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Volume 3 Management, mergers and fraud 1987–1993
Author: John Wilson

The final volume of this detailed history of Ferranti covers the last seven years of its operating existence, starting with the 1987 merger with ISC and culminating in a humiliating demise consequent upon GEC’s 1993 decision to withdraw its bid for what by then was an unprofitable rump. Extensive attention is paid to the way in which ISC evolved under James Guerin’s stewardship, providing insights into the shady world of international covert arms dealing. While in 1987 Ferranti purchased what was regarded as a highly profitable defence electronics business, by 1989 it was apparent that ISC’s net worth was marginal, creating an accounting hole in what by then was Ferranti International from which it never recovered, in spite of highly imaginative strategies enacted by a new chief executive, Eugene Anderson. The book provides detailed insights into international mergers, corporate governance issues and defence electronics that highlight the dangers associated with competing in one of the fastest-moving industries of that era.

John Wilson

This chapter identifies the key features of a business that by 1982 had been in existence for 100 years. The main theme is how the engineering-led strategy and devolved management structure created by the de Ferranti family up to 1975 had been built on by the chief executive, Derek Alun-Jones, imposed by the government as a result of its bail-out in 1974. Addressing the major market challenges facing Ferranti in the 1980s, the chapter concludes with an analysis of Alun-Jones’ ‘American Strategy’ which culminated in a major acquisition programme.

in Ferranti: A History
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John Wilson

This chapter traces the career of James Guerin and his establishment of ISC in 1972 as a vehicle for his aspiration to be a major player in the international defence markets. After failing to develop a viable product range, Guerin resorted to covert arms deals on behalf of the CIA, building a highly secretive business that was eventually obliged to register on the London Stock Exchange, rather than in New York, because of the liberal English company law. Whatever the reality behind Guerin’s business model, the firm attracted Ferranti management because of its American and international links.

in Ferranti: A History
John Wilson

This chapter provides a detailed analysis of the 1987 merger between Ferranti and ISC, highlighting the involvement of both senior management on both sides and a host of major City of London finance houses and associated firms. The key theme is the way in which contemporary regulations were followed rigorously, providing the opportunity for ISC to cover up some of the more dubious aspects of its accounts. Another issue developed is the personal relationship between James Guerin and Derek Alun-Jones, given the role this played in both the merger negotiations and consequent amalgamation.

in Ferranti: A History
John Wilson

This chapter unravels the fraud that had been perpetrated by James Guerin in compiling ISC’s accounts over many years. This requires a detailed analysis of the missile contracts that Guerin claimed to have secured in the Middle East, Pakistan and China. While Ferranti executives conducted extensive enquiries into the veracity of these contracts, it was almost two years after the merger before they realised the full extent of the fraud. The key theme will be the extent to which Ferranti executives continued to place considerable faith in Guerin’s claims, indicating the importance of trust in such relationships.

in Ferranti: A History
John Wilson

This chapter provides a detailed analysis of how multi-agency American and British investigative teams unravelled the highly intricate web of illicit activities created by James Guerin since the 1970s. By the time that the Grand Jury (in Philadelphia) was charged with investigating the criminal counts, there was an enormous amount of evidence implicating Guerin and his key executives. This finally resulted in a series of trials, consequent upon which Guerin was given a 15-year prison sentence and his co-conspirators a range of smaller sentences. At the same time, Ferranti also pursued compensation through the British courts, but in the end was obliged to accept a small sum from Peat Marwick Mitchell as ISC’s auditors.

in Ferranti: A History
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John Wilson

While the court cases were taking place in the States, Ferranti management was assessing how the fraud could be accommodated in the accounts, and especially the extent of bank borrowing required to prevent bankruptcy. It will become clear that while a bank syndicate provided extensive loans, the conditions placed on these funds resulted in an extensive disposal programme that left Ferranti bereft of profitable activities, and especially the hugely successful Scottish division. Another condition was the replacement of Derek Alun-Jones as chief executive with Eugene Anderson, an American with extensive experience of corporate turnarounds. These developments marked a dramatic change in both the nature and size of the business, as well as the corporate culture that had flourished for over 100 years.

in Ferranti: A History
John Wilson

This chapter analyses the strategies devised by Eugene Anderson in order to effect a recovery after the traumatic discoveries of 1989. This will include an assessment of the extent to which he was able to rebuild a ‘New Ferranti International’. As well as restructuring the business, and especially the American subsidiaries, further disposals were also effected, reducing the size of the business and its prospects of recovering fully. This also coincided with dramatic developments in the world defence market, not least the end of the Cold War and the consequent mergers in military-related sectors.

in Ferranti: A History
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John Wilson

This chapter tracks the final 18 months of a business that was slowly fading into corporate obscurity, holed fatally by a massive fraud and victim of a one-sided deal with its bankers that resulted in the disposal of most of its profitable divisions. GEC’s Arnold Weinstock played a key role in the final stages, but ultimately withdrew its offer to buy the remaining activities, forcing Anderson to concede defeat. Although Ferranti disappeared as trading operation in December 1993, the name lived on in various management buy-outs and a pension scheme that ironically has continued to flourish.

in Ferranti: A History
John Yamamoto-Wilson

Masochism depends on fantasy, whether acted out or merely imagined, and the fantasy depends on an Other, who witnesses either as an observer or as a participant the suffering, real or imagined, of the fantasist, who in turn feels gratified. This chapter explores the motif of the captivating power of the woman's gaze as part of a wider discourse of male anxiety in early modern literature, a discourse in which, as Nussbaum says in relation to Butler's Hudibras, 'Women use their sexual powers to make foolish men weak and feminine' and the male becomes 'a captive of his own stupidity'. It charts the discursive evolution of the transgressive woman and the foolish man and highlights the male anxiety generated by the female Other. The chapter reviews Theodor Reik's analysis of masochism, which defines two 'constituent elements', fantasy and suspense, of which 'phantasy is the most important'.

in The hurt(ful) body