrational exuberance” fueling the rising securities markets came to an end; stock prices began to fall, including that of VNU. Rob van den Bergh did not even get the satisfaction of witnessing his firm's peak price as CEO, since that achievement (closing at €36.53 at the end of February) preceded his ascent to that post in April. Indeed, by then the share- price had already dropped by one-third within two months' time, to €25.60. That was a problem: an early-2000 shares-emission had explicitly been an important part of the plan for the Nielsen acquisition, to raise money to pay that tremendous acquisition price. Now it would fall short of the original financial target, so that VNU management later that same year had to approach shareholders one more time with yet another such share-emission.4

Both times the company went ahead anyway with issuing the new shares, which it privately offered only to existing shareholders, confident that they would be glad to subscribe and so keep their relative portions of ownership undiluted, that they would continue to trust in management's judgment that these steps were necessary for the company's growth. VNU was long used to having this sort of comfortable relationship with its shareholders, who had always been domestic investors like the big Dutch banks (e.g. ABN-AMRO or its earlier incarnations; ING), insurance companies, and pension funds. These were content to maintain stable holdings for years, indeed for decades, and to leave such decision-making to the Management Board (raad van bestuur), working under the oversight of the Supervisory Board (raad van commissarissen).

What they actually encountered in the year 2000, then, came as somewhat of a surprise. Van den Bergh and his presentation team found that they had a lot of explaining to do, to a series of very skeptical asset-managers representing major stakes in the company. Chief among these was Fidelity, the Boston-based largest retail mutual-fund investment company in the world. By itself, Fidelity's substantial share in the company (over 10%, but limited by internal policy to no more than 15%) was the sort of endorsement that VNU was glad to have, yet the briefings Van den Bergh held at their London office together with CFO Cremers were tense, as their portfolio managers there in charge of European media investments were none too happy about the recent dive in the value of the VNU share.

This new estrangement between management and shareholders would have been unfortunate at any point, but particularly so then, just as Rob van den Bergh had become VNU's CEO. For now the way was clear for him to press on full-speed-ahead with the transformation of the company he had been planning for much of his tenure, and his plans were ambitious:

4 Money from that second emission was also used to pay for Miller Freeman, which VNU agreed to

buy in September, 2000, for €650 million. Another American-based firm, Miller Freeman was a substantial reinforcement to the VNU business division involved in staging trade fairs and conferences.

− Nature of customers: While the old VNU had been overwhelmingly a retail- oriented firm, selling a series of publications to private individuals, the new VNU would orient itself on a business-to-business basis.

− Sources of income: Revenue for VNU publications had derived mainly from subscription fees plus advertising. While under ordinary circumstances these sources were relatively stable and predictable – especially the former – Van den Bergh planned a transition to a revenue model just as stable, or even more so, derived from providing business information within the context of long-term contracts – of generally seven years' duration in the case of Nielsen Media Research, usually three years for AC Nielsen. In fact, VNU had started to earn more from business services than from publications as early as 1997, but the company was to be driven much further in this direction.

− National basis: The Nielsen Media Research acquisition was also significant in the push it provided to VNU away from its Dutch origins. It was a massive addition to the company's operations and cohort of employees – but those operations and employees were overwhelmingly located in the US, not in Holland. From this point, serious planning began within the VNU bureaucracy for gaining a listing of the share on the American capital markets, a step which itself would require the firm to transition to keeping its books according to the US GAAP (Generally Accepted Accounting Procedures) accounting standard.

Was any of this explained during these meetings with shareholders? That is doubtful. The aim

was simply to put out the fires, i.e. to ensure that the new shares were sold. That this now required this sort of kow-towing to shareholders was something new, but then so were these shareholders: foreign, demanding, and immune to any friendly cajoling on the basis of the common “old school” tie, because there were no such mutual ties that bound them with the VNU emissaries other than a common skill in reading and analyzing balance sheets and income statements.

Rob van den Bergh still found this all rather annoying. For him, this petty fixation on a mere short-term financial maneuver was a classic symptom of the short-sighted, short-term business attitude that he absolutely hated. In any event, he always liked to hold strictly to the agenda at any meeting, for you could at least presume that the attendees would be knowledgeable about prepared topics. If he should find himself confronted by any off-topic question he considered “stupid,” that would drive him up the wall and probably ruin that meeting's collective ambiance. Van den Bergh's energy and low-key demeanor made him a breath of fresh air in the VNU management corridors in Haarlem and New York, but, rather like Dr. Jekyll/Mr. Hyde, his bad side was liable to emerge whenever he had to interact with anyone who did not share his information and assumptions. These could include reporters and analysts, especially those still too new and inexperienced to realize that they possessed no magical insights into how he should be running his firm. But shareholders asking off-the-wall questions were also at risk of a Van den Bergh outburst, even at the VNU annual general shareholders meetings. Unfortunately, as VNU shares became traded more widely, he was encountering such questions more often now, and he knew that he should be better in responding to them: “Perhaps VNU needed a CEO who found communication to the outside more important than I did. I definitely devoted too little time to it. But that's just how I am. In the next lifetime I'll definitely take a course in Investor Relations.”

THE DIGESTING OF AC NIELSEN

For this lifetime, though, he paid experts for doing that, those of the company's Investor

Relations department, who were very practiced in and well-paid for what they did5 . He would carry on with the transformation that he considered vital to VNU's fortunes; the next step in that was the acquisition of AC Nielsen. Taking this firm on board would put VNU right into the center of the business-information market in America, and in over 100 other countries as well. Whereas Nielsen Media Research enabled marketeers to know just how many pairs of eyes and/or ears actually were exposed to the messages they crafted, the truly crucial variable, of course, was how many samples of product those audience-members, and others, ultimately decided to buy. That was where AC Nielsen came in: the company cast a wide net of data-collection over the supermarkets and other retail outlets of any given area, and so was able to gather automatically vital information as to what was being bought. In addition, the company also engaged a sample-set of consumers in each area to regularly “scan” their purchases into AC Nielsen data-readers, to provide a more-specific analysis of consumer buying habits.

Unlike Nielsen Media Research, though, AC Nielsen was not alone in this field. And that fact raised serious issues about whether acquiring it was really a good idea when the subject came up for discussion by the Supervisory Board. Indeed, there was an increasing trend for major retail chains to start gathering more precise sales data themselves, bypassing outside firms like AC Nielsen, through mechanisms such as scanning and loyalty-card schemes. The acquisition price of $2.3 billion also seemed very high; furthermore, though it may have been just cultural differences, the American personnel from AC Nielsen sent over to brief the Board did not hit it off well with the directors. On the other hand, in late 2000 AC Nielsen had just persuaded a significant FMCG client to switch over to it from the competition.

No, Rob van den Bergh was certain now was the time to strike with a take-over of AC Nielsen – even if VNU this time did not really have such a sum of money ready at hand. A number of other costly acquisitions had recently preceded it, after all, although this one was probably the most important one for Van den Bergh's intended transformation of VNU. A “bridging loan” that CFO Frans Cremers was able to arrange ensured that the money was there up-front, but then that sum needed to be repaid. It was time to sacrifice some element of the VNU “family jewels” to afford that, namely the magazine division. Although the flagship product-line in the “old VNU,” in Van den Bergh's estimation the magazines were now expendable. Plus, that division was an attractive asset that was sure to fetch a high price. After all, its titles had well-established brands and market-shares, indeed several of them (e.g. Playboy, Libelle, Margriet) were of national renown both within the Netherlands and often in the adjoining Dutch-speaking area of Belgian Flanders as well. Income from subscribers was fairly steady; it was an attractive “cash cow.”

CFO Frans Cremers was hopeful of gaining up to €2 billion from the sale to help offset the $2.3 billion committed for the AC Nielsen purchase, but thought he at least should bring in €1.6 billion from the bidding-process he set up for companies interested in buying the magazines.

5 Actually, in practice it was CFO Frans Cremers who was in charge of VNU's relations with

shareholders and other investors, using Investor Relations as his support staff. But he was also quite skilled in – and well paid for – what he did.

6 Remember that these transactions were occurring end 2000/beginning 2001, when the euro stood at around $0.94. One remarkable aspect of Rob van den Bergh's transformation of VNU was the extent to which it involved purchasing American assets at a time when the strength of the dollar made them extra- expensive in terms of the euro in which VNU earned most (but less and less) of its revenues. But VNU was hardly alone in this – among other major Dutch firms that made major acquisitions of American

6 However, it turned out that even that “realistic” estimate proved overly-optimistic in view of the tough economic conditions of early 2001, in which the all- important advertising sales were suffering. And there was still surprising remaining resistance to VNU's intention of getting rid of its magazine division - “complete,” as an article in the Dutch daily Het Parool put it, “with its rich history and unmistakable influence on the norms and values of the average Dutchman.” One VNU magazine- division executive who followed the division to its new ownership, in the hands of the Finnish publishing firm Sanoma, at the time the sale was executed on 1 October 2001 spoke at his going-away dinner of the “heart transplant” that in his view this represented for VNU.

The price Sanoma paid in the end totaled €1.2 billion, which, even when supplemented with the sale of VNU's rather smaller educational division that same year, did not raise enough money to close the considerable financial gap that the AC Nielsen acquisition had opened. But CFO Frans Cremers had already sensed that that problem might crop up, and spent most of the first half of 2001 conducting a long and complicated campaign to gather additional, precautionary funds to keep VNU on an even financial keel. He succeeded in this mainly by issuing convertible debt obligations – that is, convertible into VNU shares if the share-price exceeded a certain price – and was aided by a couple strokes of luck. The combined effect of a timely rally in that VNU share (thus enticing holders of the obligation with the prospect of gaining shares as they rose in price) together with the generally low interest rates following the “dot-com” crash ensured that the company got the money it needed at advantageous terms.

