Netto deal may bode well for new Asda boss Clarke

A study suggests that CEOs who make a big early deal are more likely to be a long-term hit.

Last Updated: 06 Nov 2012

Brand new Asda chief exec Andy Clarke may have been in the post for all of half an hour (well, a month actually, if we’re getting hung up on details), but he’s already on the right track. The new CEO has just made a £778m bid for Netto’s UK stores. And according to research by Cass Business School, that ought to be a good sign: apparently, CEOs who take the bull by the horns and perform a major deal during the first year of their tenure tend to be more successful in the long run than their peers.

This is actually a relatively unusual move by Clarke, who was recently promoted from COO: the most assertive CEOs tend to be those who have been brought in from outside the company, says Cass, rather than those who have been promoted internally. Not surprising, in some ways – those who have risen through the ranks might be more familiar with how the company works, but new recruits will always be keen to make a big first impression.

Still, although Clarke may well be feeling pretty pleased with himself over the Netto deal at the moment, it’s important that he doesn’t get too carried away. The Cass study also found that if a CEO does more than one landmark deal during his or her first year in the job, it ‘invariably’ leads to the company performing less well. So after buying Netto in his first few weeks in charge, Clarke would be well advised to sit on his hands for the next eleven months.

Of course, he’s got plenty of other stuff to be getting on with. Clarke’s five-year plan for Asda is pretty ambitious; one of the targets is overtaking Tesco as the UK’s biggest supermarket. We fear he may have his work cut out for him on that one, particularly since Asda appears to have lost a bit of momentum lately. But an aggressive price-matching policy, introduced this month, suggests that Clarke is willing to play rough.

But that’s all for the future; for now, Clarke has enjoyed a good start to life as CEO. Asda has been linked with various targets in recent years – Woolworths, Argos and Matalan – but this decisive move allows him to take the fight to Tesco and Sainsbury’s by moving into smaller, high-street stores. But challenges remain. Buying the Danish chain is the easy bit; now it’s time to bring home the bacon.

In today's bulletin:

Shell snaps up US rival as BP's woes worsen
Pru seeks last-ditch discount on £23bn AIA deal
Royal Mail set to go Greene with first female chief exec
Netto deal may bode well for new Asda boss Clarke
Psychology at Work: Mind your language

Find this article useful?

Get more great articles like this in your inbox every lunchtime