STRUGGLING FOR INTEGRATION

Cremer's timing was indeed fortuitous for the company; those convertible obligations would have been a considerably harder sell in the latter part of 2001, and not because of any influence of the attacks on New York and Washington on September 11 of that year. Even before that cataclysmic event – two weeks before, to be precise – VNU had been forced to issue a profit warning at the time of the presentation of its half-yearly figures, advising its own shareholders and the public in general that its previous estimate of a gain of profit-per-share of 10% for 2001 was no longer operative; something closer to half of that was more realistic.

Clearly, somehow the recent acquisitions that had embodied the company's changing direction – most especially Nielsen Media Research and AC Nielsen – were not yet “settled in” or properly integrated into the company so that they could fully realize their profit-producing potential. That situation was obviously unacceptable – VNU had hardly been in the habit in the past of issuing with profit warnings – but at least there then followed an interval of several years during which the make-up of the company remained relatively undisturbed. Here was the chance for top-level management to devote attention to setting things right, to coax financial performance out of the company more in line with what its potential suggested that it could deliver, and specifically to justify to shareholders and other observers the high prices that had been paid for those acquisitions of around the turn-of-the-century.

companies at around that same time were Royal Numico and Royal Ahold, just to name two of the most prominent – and to a great degree that which was making the dollar so strong was precisely the attractive business conditions prevailing in the US at that time that drew in so much foreign capital. Not only was there tremendous prosperity and rising asset prices of all types, but the American market seemed advanced in some qualitative way as well – as if there they had come upon the new business methods and new technologies which could keep the boom going forever.

Unfortunately, throughout this period management faced an uphill slope in trying to bring about these improved results, caused by the depreciation of the US dollar vis-a-vis the euro. For those transformative acquisitions, together with the divestment of the newspapers and magazines, had shifted VNU's commercial center-of- gravity quite substantially over to the American market, and thus to earnings in dollars. On the other hand, company accounts (including dividends) were still denominated in euros, so that a weaker dollar translated directly into weaker financial results.

This itself was an unfortunate influence on the performance VNU could achieve, yet of far more fundamental impact upon company performance was the simple fact of the drastic transformation that the company was attempting. It involved entirely new companies - new technologies, new ways of doing business – and taking them and somehow making them work well together. Those companies, in turn, were generally different from each other: for example, while both Nielsen Media Research and AC Nielsen were companies with an American business culture (and, indeed, had also previously been sister-divisions within Dun & Bradstreet), the former operated as a quasi- monopoly while the latter was but one company in a fiercely-competitive and worldwide market for retail sales information. Such a difference had to produce a marked difference in outlooks.

Such heterogeneity could not help but carry through to exert an influence on every aspect of the company's operations. Of particular concern was data: in its new incarnation, VNU was truly all about data, about its gathering, its processing, its reporting. But the company's new divisions naturally each had different ways they preferred to do all those things, and came with what were initially separate data-banks, procedures, report formats, and the like. Now it was supposed to be able to offer a series of interrelated information products to its clientele, but how could that happen when, say, one division's computers could not access another divisions data bank? Or when a combined report to a client contained data presented in differing formats or, worse, presented on a different basis? At an early stage it became clear that a much greater degree of back-office integration was needed, but progress was slow. It was finally overseen from early 2005 as a full-time assignment by the executive who was formerly corporate controller, working out of his Haarlem office, but such things as the standardizing of data formats and procedures within VNU remained far from complete even with substantial support for the task from the consulting firm Accenture.

Of even more importance than these “hard” data differences, though, were the “soft” differences in attitudes and outlooks between the various divisions now being put together to form the new VNU. These were reflected even when it came to the company's headquarters: Where was it? In Haarlem or New York? VNU was still a Dutch-registered company, with its share traded on the Amsterdam Stock Exchange and its accounts in euros, but Rob van den Bergh and much else of top management spent most of their time in New York City.

There, although they might have eliminated their physical distance to what were the new main axes of the firm's operations, the difference between American and Dutch business cultures remained considerable. A case in point was Michael Connors, head of AC Nielsen at the time of its acquisition, who then gained a seat for himself on the Management Board reflecting that division's considerable weight within the larger company, in terms of employees and revenue earned – as well as its centrality in the effort to make the “New VNU” a super-profitable enterprise. For many, Connors' main interest upon coming aboard VNU after the acquisition was mainly to establish and defend a “crown prince” position as Rob van den Bergh's explicit successor as company CEO upon the latter's planned retirement in 2007. In the meantime, Connors seemed to many to lack the sort of deference to Van den Bergh that one would have expected him to display.

Perhaps this was to be expected, in view of the fact that Van den Bergh, although company CEO, earned only half of Connors' yearly total compensation (and also half of that earned by another Management Board member of American origin, Gerry Hobbs). Yet it still remained an anomalous situation, particularly when, in April of 2003 and at the encouragement of the Supervisory Board, Van den Bergh placed himself directly in charge of VNU's Marketing Information division (and thus of AC Nielsen) in order to try to do something about that division's continuous series of disappointing results. But this reflected a more general lack of comprehension and respect between American and Dutch VNU managers generally. (Connors himself would leave VNU at the beginning of 2005, shortly after the Supervisory Board made it clear that it did not view him as any sort of future company CEO.)

Lines of division did not just follow differences in nationality, however. With its key acquisitions VNU had unknowingly come to own a patchwork of power-centers, in many cases headed by very territorial managers quick to defend their turf and little interested in cooperation with any greater whole. This phenomenon naturally reared its ugly head at the inter-divisional level, where relations were continually bad between the Business Information (Nielsen Media Research) and the Market Information (AC Nielsen) divisions7 , but also was found deeper down in the company structure. AC Nielsen in particular fell victim to jealous competition between what came to be known as the “Three Amigos,” the informal name given to three heads of geographical divisions within that operating division who seemed constantly maneuvering against each other for advantage. In this sort of an environment, one could try to devise as many schemes to better integrate VNU's new component companies as one wanted, but actually implementing them would turn out to be another matter entirely.

In any case, for VNU such a period free from major changes to the make-up of the company could hardly last for very long. May 19, 2004, marked the announcement that it intended to put its World Directories Group division – bought only six years previously – up for sale. It may have involved business information, but the directories business was also publishing – VNU was no longer interested in publishing, so it had to go. An additional concern behind this decision was that such a line of business would shortly be radically transformed, or even eliminated outright, by the Internet.

Still, Rob van den Bergh was confident that a buyer could be found who could be persuaded to ignore such considerations in favor of the predictable and steady income stream this business division could provide. Such characteristics meant that even a purchase financed largely with borrowed money could be accomplished with no worries about paying the money back. This was precisely the specialty of “private equity” firms, at that time a relatively-new phenomenon in the American business world, and certainly in the Dutch. They specialized in taking public companies private again by buying control of them, always employing funds to do so predominantly made up of borrowed money. Once in control, they would install new management to get the company back in shape to produce healthy profits – usually employing a ruthless cost-cutting program – which would provide the cash-flow for repayment of their loans.

7 In seeking to understand the behavior of these heads of the acquired American divisions, the

following points would be useful: 1) They were already wealthy men, from the Dun & Bradstreet public offerings that had spun their organizations out as independent businesses in the 1990s; 2) They had indeed operated for a time as heads of independent businesses, answerable to nobody but shareholders and the market, and so inevitably had the egos to match; 3) Now within the VNU structure, their inside knowledge about how to successfully run their unique and highly-technical businesses made them almost indispensable; and 4) This was reflected in compensation packages which continued to dwarf what their nominal Dutch superiors at corporate headquarters received. Note that much of this also held true for the executives one or two layers lower within their hierarchies.

Whether they then sold the refurbished company again or kept ownership for a while, the end-result would be a handsome financial reward for the minimal portion of own-capital that they committed at the start of the process. Sure enough, the World Directories Group's ultimate buyers turned out to be a consortium of two such firms, Apax and Cinven, who paid VNU €2.1 billion to take it over at the end of September, 2004.

QUO VADIS

So that was an additional €2.1 billion added to company coffers – but had Rob van den Bergh

pushed through the World Directories Group transaction only with the purpose in mind of further refining VNU's business focus, or was it really for that money? For that matter, what was to be done with that money?

Part of the answer was easy: the company was still burdened with rather more debt from the past than it would prefer – some €3 billions' worth – and the credit-rating agency Moody's had already in March threatened to lower VNU's rating. So some of those proceeds would be devoted to lowering that, but by no means all of them. What of the rest? The weekly magazine Elsevier thought that it knew the answer. Entitling its coverage of the World Directories deal “Addicted to Take-Overs,” the magazine pronounced its judgment that “VNU's obsession with buying and selling companies makes the publishing concern capricious and opaque for long-term investors.”8 But many in the ranks of VNU shareholders shared similar concerns. Attitudes within Western business world in general had in several respects flipped around completely within a few short years; cash or cash-equivalents were now not things most businessmen liked to see on a company's balance sheet for at least two reasons: 1) Money sitting idle like that was simply inefficient, even if it earned interest – interest rates were generally low, anyway; and 2) If it did anything, it made a company vulnerable to the attentions of private equity investors, as that sitting cash guaranteed repayment of the funds they could borrowed to accomplish any such take-over.

One simply had to do something with any money one accumulated – and fast. In the “go-go” years of the 1990s, the obvious answer for Dutch firms would have been to go look for acquisitions, but that business world had sobered up considerably since then, after the stock-market crash of 2000-2001 and the early-2000's recession (together with several instances of corporate malfeasance: Enron, WorldCom, Ahold, etc.) had largely dashed the grandiose profit-hopes that had been behind those purchases. VNU shareholders certainly had specific reasons of their own to look askance at any plans for further acquisitions, as the fruits of the company's own acquisition-wave around the turn of the century had hardly panned out yet to any appreciable extent. A Lehman Brothers analysis, published the following year, would judge that Nielsen Media Research and AC Nielsen, in particular, could not be shown to have been worth the capital expended to purchase them. Company financial reports and presentations consistently showed returns not living up to management commitments. (The Market Information division – i.e. AC Nielsen – in particular never achieved the 15% yearly return that was constantly promised.) Shareholders could already clearly see that something was wrong, namely in the form of the low VNU stock price that such constantly disappointing results had brought about.

8 Of course, Elsevier was published by VNU's long-time Netherlands publishing rival, Reed-Elsevier,

with whom it had a long but ultimately-fruitless history of merger proposal and counter-proposal, so there may have been some ulterior motive behind these comments. Could it have been professional jealousy?

For shareholders, then, what should be done was obvious: they wanted some of that

World Directories Group money back in their own pockets, via extraordinary dividends and/or share buy-backs. Netherlands-based companies and individuals had even more reason to look favorably on such measures, as a recent Dutch tax-system reform had changed the way holdings of wealth were taxed and thus opened up the possibility of distributing the money back to shareholders in a tax-free way. Furthermore, these shareholders were no longer so inclined to be shy about expressing their opinions, either; the Swiss-based UBS-Warburg, a major holder of VNU stock, sent a team of its analysts to Rotterdam in October, 2004, to let Supervisory Board Chairman Aad Jacobs know that what they desired was “no more adventures. We want the buy-back.”

What was on Rob van den Bergh's mind over this question? Strictly speaking, this was a financial matter and, regrettably, during this time (late 2004) VNU was in transition when it came to top-level financial expertise that could be applied to it. Frans Cremers was basically busy settling his affairs towards his long-awaited retirement at the end of the year - although he also did not mind letting his CEO of his own private preference that that money be returned to shareholders. The company was busy trying to locate another top-notch CFO to come to Haarlem – but probably soon to New York City - to work for VNU. The head-hunting firms finally came up with their list, with at the top the name of Rob Ruijter, the businessman who had made his name at the turn of the century by rescuing the noted Dutch enterprise-resource-planning (ERP) software-maker Baan from a financial crisis by negotiating the sale of that company to the British software firm Invensys. Ruijter then went on to work as CFO at the Dutch national airlines KLM, where he was also instrumental in arranging its merger with Air France at the end of September, 2003. The several months before his official naming as VNU's new CFO on 1 December 2004 were spent mainly getting him introduced to and familiarized with shareholders and the company's other important stakeholders.

Still, the vexed question of what to do with much of the money gained from the earlier sale of the directories division remained; a decision could not be put off for long. Rob van den Bergh was not much given to contemplation, yet he realized that this question could very well represent a crucial inflection-point in his company's history that would determine its form and its success far into the future. This moved him to take advantage of a rare stretch of “down time” available to him – the slow period around the Christmas and New Year's celebrations – to compose an extended memo on the roads he saw open for VNU entitled “Quo Vadis?”, as in the Latin phrase meaning “Where are you going?”

As always, the key to Van den Bergh's analysis lay in that new pile of cash; everyone could see that it made VNU vulnerable to a possible take-over. But maybe something like that was in fact best for the company, he speculated. It could come in many forms, including a take-over by some other company in a closely-related industry designed to incorporate VNU's assets and core competencies with those of the predator company to produce a powerful new entity whose strength would be greater than the sum of the parts used to build it. On that score, however, Van den Bergh naturally preferred a situation in which the acquisition instincts of himself and his advisors played the driving role – i.e. where VNU would be the acquirer rather than the acquired – and which crucially proceeded in a manner designed to find new assets to best fit VNU as a going concern, rather than subsume his company into some other entity where VNU was found to fit best.

9 In fact, desultory discussions about possible mergers had been going on for decades between

VNU and its other main rivals in the Dutch publishing world, namely Elsevier and Wolters Kluwer, but had never gotten off the ground, in part because of this very attitude. It was all a bit like the inevitably dull dance at a high school out in the country, where the handful of students there have all been acquainted for years and know full well that no one is willing to let his or her partner lead.

9 More intriguing was the prospect of a take-over that would take VNU private; here, money brought to the table from one or more private-equity firms (most of it borrowed) would buy out the present shareholders and so allow VNU to proceed under private ownership, still with pressures to perform and earn profits but of a rather different sort than those faced by public companies. Exercises such as these had often assumed the particular form of a “management buy-out,” in which the private-equity firms involved had worked closely with the given firm's management to carry out the deal and then retained all or most of that management in place for the new regime. In discussing such options within his “Quo Vadis?” memo, Van den Bergh had no need to limit himself to writing merely theoretically. For one thing, he himself had been serving for some time as a director with the prominent European private-equity firm 3i, while his good friend and VNU Supervisory Board member Gerry Hobbs was also involved with a smaller American private-equity firm, Boston Venture. More importantly, there had already been a private-equity inquiry about the possibilities of such a management buy-out of VNU, in the form of a visit in October from Klaas Meertens of JP Morgan. In itself, JP Morgan was no private-equity firm, but it was the banker to many such enterprises, and Meertens in particular was known to have considerable influence on investment outfits up to and including Kohlberg, Kravis, Roberts & Co., the marquee American firm that had first put the private-equity phenomenon on the map with its celebrated hostile take-over of RJR Nabisco in the early 1990s. Meertens was clearly interested in VNU, and after his initial visit he kept giving Van den Bergh a call trying to arrange a further meeting for him with his investment acquaintances.

So that was one realm of possibilities. While acceding to shareholders' demands and simply returning the remainder of the World Directories Group sales money to them via one device or another was another, it did not appeal much to the VNU CEO. “Giving money back is poverty,” was his saying, meaning that resorting to such measures merely attested to a paucity of imagination, and of gumption, on the part of any company's management that had to make you wonder how such people could justify the salaries paid and the confidence entrusted to them in the first place.

No, Rob van den Bergh was always more likely to be inclined to aggressive options that served to further build up his company, and for his “Quo Vadis?” paper he had another plan to propose whose details were already fairly clear: he had the American company IMS Health in his sights as an acquisition target. From one perspective, this was neither very original nor hard to predict. After all, IMS had been the third company (after Nielsen Media Research and AC Nielsen) to be given an independent structure and, in effect, put in the shop-window for purchase by Dun & Bradstreet in the late 1990s. Still, none of this took away from the fact that that company's extensive coverage of pharmaceutical sales-data, not only within the US but worldwide, made it in Van den Bergh's eyes the perfect complement to VNU's current offerings and capabilities, and so a vital next-step to the champion business-information firm he was trying to build. IMS had long known of this interest, for the top management from both companies had been in contact since 2002. For most of that time discussions had centered mainly on ways both firms could cooperate, but the prospect of some sort of future purchase or merger had never been far from the back of anyone's mind. And now VNU had assembled a pile of money that could go some way towards making that happen! That certainly made the on- going talks between the two firms more interesting going in to the last quarter of 2004, leading eventually to a get-to-know-you visit by VNU's entire Supervisory Board in December of that year to IMS' offices in New York City. At about the same time a shuffle of IMS top-management occurred - David Carlucci, a younger executive formerly of IBM, took over the CEO reins - that some analysts interpreted as intended to align such personnel to a future within VNU's management ranks.

The Supervisory Board was impressed with what they saw during that New York City visit. They could also see the logic for an IMS deal in that section of Van den Bergh's “Quo Vadis?” memorandum that set out that argument, although the VNU chief himself professed to have no personal preference about which future course of action was ultimately chosen. Indeed, he had just written in the Annual Report for 2004 that he anticipated no more acquisitions.10 To be sure, there were dissenting voices to the IMS plan within the company's executive suites, particularly the one located at the traditional headquarters in Haarlem. That still housed (along with Finance) Investor Relations, and the idea of a purchase of IMS Health struck a very wrong chord there with that department's head, Rob de Meel. His tenure at VNU exceeded even that of Van den Bergh, and for many years he and Frans Cremers had formed the team which was known and trusted among shareholders and analysts alike for handling the company's communications and relations with the outside world. But now there was a new CFO, Ruijter, who doubted De Meel had enough time left in his VNU career for it to make sense to have him move to New York, and who really wanted his own man at IR anyway. De Meel's serious doubts about the wisdom of an IMS acquisition and his willingness to raise them, while principled and responsible, were what ultimately sealed the argument that a retirement a bit earlier than planned was his best option.11

For Rob van den Bergh was under no false illusions: nothing less than a unified front of agreement among those few privileged to know of the advancing IMS Health plans was necessary to drive the acquisition through to success. The Supervisory Board was already sold on the idea. It provided its official go-ahead at a meeting in mid-March 2005, but that was merely the easiest step. What remained to be done was not only bringing negotiations with IMS Health to a successful conclusion, and with acceptable terms, but also doing all of this in secret. This was nothing new, and indeed some countries' securities laws even demanded it: preliminary merger or acquisition negotiations were always undertaken under strict conditions of confidentiality because there were always parties looking to make some quick money on the markets by trading on such insider information. Still, the sharper-than-normal atmosphere of controversy – even suspicion – over what VNU's next step should be meant that the risk of someone uncovering the incipient deal and ruining it was also higher. If the worst should happen, Rob van den Bergh was ready with a fall-back option: in a letter to the Supervisory Board just prior to that mid-March meeting, he made it clear that a private-equity buy-out would be the best way to go if the IMS transaction for any reason could not go forward.

Why was Van den Bergh willing to countenance the purchase of his company if the purchase of IMS Health should fail? It was not only the case that IMS represented to him the essential complementary piece for turning VNU into a giant in the business information realm. The IMS transaction also constituted in itself a process that he considered equally as crucial to the company's future fortunes: the completion of its Americanization.

10 “Rapid growth in organic revenue is essential for our future and remains a top priority in 2005,”

he had written. 11 De Meel had one more important task to perform before his departure. In June (2005) VNU

held what was for it something unusual: an “Investors Day” in New York, designed to feature exhibitions and presentations by top executives to build confidence in the company among actual and potential shareholders (although any talk about acquisitions was strongly downplayed). Rob van den Bergh, however, canceled his scheduled appearance there at the last minute, citing “family reasons.”

In the first place, IMS itself was American-based and so would add still more to the weight of US-based activities under the VNU name – not to mention sheer number of VNU employees in the US - that had already assumed enormous proportions as a result of the company's take-over wave of the

early twenty-first century.12 Already Van den Bergh himself and most of his Management Board lived in the New York City area and spent most of their time working at VNU's building on Broadway. Some presence at the old Haarlem headquarters had continued to be desirable so that VNU could retain its status as a limited liability corporation under Dutch law, however, and so both Investor Relations and most of Finance continued to be housed there. (Crucially, Rob Ruijter had also put his office in New York, with a support staff of American employees.)

In addition to that, however, prospects for an IMS purchase soon came to involve a required listing of VNU shares on one of the American exchanges, principally to enable the option of issuing shares there as a source of funding for the deal, but also as yet another important milestone of demonstrating a US presence. Such a listing would be a complicated undertaking, as it would involve the transformation of the company's accounts from an Dutch GAAP to US GAAP accounting standards, when the VNU finance staff was already busy transitioning those accounts to the International (IFRS) standard now required by the EU. Considering that the company had operations in over one hundred companies, and that the books in all three accounting standards – Dutch GAAP, US GAAP, and IFRS – would have to be reconciled with each other, it was a monumental task that now fell mainly upon the Finance personnel mostly still located back in Haarlem, who had to address it with only the usual set of hands-on-deck13 . What was more, those privy to the company's new intentions of acquiring yet another major American firm could also figure out fairly quickly that this exercise might very well be among the last that Netherlands-based personnel would ever be called upon to do.

Whatever the attitudes of headquarters staff, it was those who ultimately owned the company, the shareholders, whose opinions really counted. That the natives here were restless was already evident from feedback such as the UBS visit. April saw yet another such intervention, this time from the London headquarters of the European office of Fidelity Investments. In a letter to management, the fund-managers there pronounced themselves dissatisfied with what they had recently heard at VNU's presentation of its results for calendar 2004. Yet again the company had failed to fulfill the potential with which that enormous wave of acquisitions at the beginning of the decade was supposed to have provided it; it was time that it did so, through greater attention and effort devoted to making all its assorted parts work better together, and in the meantime any new acquisitions should really be out of the question. Of course, the remainder of that money left from the World Directories sale needed to be dispersed, but the best way to do that was to return it to shareholders.

Needless to say, this communication was not met with any more sympathy from VNU management than had been the complaints from UBS: yet another set of financial experts who thought they could tell us how to run the company, even while owning no more of it than maybe a couple of percent! Rob Ruijter summarily dispatched a reply to London thanking those there for their input.

12 An interesting clue to the progress of “Americanization” within VNU can be found simply by

examining back-copies of its in-house employee magazine. From its very founding VNU put out a publication designed to inform employees what was going on in the company – at first a newsletter, then a full-color magazine – written in Dutch and called Kroniek (Dutch for “chronicle”). This ceased publication in 2001, however; and for around two years, employees had to resort to their inter-office grapevines for any news, until a replacement came along starting in 2003. But this was written in English (with the title “Links”) and published in New York!

13 To provide added flavor to the Finance experience at Haarlem headquarters, managers there now often found themselves staying at the office late in order to be available for teleconferences with New York- based company executives – for whom it was only mid-afternoon, given the 6-hour time difference.

But relations with the shareholders turned out to be no better at the annual shareholders' meeting that convened shortly thereafter. This had nothing to do per se with any IMS acquisition, since such developments were still a closely-held secret, and neither did they have anything to do with that long-simmering demand to have the World Directories money returned to shareholders. Rather, what prompted unexpectedly fierce resistance at the annual general meeting was management's proposal to issue preferred shares, wishing simply to make use of this financing option to boost the company's working capital. But shareholders saw no need for any such measure, and recent changes in Dutch company law had also deprived preferred shares of much of the tax advantages that they once provided. In what was a rare happening indeed in the world of general shareholder meetings – which almost uniformly are so pre-planned and stage-managed as to never inspire any more of a strong feeling than boredom – the agenda item proposing the preferred shares was actually taken up for discussion and a formal vote, and was then duly voted down.

Still, none of this worried VNU management unduly. In the final analysis, Fidelity, although a name of great prestige and long standing in the mutual fund industry, could speak for only a small slice of the company's ownership. As for that unseemly fracas at the annual general meeting, that had been merely a freak wildfire of shareholder resistance to what management could clearly see was best for the company, without any real leadership that anti-management insurgents could coalesce around. A little more alarming was a letter that arrived in late June – just as negotiations with IMS Health seemed to be reaching their final phase – from the Monaco-based firm Knight Vinke Asset Management. The argument from Knight Vinke's head officer, Eric Knight, was by now more than familiar: the surplus cash needed to be returned to shareholders, management attention needed to address with re-doubled determination the proper integration of the company's various divisions, rather than going on the hunt for more. Coming from Eric Knight, however, made it a bit more ominous, as Knight Vinke already had a notorious history of “punching above its weight” in shareholder matters. Just the previous year Eric Knight had played an instrumental role, despite his firm's minuscule holdings of Royal Dutch Shell, in persuading that company to abolish its long-standing dual Dutch-British ownership structure and fuse itself into one company. No one was more wary of what Eric Knight could do once he set his mind to it than Aad Jacobs, who had been Chairman of the Supervisory Board of Shell at the time and had tried to dismiss such a fusion as too expensive (in taxation terms) and unworkable.

THE BATTLE FOR IMS

Be that as it may, none of this could be allowed to affect the on-going negotiations with IMS

Health, which were coming quickly to a close in the early summer of 2005. The deal itself was finally announced to the public at the Amsterdam Hilton on Monday, 11 July 2005, with key IMS figures there in attendance including David Carlucci, IMS' CEO, and Nancy Cooper, who already had an impressive record of achieving internal integration and so was looked to as key to enabling VNU to integrate IMS into its structure in an optimal manner – something that probably would be only the very first of her assignments for the company. “VNU and IMS know each other well. We are working together extensively already,” Rob van den Bergh explained to those assembled in the Hilton's grand ballroom. “With this deal we raise that cooperation to a higher level. The new combination will be a true world-player.” It would be an irresistible “one-stop-shop” for marketing information for the big pharmaceutical companies, he explained.

The aging of European and American societies, in particular, meant steadily more drugs and medicines consumed, yet at the same time a growing trend towards the use of non-prescription drugs meant that, to be truly effective, market-monitoring had to track drug purchases by ordinary consumers together with the conventional prescriptions issued by doctors and hospitals. With IMS tucked into its company structure, VNU could uniquely provide precisely that sort of all-inclusive market coverage.

The price-tag? It amounted to $28.10 per share offered to IMS shareholders, paid in a combination of cash and VNU shares. This was about a 16% premium over the current IMS share-price, and amounted to a total evaluation of IMS of €5.8 billion - a sum exceeding the amounts paid to acquire Nielsen Media Research and AC Nielsen put together. Interestingly, one key provision of the deal was that VNU would be liable to IMS for a $125 million penalty should the former call off the deal unilaterally. Then again, IMS would have to pay VNU the same amount if, before the deal was approved and executed, it jilted the latter by accepting some other (presumably higher-priced) take-over offer. The deal as it was shaped seemed very advantageous to IMS managers: not only did those of them with extensive holdings in their company's stock make enormous amounts of money, but the roster of top management within the future combined company was dominated mostly by IMS names.14

In any case, the most important thing was that the proposed deal was now out for public analysis and comment. Reception on the part of the analyst community was mixed but generally cautiously positive. No one had expected something this big, so that many found the price somewhat high: that €5.8 billion amount represented twelve times IMS Health's EBITDA and four times its revenue. Still, the logic of how IMS fit within VNU's portfolio of marketing-information activities, and the advantages to be derived from that, was clear and convincing. The resulting whole would amount to something much more profitable than its individual parts, because “synergies” could be expected not only on the cost side, where duplicate functions would be eliminated, but more importantly on the revenue side, where the combined company's new capabilities would attract new customers and coax greater revenue-yields from old ones. On the other hand, so far VNU had a poor record in actually realizing such potential synergies in marketing information activities.15

Another “voice” offered its own comment on the proposed deal, namely the securities markets. Normally after the announcement of a take-over involving (partial) payment in the acquiring company's shares, the price of such shares usually falls because of the dilution such a purchase means to the stakes of those already holding them. Indeed, this was something Rob van den Bergh had worried about to the Supervisory Board back when the IMS deal was still under discussion; he expected this effect together with additional shareholder disappointment at not getting any share buy-backs to put a serious short-term hit on VNU's share-price, which had for some time been far lower than management felt was justified. On the other hand, one usually sees the share-price of the acquired firm rise, if that price was below the offer-price (as was the case here), as a natural reaction to the prospect of selling ones shares again in the near future at that offer- price.

14 Of course, that was perhaps no surprise in view of the decisive shift to an America-based running of VNU

that the IMS deal represented, as was previously discussed. 15 In its analysis, the investment bank Lehman Brothers accused VNU of simply re-assembling the old Dun

& Bradstreet, but declined to venture any opinion over whether the IMS acquisition would turn out to be a good idea. In this it was not being entirely original. Dutch commentators back at the time of the sale of the magazine division had already remarked that all that was being accomplished then was some name changes: VNU (i.e. the old VNU, the magazine-publisher) was now called Sanoma, while Nielsen was now called VNU.

Funnily enough, though, the opposite effect was seen in fact: VNU's share-price actually started to rise and the IMS share-price to fall over the summer. Indeed, by September the latter lay, at around $22.50, a full 20% under the offer price.

Analysts were one thing, but VNU management knew that a skillful sales-job would be needed to get the needed acceptance for the deal from company shareholders, who could clearly see slipping away here the money that many had hoped to get back themselves. Unfortunately, the regularly-scheduled presentation of VNU's half-yearly figures, following the IMS announcement by a month, did little to cheer up the shareholders any further: on a year-on-year basis revenue was up but profit was down, and once again the AC Nielsen division disappointed in the autonomous revenue growth it actually achieved. It was plain to see how far the company still had to go in effectively integrating those assets it already possessed, and several more-outspoken shareholders (e.g. UBS, Fidelity) had already pointed this out explicitly. For these, the IMS deal announcement was tantamount to a slap in the face.

All of that was regrettable, to be sure. But the important thing was that this acquisition of IMS Health was what the company needed for its long-term success, and VNU management were always aware that it was they who were charged with the responsibility of guiding their company's fortunes in the best interests of all its various stakeholders. As in the past, the shareholders simply needed a clear and full explanation about what the IMS take-over specifically entailed and why it was the best step to take for VNU's16 future. They would soon get that, as Rob van den Bergh and other top executives prepared to embark on the customary “road show” to visit various major shareholders, who, after all, were reasonable people. Yes, you had your mavericks like Knight Vinke and Fidelity, but those never represented any big-enough block of shares to worry about. As for those who did, the road show usually just amounted to a series of social engagements with old friends – sharing a hot cup of good Dutch coffee with portfolio managers at the big Dutch pension funds, the big Dutch banks and insurance companies, whose firms had been part of VNU seemingly forever, and who knew better than to make waves and thereby make management's job harder than it already was. Anyway, all of them were well aware that, if things ever came to the point where they simply could not accept a given course of action that management proposed to take, they could always simply sell their shares.

In this, though, the VNU top executives were laboring under some dated assumptions. The year 2005 in fact showed a radical shift in the composition of the company's shareholder base, away from the old-school type of shareholder that they assumed still made up the majority. It's true that such developments were not easy to detect. To be sure, shareholdings in any one company that met or exceeded a threshold of 5% were required to be reported to the Dutch security markets authorities, and thereby made public. But there was a loophole: investment management companies in particular usually controlled several investment funds, and it was only when that 5% threshold was reached within any one individual fund (i.e. under the control of one fund manager) that the reporting requirement came into force. Such companies could therefore own much more than 5% in any one company and keep it secret as long as they split the holding up into pieces.17 It was also true that Dutch shares were issued not by name but to the bearer, which further made precise identification of shareholders difficult,

16 Well, not “VNU” exactly, since another aspect of the deal involved the company changing its

name to “Nielsen,” to reflect the fact that it was no long so much of a “U” (Dutch uitgever, or publisher) nor indeed very “N” (Nederlands, or Dutch), and to help it gain name-recognition particularly in the American market.

17 This loophole in Dutch securities law was finally closed in 2006, so that holdings were calculated on the basis of what an entire investment company had control over.

whether for routine communication purposes or for management trying to figure out precisely the nature of the shareholder constituency they were charged with serving. “Difficult” - but not impossible, and after a “snapshot” of their shareholders that VNU had taken in February by its research office, there was no indication that VNU management had been further interested in monitoring this. After all, they had been unpleasantly surprised already at the spring annual shareholders' meeting by the opposition to their preferred shares proposal, when one spokeswoman against it emerged out of nowhere claiming to represent the votes of 45 million shares. Was this claim actually true? No one in the company knew, or tried to find out.

Even more useful would have been some investigation into shareholder composition once the time came to sell the IMS deal. That would have revealed the Templeton Fund to be a particularly crucial player. This prestigious investment fund, headquartered in the Bahamas, had been founded by the legendary investor John Templeton (later knighted by Queen Elizabeth II), and was run by Murdo Murchison, who from 2000 on had taken a strong interest in VNU and its ongoing transformation. He had steadily built up his share in the company, until in the summer of 2005 it amounted to around 15% of total VNU common shares, a holding that he naturally split up among various Templeton funds to retain confidentiality. Murchison also had a strong opinion about the prospects of an acquisition of IMS Health, and that out of past experience: Templeton had also owned a substantial stake in IMS, for a while. It was a well-run company, in an interesting niche-business – but it had put off several private-equity companies, who had approached in the past to purchase it, with the high price its management demanded. As far as Murchison could calculate, in revenue- and profit- multiple terms VNU had now consented to pay that same sort of exorbitant price. This realization simply made him unable ever to generate much enthusiasm for this deal, an attitude that even a later personal visit to Nassau, with a presentation by VNU top management including Supervisory Board Chairman Aad Jacobs, could do nothing to change.

That same management was already aware of the objections to the IMS deal from Fidelity, from the “no more acquisitions” letter of last April. It was clear that the Boston stop on the IMS road show was going to be a tough one, so that Rob van den Bergh made sure that he took along not only Rob Ruijter but also the key personnel from IMS, namely David Carlucci and Nancy Cooper. That enlarged team still had little effect, however, for the Fidelity fund-managers were particularly outraged over the “promises” that, in their eyes, Van den Bergh had earlier issued not to engage in acquisitions of such a scale. But the VNU/IMS team did learn some very useful things. To their surprise, Fidelity revealed that its stake in VNU, which it had steadily built up since the beginning of the year, now amounted to about 11%. Also, Fidelity had been made aware via its own connections of the interest by private-equity companies in buying VNU (i.e. the other option that Van den Bergh had explored in his restricted-circulation “Quo Vadis?” memorandum). In exchange, the Fidelity executives heard precious little that was very agreeable to them from the visiting VNU/IMS team, whose very joint presence gave witness to the planned acquisition which it was Fidelity's position to oppose. Nonetheless, afterwards Fidelity decided simply to continue its efforts to buy further VNU shares, up to the limit of a 15% stake decreed by company policy.

In this same vein, it was no more possible for this IMS road show to avoid a stop at Knight Vinke Asset Management as it had been to skip Fidelity. Yes, that investment firm had been founded in the first place only two years previously, and its stake in VNU was only at around 2%. On the other hand, even that 2% meant an investment of some €150 million, which actually represented a full half of Knight Vinke's invested capital.

Whether Eric Knight was vouchsafed a personal briefing by VNU officials on the IMS deal or not, he was sure to focus quite a lot of his attention on the matter.

Past form, as well as the unique sort of investment firm that Knight Vinke had already revealed itself to be in its short span of existence, suggested that it was not very wise to try to ignore it. For Eric Knight made his money by what he himself termed “moral suasion,” which basically amounted to correcting firms that were doing something wrong in their operations – thereby ultimately making them more-profitable companies and so increasing the value of his holdings in them. So far, Knight had never had to accept “no” for an answer when it came to his “moral suasion”; his firm might be as a mouse in terms of the tiny ownership-shares it could afford to buy in the large-cap firms in which it took an interest, but it was a mouse that nonetheless knew how to roar. His formula for leveraging his influence this way usually involved a combination of 1) Intense research and preparation, both in-house and hired from consulting firms, to identify the problems and the necessary corrective measures; 2) The collection of support for those corrective measures first, not from the target company itself, but rather from another shareholder with substantially larger holdings, who then was usually glad to use Knight Vinke to do the necessary dirty work to persuade the target company to implement them; and 3) Astute use of the media, both for exerting public pressure on the target company and for solidifying and enlarging its support among other shareholders. And Knight had been interested in VNU in this way since the previous year, seeing in the failure of management there to effectively integrate the market-information acquisitions of several years previously a tremendous damper on the company's natural profit-making potential.

VNU management were well aware of this point-of-view, of course, from past Knight Vinke communications both public and private – but, from the above logic, Eric Knight and his fellow Knight Vinke managers were entitled to their very own briefing on the IMS deal anyway, which finally took place on 30 September at VNU's New York City office. Rob van den Bergh even tried a little bravado, telling Knight that “a majority of our shareholders stand behind us,” meaning that he was sure that management would win should the acquisition be voted on during the following spring's annual general shareholders' meeting. For while at that point it was true that, over the course of the IMS road show to that point, VNU management had failed to gain firm positive support for the acquisition from any major shareholder, no one had said “no,” either.

Actually, that was not 100% true: perhaps Van den Bergh had simply let slip out of his mind a recent episode that conformed more to the norms of the Dutch investment environment of old. A major shareholder – namely Capital Asset Management of London, with ownership of around 7% - upon learning of what VNU planned regarding IMS, simply could not agree and had sold off that entire stake. Much of that went to Fidelity; a little of it even went to Knight Vinke. Eric Knight was well aware of this and more, as he had engaged his own American research organization to keep him informed of the fluid VNU shareholder situation. Even as both Templeton and Fidelity both issued public statements just after VNU's New York meeting with the Knight Vinke managers, expressing their opposition to the IMS acquisition, Knight put himself at the center of a communications web between those two firms, his own, and several other large shareholders which he could identify as likely also being inclined against the IMS deal.

Clearly at this point Knight felt a certain momentum gathering behind his efforts to try to persuade VNU to call off the deal. But that “road show” briefing from Van den Bergh alone was therefore not sufficient for him when it came to interaction with management; yes, Van den Bergh's claim of majority support had almost immediately been thrown into doubt by the public statements of the two influential shareholding investment companies,

but if things were simply allowed to go on as they were then the “pro” and “con” sides would simply carry on trying to build up their positions and the actual decision would be put off until the general shareholders' meeting in the spring – and in the meantime tremendous effort and money would be expended to prepare for the acquisition on the possibly mistaken assumption that it ultimately was going to occur. Far better to push the confrontation forward to as early a point as possible, Knight figured – especially when the balance of forces seemed to be cresting on his side.

It was this logic that moved him to pick up the telephone and contact Supervisory Board Chairman Aad Jacobs. Their relations were hardly friendly – they had tangled before over the structural change that Knight Vinke had succeeded in pushing through at Royal Dutch Shell – but both were at the same time consummate gentlemen. Jacobs also had a good idea of Knight's purpose, but he had also had his expectations for the IMS deal considerably chastened by his recent far-flung, and unsuccessful, jaunt to the Bahamas to try to persuade Murdo Murchison to change his mind. Ordinarily, it was a tad outrageous to allow shareholders to meet with company directors without any representative from the Management Board present; but Jacobs relented anyway, and arranged a meeting at his office in Rotterdam for 19 October, where he together with former CEO and still Board member Joep Brentjens would be waiting to see what Eric Knight and other large- shareholding representatives had to say.

The visiting entourage turned out to include executives from Fidelity, Templeton, and UBS, but Knight had clearly been delegated as their common spokesman. With the assistance of a PowerPoint presentation he had loaded on his laptop, entitled “Why we reject the IMS transaction,” he went through his talking-points one more time: the envisioned management structure for the new, combined firm was simply too complex; the current VNU share-price was so low that the diluting effect of the new shares issued to pay IMS shareholders would be unduly severe; but, at bottom, it was focused management attention on the efficient organization of the assets already in place that was the way to turn VNU into the vastly more-profitable company that it should be, and not this expensive new acquisition. Instead, the remaining money from the World Directories sales should be returned to shareholders; in fact, Knight raised the subject of an $8 billion super-dividend. And if Van den Bergh wanted to speak of shareholder support, Eric Knight was more than willing to do so as well: he told Jacobs that he could count on 46% of the company's shareholders against the IMS proposal, and amount which, if true, was far too close to 50% this early in the game for management to have any confidence that it could have its way in any vote at the annual general shareholders' meeting.

Aad Jacobs could see no way out; afterwards he swiftly convened a meeting of the full Supervisory Board to pass on his pessimistic sentiments. Two weeks later VNU issued a press-release that it was reconsidering its plan to acquire IMS Health. On 17 November it officially announced that the deal was off.

INEVITABLE ALTERNATIVES

That was it, then: the IMS acquisition was dead, because getting the deal approved even by just a majority of company shareholders now appeared just too unlikely. And with it out the window went Rob van den Bergh's vision of VNU bestriding the world as a business-information giant. Now it could only be . . . what? It would ordinarily now be Van den Bergh's role now as CEO to go back to the drawing-board to figure something out, except that his authority and credibility within the organization were now shot. Japanese executives in similar circumstances, at least in earlier times,

would have been expected at this stage to withdraw to a private room to disembowel themselves with a sharp ceremonial knife; the norms and values in the Netherlands were considerably kinder, but it was still clear that Rob van den Bergh (and quite possibly more executives as well) would have to go . . . well, eventually.

Actually, the reputation of Supervisory Board Chairman Aad Jacobs was stained by the IMS failure at least as much. But Jacobs was scheduled to retire soon anyway; company regulations dictated that a Supervisory Board member of his age had to step down at the first general meeting of shareholders of the following year. In the meantime, his long experience in and knowledge of the company was almost indispensable for guiding it out of the stormy waters in which it found itself. The same reasoning could be applied to Rob van den Bergh, for that matter; the one thing VNU did not need, at least at this early stage of post-IMS recovery, was the further uncertainty that a search for a new CEO would bring.

For the sharks were in the water, circling hungrily, now smelling blood. These were, of course, the private equity investment companies, and VNU was for them now a very attractive target for take-over because of the large holdings of cash-equivalents it still carried on its books. VNU's typical earnings-stream was also just what private equity firms wanted to see: mostly insulated from economic ups-and-downs (that had been Rob van den Bergh's explicit goal in the first place), with much revenue guaranteed in long-term contracts with major corporations.

Thus, it could not really have been a very great surprise to Van den Bergh on 18 November 2005 to get a call on his mobile telephone and see on the screen the name of Alexander Navab, of Kohlberg, Kravis, Roberts & Co. (KKR). “Let's meet,” was Navab's suggestion. It was always much more desirable to do a take-over with a firm's cooperation, rather than against its resistance, but that usually meant you needed to be first-on-the- scene to propose it and convince current management that that was the best way to proceed. KKR had been watching and investigating VNU, waiting to make its move, for quite some time, since the end of 2004 in fact, in a research effort that totaled up to €1 million. What is more, analysts at JP Morgan (KKR's house bank) had raised the alert level only the previous month with a report that had cast serious doubt whether the IMS acquisition would be able to go forward.

That meeting duly took place four days later, at VNU New York City headquarters on Broadway, and included KKR patriarch Henry Kravis himself. There the KKR executives described how they had already formed a consortium of private-equity firms interested in bidding to take over all of VNU, including other than KKR itself Thomas H. Lee, Blackstone, and also the Netherlands-based investment firm Alpinvest. Listening to their presentation, both Van den Bergh and CFO Rob Ruijter found their case intriguing. Fresh from their victory in the IMS matter, VNU shareholders would not have accepted at that point from top management anything less than an exploration of all further options towards creating further value for the company. Calls from within the shareholder ranks for an investment bank to be brought in to study just how that might best be done had come even when the IMS acquisition had still been up in the air, and had redoubled after its failure. But now, as a result of this meeting, management had what seemed like a reasonable plan for going forward, and Van den Bergh soon afterwards handed it off to two of VNU's “house” financial advisors (i.e. with whom the company had long business relationships), Credit Suisse First Boston (CSFB) and Evercore Partners, to carry forward the task of investigating further paths for the company that shareholders had been demanding. Soon, at the beginning of December, another private-equity consortium of firms emerged to express its interest in purchasing VNU as well, one composed of Bain Capital, Texas Pacific, and Warburg Pincus.

On 13 December the full Supervisory Board met to formally give CSFB approval to pursue negotiations towards a possible take-over with these two consortia, including permission for their representatives to examine the company's accounts. At the same time, the Board set up a “transaction committee” composed of several of its members, including Chairman Jacobs, for monitoring the progress of those negotiations. VNU also formally reported to the press the fact of their existence to finally quell the swirl of rumors around the markets for weeks that VNU was once more “in play.”

SHAREHOLDERS STILL DISSATISFIED

Perhaps unsurprisingly, all these efforts on the part of VNU management still failed to satisfy

shareholder demands fully. All right, KKR had successfully maneuvered to show up first on the scene to present its take-over plan, but that by no means had anything to do as to whether the KKR bid offered the best return to the shareholders. For that matter, why did the entire company need to be sold off and taken private? It was clear that certain of VNU's divisions were better performers than others, and also that various attempts to derive “synergy” between the company's various operations had never come to much; surely it was possible that there were certain “core” divisions that VNU would be best- advised to keep, while selling off “non-core”? It was true that both these two big consortia had formed around the exclusive idea of buying VNU whole, but that was those companies' conception and, again, not necessarily the best plan from the point-of-view of shareholders. (There were also rumors that VNU had secretly insisted that interested private equity companies sign an agreement that they would only ever seek to buy the whole company, not partly, as a condition even to being considered eligible for submitting a bid either individually or collectively, but management denied having ever done this.) Eric Knight, for one, was far from satisfied with the post-IMS course of events so far, nor with the engagement of CSFB and Evercore to study VNU's options and conduct the negotiations. Knight Vinke instead engaged for itself the Boston Consulting Group, to submit its own independent and no-holds-barred assessment of where VNU should go from here to best benefit its shareholders.

Of course, few other parties were as obsessed with VNU and exactly how its future should best be pursued than Eric Knight, other than the company's own top management, so that his arguments often struck most other shareholders as somewhat abstruse. The simple thing that could make everyone else sit up and take notice was price, namely at what price-per-VNU-share would the consortia offer to buy out the company. Formal offers from either of the competing groups were still something for the future, as their accountants were still busy going through VNU's financial records. However, by 13 January 2006 the original consortium (the one headed by KKR and Thomas H. Lee but since expanded with more firms18 ; it had adopted the collective name Valcon) was ready to publish a preliminary “indicative” bid of between €28 and €28.50 per share, valuing the entire company at around €8.4 billion. This did much to clear the air on the investor side; even though such an “indicative” bid was ultimately non-binding, it convinced the other consortium that any potential deal was already becoming too expensive for its members' collective tastes, and rather than offer its own “indicative” bid, that consortium in short order simply withdrew from the process.

18 The other investment firms joining the original four were Hellman & Friedman, Apax Partners,

Carlyle Group, and Permira, but Permira then withdrew in January at the time of the “indicative” bid because it was itself unwilling to pay even that much.

Having but one party to deal with for selling the company simplified the lives of VNU and its negotiators quite a bit – although when the Valcon consortium then requested a preliminary agreement to make them exclusive negotiating parties, that was refused according to the logic of “keeping all options open.” Aad Jacobs did agree, however, to cease for now the process that had been underway to find a suitable successor for Rob van den Bergh as CEO.

This “indicative” bid did much to clear the air on the shareholder side, too – like a brisk, chilly gust of wind. For even €28.50 per share was a number that definitely fell short of what most shareholders had been expecting. Around that same time (i.e. December 2005/January 2006) VNU shares on the Amsterdam exchange routinely traded for more than that amount, for heaven's sake! More fundamentally, even without the boost that IMS would have represented to the Marketing Information division, most shareholders had much more faith in the continuing viability and earning-power of VNU as a whole than what that €8.4 billion valuation implied – the company was worth much more than that!

Eric Knight was quite sure about that, too – he thought a price of even €40 per share was justified, at least proportionally for certain components of VNU if they were sold off separately - because that was what his independently-commissioned Boston Consulting Group study was telling him. And he desired most urgently another meeting with Aad Jacobs and other top management to impress the point upon them. This he was granted the first week of February, traveling along with a BCG representative to Haarlem to meet there with Jacobs, Rob van den Bergh, and Rob Ruijter. There he put forward his case about what should happen with VNU going forward: do not sell (especially at the ridiculously-low price that had been mooted), but instead focus on implementing internal improvements to the way the company was structured and run to truly maximize its value. (Part of this program also involved bringing in new management at the top, but since that was already an explicit part of the program no matter how things went in the future, it is likely it was not discussed.) In the eyes of Eric Knight, as confirmed by the BCG study, the key was enhancing the firm's productivity, its revenue-earned-per-employee, to raise it up to levels which other VNU competitors had managed to attain. It was time to institute better methods, such as closing marginal offices in far-off lands that did not justify their investment. Reaction from the VNU executives, though, was dismissive; although it was true that the company was indeed about to embark upon its own cost-cutting campaign - “Project Forward” - that BCG study was surely based upon out-of-date and inaccurate information. Besides, they were fully prepared to endorse the Valcon offer for the whole company when it was finally made public.

That occurred on 8 March 2006. The prospectus Valcon issued that day put the official bid at €28.75 per share and specified a required 95% shareholder acceptance for the deal to go through. Knight Vinke immediately issued a statement rejecting the bid, but the portion of VNU that that company owned directly was only 2%. However, subsequent announcements by leading shareholders also rejecting the bid started to cast grave doubt on its chances for acceptance. Fidelity issued a statement saying “no” and so did Templeton, despite yet another pilgrimage to Nassau by Van den Bergh and Ruijter (Aad Jacobs had had enough of begging-trips to the Caribbean by that point) to try to sell Murdo Murchison on the merits of the Valcon proposal. While the failure to do that was certainly frustrating, even more bitter was the blow delivered by ING Bank (holding 8.3%) when it also rejected the bid, while also calling for VNU to remain a Netherlands- listed firm; after all, Aad Jacobs was still a long-time member of the Supervisory Board there.

All in all, as its appointed date of 13 April came ever-nearer, the annual VNU general

shareholders meeting promised to be a quite boisterous affair for the second year in a row. Already a faction of shareholders larger than the 5% of dissenters that could be allowed had announced their opposition to the Valcon buy-out deal that VNU management

was publicly recommending be accepted. Meanwhile, while VNU management may have temporarily ceased its internal efforts to find a suitable successor to Rob van den Bergh as CEO, Fidelity had already taken the initiative on its own to engage the noted headhunting firm Russell Reynolds & Associates to undertake that task.19 And Eric Knight had some special treats of his own prepared for 13 April, which he had taken care to submit to the meeting's official agenda in time.20 Among the propositions he indicated he might desire to bring up for a vote were one declaring that VNU should be allowed to be sold off in parts, another expressing shareholders' lack of confidence in the present Supervisory Board, and also a proposition that he himself should gain a seat on a completely new Supervisory Board. What was more, despite all of this turmoil – and having possibly learned nothing from the IMS experience the previous year – it seemed that VNU management, in its negotiations with Valcon, had once again permitted clauses in the proposed take-over deal that would commit the company to paying a substantial penalty- sum to the bidders should the proposal be rejected.

April 6, just one week prior to the VNU general meeting, found Eric Knight holding court in London at the Ritz Hotel, presiding over a collection of VNU shareholder representatives that might very well have exceeded in sheer attendance those who could have been expected to show up the following week in Amsterdam. With the wind apparently at his back in his campaign to stifle the proposed Valcon take-over, Knight wanted to consolidate his support by rallying the troops: he would gladly explain to everyone his own vision (backed by independent research) of VNU's best future path, and of course in doing so looked to pick up as many proxy-declarations (whereby other shareholders authorized Knight to vote in representation of their shares at the general meeting) as possible. It was a clever move, since although many still thought the Valcon bid was much too low, deciding to reject it was also highly uncertain. After all, many shareholders had picked up their shares at a price in the low-20s for which the Valcon offer did represent a positive, if modest gain. VNU management was officially in favor of the bid, and no one could know for sure how VNU would proceed (either the company or the share-price) if it failed a second time with a major initiative. There at the Ritz Hotel meeting Eric Knight went so far in pushing his own rosy view of VNU's true future value as to maintain that both Knight Vinke and Fidelity were actually interested in building their shareholdings further; some of those present thought that they heard him promise a “Plan B” to the Valcon offer, namely some sort of offer to buy shares at an indeterminate point in the future at a price somewhat above the €28.50 that Valcon was offering.

CRISIS DELAYED, CRISIS RESOLVED

No one could have been very surprised at the announcement that came from company

officials the following day that the following week's general shareholders' meeting would be postponed by two months, to 13 June. To be sure, the originally-planned meeting of 13 April in Amsterdam would go ahead – but it would be only an informative occasion, to answer questions about and debate the Valcon bid.

19 It's a measure of how small the headhunting world is that it was actually Russell Reynolds that

VNU management had been working with when their earlier efforts to find Van den Bergh's successor were still active. So the firm's chief, Harm van Esch, mindful of the fact that it is really a company's Supervisory Board that is in charge of hiring its top management, at least formally, called up Aad Jacobs to make sure this new assignment from Fidelity was OK. Jacobs had no objection.

20 According to company by-laws, such items had to be submitted at least 60 days in advance to be placed on the agenda.

The official, decision-making meeting needed to be moved to June, VNU announced, so it could become clear whether that bid would in fact be accepted or not – after all, 5 May was the final day of Valcon's cash-for-shares offer - especially in light of what the VNU announcement called all the confusing, contradictory information that had come into circulation recently about it.

The day for that “informative” meeting, to be held as usual at the Amsterdam Hilton, arrived on schedule on April 13. The occasion developed into a debate between those professing a pessimistic view of the company's future prospects – ironically, this was management – against those insisting that that future was bright and would be needlessly undersold by acceptance of the Valcon offer. Of course, the leading spokesman for that latter point-of-view was Eric Knight; armed with the results of his BCG study, he went through again his arguments as to why VNU was really worth somewhere north of €40 per share, not somewhere south of €30. From his good connections with Fidelity, he was also able to announce that one suitable replacement for Van den Bergh had already been located, although he could not yet name the name and, in any event, that search would continue. He also had very little to say about that supposed “Plan B” that most everyone else wanted to hear about, although he did go through the leverage calculations that he presumed were behind the Valcon take-over attempt, which seemed to demonstrate that the €28.75 bid was indeed rather ungenerous compared to what that consortium could expect to profit from the deal.

CFO Rob Ruijter spearheaded the official VNU presentation at this occasion. Unfortunately, as he informed the gathered shareholders, the company's various divisions were facing heightened competitive pressures all along the line, especially AC Nielsen. For all the trouble and expense that Knight had expended to obtain an analysis of VNU's operations from another, independent viewpoint, the fact remained that that BCG report relied far too much on imprecise information, meant only for public consumption, that for the most part was by now out-of-date. Naturally, management had better information, and thus a clearer picture of the company's prospects. Furthermore, many of the measures needed to bring VNU back into tip-top competitive shape were far easier for a private company to accomplish.

Overall, this was a debate in which Rob Ruijter largely came out on top in the end. Many assembled shareholders did start to think again about what would be their best posture towards the Valcon bid. In the meantime, as the 5 May deadline to accept the deal grew nearer and nothing else was forthcoming about Eric Knight's mysterious “Plan B,” the Dutch securities-market legal watchdog (the AFM, or Autoriteit Financiële Markten) started to sniff around: such hinting about a possible future share-offer for the purposes of influencing shareholders' votes on an important matter of company business was really beyond the legal pale. Not only did these very public AFM moves turn Eric Knight into the subject of an investigation by the authorities, but they also served to remind all other shareholders how little of any further substance had been announced about this “Plan B” since the day when it was first brought up at the London meeting.

To their pleasant surprise, the leading authorities behind the Valcon consortium were also able in that Spring of 2006 to enjoy a pair of market developments that together served to make their €28.75 bid a more attractive offer, namely a general downturn in the securities markets (which lowered the VNU share-price once again below the level of the official bid) and a strengthening of the euro against the dollar, which made the deal more attractive especially to US-based VNU shareholders. Still, even two days before the 5 May deadline none of the VNU shareholders had as yet offered their shares for sale according to the terms in the 8 March prospectus. That 3rd of May saw yet another open letter from Chairman Aad Jacobs,

that he managed to have published in the leading Dutch business newspaper, Het Financieele Dagblad, in which he maintained that if he were in the shareholders' shoes then, yes, he would also wait until the last minute to announce his decision, but that decision would be to accept the Valcon offer.

But Valcon did not need Ad Jacob's intervention, for they had an ace up their sleeve which they could now deploy. On 4 May they announced that they were boosting their per-share offer by €0.75, to €29.50; that they were extending their deadline for acceptance; and that they now insisted only on gaining 80% of shares before they would consider the take-over accepted. That difference may have been only three euro-quarters per share, but it was a meaningful one nonetheless; for one thing, it represented an additional sum of €200 million that Valcon was bringing to the table that it would not be able to borrow (because it was to late in the deal) but had to come up with out of its own resources. Essentially, the gesture showed one and all how serious Valcon was in its pursuit of VNU, and no one failed to realize that significance. In a negative-image of the initial reactions to the 8 March prospectus, one leading shareholding entity after another proceeded to announce that it was accepting the Valcon offer.

Powerful, determined investor interests had faced off for two months against powerful, determined shareholder interests; with this last-minute €200 million concession of the former to the latter, a deal was able to be done. Rob van den Bergh learned by telephone that the shareholder acceptance had been passed, so that the deal was officially done, on May 21 on his way to play the celebrated Augusta golf course in Georgia (USA). Soon he was to make way entirely for Rob Ruijter to take over operations at VNU for a few months, prior to the execution of the take-over deal, making VNU privately-held company, in August, 2006.

With new, private ownership came completely new top management including a new CEO, namely David L. Calhoun who immediately came to the company from a successful career within General Electric which had seen him cap a series of positions as CEO of that company's various divisions (Aircraft Engines; Employers Reinsurance Corporation; GE Lighting; GE Transportation Systems) with being named GE Vice Chairman. Naturally, an entirely-new Supervisory Board was also engaged, as the company moved entirely to an American basis (e.g. headquarters in New York, adoption of the US GAAP accounting standard, utilization of the American securities markets). To top it all off, there was a re-christening: As of January, 2007, what had been known for more than forty years as VNU became instead the Nielsen Company.

With the new regime in place, the Nielsen Company proceeded to shore up the international positions in marketing and consumer information it had already attained as VNU and to aggressively move into new markets being opened up by technology, such as on-line intelligence and mobile measurement. (Financial figures for the company's 2007 results are available in the appendices.)

Appendix

(CHAIRMAN)

VNU BOARD OF DIRECTORS (RAAD VAN COMMISSARISSEN) COMPOSITION THROUGH THE YEARS (FROM AGM 1995) (VICE-

CHAIRMAN)

State as of 25 APR 1995 (Assumption by drs. P.A. W. Roef of Chairmanship) drs. G. Van prof. dr. J.J.A. mr. H.B. Vandrs. P.A.W. Roef Schalk Vollbergh Liemt F.L.V. Meysman G. Jeelof mw. drs. M.W.M. Vos-van

Gortel State as of 23 APR 1996

drs. G. Van [resigned, not drs. P.A.W. Roef Schalk drs. P.J. Van Dun immed. replaced] F.L.V. Meysman G. Jeelof mw. drs. M.W.M. Vos-van

Gortel State as of 1 MAY 1996

drs. G. Van [resigned, not immed. drs. P.A.W. Roef Schalk drs. P.J. Van Dun F.L.V. Meysman replaced] mw. drs. M.W.M. Vos-van

Gortel drs. G. Van

State as of 1 JAN 1998

drs. P.A.W. Roef Schalk drs. P.J. Van Dun drs. A.G. Jacobs F.L.V. Meysman mw. drs. M.W.M. Vos-van Gortel

drs. P.A.W. Roef drs. A.G. Jacobs drs. P.J. Van Dun

drs. P.A.W. Roef drs. A.G. Jacobs drs. P.J. Van Dun

State as of 18 APR 2000 drs. J.L.

Brentjens* F.L.V. Meysman mr. P.A.F.W. Elverding mw. drs. M.W.M. Vos-van Gortel

State as of 16 APR 2002 drs. J.L.

Brentjens* F.L.V. Meysman mr. P.A.F.W. Elverding [resigned, not immed. replaced]

drs. J.L.

State as of 15 APR 03

drs. A.G. Jacobs F.L.V. Meysman R. Dahan Brentjens* mr. P.A.F.W. Elverding drs. J.L.

State as of 1 JAN 04

drs. A.G. Jacobs F.L.V. Meysman R. Dahan Brentjens* G.S. Hobbs* mr. P.A.F.W. Elverding drs. J.L.

State as of 19 APR 05

drs. A.G. Jacobs F.L.V. Meysman R. Dahan * elevated from the Management Board

Brentjens* G.S. Hobbs* mr. P.A.F.W. Elverding drs. A. Van Rossum

Selling, gen, admin. exp. 1492,4 1473,6 2007 NUMBERS REPORTED Operating income 404,2 267,8 PER US GAAP.

Interest charges

473,6

334,7 2006 NUMBERS REPORTED Forex losses 76,7 59,0 PER IFRS (International Financial Net non-operational losses 46,8 160,2 Reporting Standards).Income tax expense 13,2 -52,6

Income before extraor. items -206,1 -233,5 SOURCE: BLOOMBERG

Extraor. loss pre-tax Minority interests

-1,5

13,5

Net income -204,6 -247,1 NIELSEN/VNU BALANCE SHEETS 2006-07 € millions 2007 2006Gross fixed assets 523,9 Accum. depreciation 140,6 Net fixed assets 383,3 397,3Long-term invt./rcvbls/other 9738,7 10054,6

Noncurrent assets 10122,0 10451,9

Other current assets

750,2

1161,6 Marketable securities 114,5Cash & near-cash 273,6 478,4

Current assets 1023,8 1754,5

TOTAL ASSETS

11145,8

12206,4

Share capital

2906,1

3169,3 Preference/priority Retained earnings

0,7 -193,4

-201,7

Minority interest 2,7 79,6

Shareholder equity 2716,2 3047,2

Long-term borrowings

5511,2

5884,4 Other long-term liab. 1581,3 1723,4Noncurrent liab. 7092,5 7607,9

Short-term borrowings

146,1

160,7 Trade payables 85,0 81,1Other short-term liab. 1106,1 1309,4Current liab. 1337,2 1551,3

Total liabilities 8429,6 9159,1

TOTAL LIAB. + EQUITY

11145,8

12206,4 Shares outstanding (mill.) 258,5 258,5

Appendix NIELSEN/VNU INCOME STATEMENTS 2006-07 € millions 2007 2006

NOTE: TOTALS MAY DEVIATE

Revenue 3440,1 3326,7 SLIGHTLY DUE TO ROUNDING.

Cost of sales 1543,6 1585,2

Appendix

VNU INCOME STATEMENTS 2002-05

€ millions 2005 2004 2003 2002

Revenue Other income

3457 3319 3899 4266 20 16 -18 9

Total revenues 3477 3335 3882 4275 Personnel costs

1752 1756 1883 2018

Supplies and purchased svc 717 704 813 797 Deprec./Amortization 249 280 153 160 Other operating expenses 421 299 390 555 Goodwill amort/impairmt -255 -286

Operating profit 338 296 388 459 Financial income Financial expense

29 -107

20 -110

16 -154

16 -184

Associates'/JV's share of inc. 10 -2 7 10

Profit before tax Income tax expense Profit from cont.

270 -20 250

204 -52 152

256 -112 144

301 -127 174

Profit from discont. ops. 6 94 --- Profit 256 246 144 174 Attributable to: Equity holders of VNU

256

250

130

170

Minority interests --- -4 14 4 EPS (€) basic & diluted Profit from cont. ops.

0,98

0,59

0,50

0,67

Profit 1,00 0,97 0,50 0,67

NOTE: TOTALS MAY DEVIATE SLIGHTLY DUE TO ROUNDING

NUMBERS REPORTED ACCORDING TO THE INTERNATIONAL FINANCIAL REPORTING STANDARD (IFRS)

SOURCE: VNU ANNUAL REPORTS

Appendix

VNU BALANCE SHEETS 2002-05 € millions 2005 2004 € millions 2003 2002 Cash and cash equiv. 862 2045 Inventories 12 23Other fin. assets 263 121 Accts. rcvble & other curr asst 960 1060Trade & other receivables 644 549 Cash and cash equiv. 490 525

Inventory/other curr. assets 169 124 Current assets 1461 1607

Current assets 1938 2839 Intangible assets

7116

8200

Goodwill 4027 3579 Property plant & eqpmnt 504 522Other intangible assets 1548 1451 Long-term financial assets 429 388

Property plant & eqpmnt 424 370 Non-current assets 8049 9110Deferred tax assets 68 116 TOTAL ASSETS 9510 10717Investmt by equity method 172 52 Pension assets 63 60 Current liabilities 1648 1914Other fin. assets 323 78 Other non-curr. assets 82 70 Debenture loans 2826 3184

Non-current assets 6707 5776 Other long-term liab. 96 103

TOTAL ASSETS 8645 8615 Non-current liabilities 2922 3287 Bank overdrafts 80 --- Subordinated loans

182 492

Accts. payable 589 628 Provisions 610 332Deferred revenues 369 334 Minority interests 82 105

Income tax payable 50 41 874 929Borrowings & other fin. 535 167 TOTAL LIABILITIES 5444 6130Provisions 79 46

Current liabilities 1702 1216 Capital stock 53 52 Additional paid-in capital 2334 2335Provisions 221 415 Retained earnings 1549 2030Post-employm. benefits 153 158 Unappr. net earnings 130 170

Deferred tax liabilities 394 334 TOTAL EQUITY 4066 4587Borrowings & other fin. 1819 2759 TOTAL LIAB. + EQUITY 9510 10717Other non-current liab. 124 103

Non-current liabilities 2711 3769TOTAL LIABILITIES 4413 4985 Share capital 51 53 Additional paid-in capital 2623 2640 Retained earnings Other reserves

1847 -372

1669 -811

Minority interests 83 79

TOTAL EQUITY 4232 3630TOTAL LIAB. + EQUITY 8645 8615

NOTE: TOTALS MAY DEVIATE SLIGHTLY DUE TO ROUNDING NUMBERS REPORTED ACCORDING TO THE INTERNATIONAL FINANCIAL REPORTING STANDARD (IFRS) SOURCE: VNU ANNUAL REPORTS

I-'t

Appendix

80 Share-price attains interim peak: NLG 80.50 (= EU R 36.53)

70

60

Take-over of AC

50 Nielsen, $2.3 billion

40 Take-over of Nielsen

Media Research, $2.7 billion

Sale of newspaper divisi on to Wegener, N LG 1.8 billion(= EUR 817 million)

Take-over of World 30 Directories, $2.1

billion

20

Verenigde Nederlandse

10 Uitgeverijen created from the merger of Cobema and Spaarnestad

0

Sale of World Directories, $2.1 billion

Departure of Fnms Cremers as CFO, replaced by Rob Ruiiter

1970 1975 1980 1985 1990 1995 2000 2005

30 Growing resistance from shareholders

Unsuccessful visit of Jacobs, Van den Bergh, and Ruijter to the Bahamas to gain support from

towards the Valcon bid Last trading of VNU share on the securities markets

Temoleton for the take-over I • I Valcon raises its bid for VNU, shareholders ca pitulate

VNU starts negotiations with IMS Health about take-over

25

VNU changes the status of what had been scheduled as the general shareholders' meeting, so that no decisions can be made

Indicative bid for VNU shares from the Valcon private-equity consortium

... Take-over called off

Announcement of Hv!S Health take-over, €5.8 bill ion

20 .. .. 0 0

2006 "

2007

.. ..

12-o7-20!