When Testosterone and Corporate Deals Merge

Testosterone-laden execs have propensity to initiate deals, but they're also more likely to rebuff acquisition attempts by rivals, or to scrap deals that are already in progress. New study finds.
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An academic study with a provocative title landed in my inbox the other day. It's called "Deal or No Deal: Hormones and the Mergers and Acquisitions Game," and in it, two finance professors from the University of British Columbia argue that CEOs with high testosterone levels are likely to act recklessly in mergers and acquisitions. Testosterone-laden execs have an outsized propensity to initiate deals, the professors found, but they're also more likely to rebuff acquisition attempts by rivals, or to scrap deals that are already in progress.

I was fascinated, because testosterone replacement is one of the hottest concepts in the rapidly growing field of anti-aging medicine. Testosterone gels such as Abbott's AndroGel, are marketed heavily to middle-aged men as the new fountain of youth -- the natural elixir, if you will for everything from fatigue to a sagging libido. The market for testosterone products has grown from $34 million to $750 million in the last decade.

But if this study is any indication, testosterone may not be so good for corporate America. The professors didn't actually draw blood from CEOs and measure their testosterone levels, mind you. Instead they examined the ages of all the CEOs involved in 350 U.S. deals between 1997 and 2007, and came to the conclusion that the younger the CEO, the more testosterone he had. It's a legitimate technique: Hormone levels peak in young adulthood and then fall gradually from there.

What the researchers found was disturbing, to say the least. Young CEOs are 20 percent more likely than long-in-the-tooth execs to withdraw a merger or acquisition bid. And when a company that's managed by a young lion is a target of Mergers and Acquisitions, there is a 2 percent higher chance that the CEO will try to block the deal. That could prompt a hostile takeover bid -- something no CEO wants.

I asked coauthor Dr. Maurice Levi a logical question: Couldn't it just be that young CEOs are inexperienced and therefore more likely to make dumb decisions? Turns out Levi already thought about that. He scrutinized the data to see if other factors could be playing a role, such as the CEOs' experience levels, marital status and even quantity of children. Guess what? None of those things mattered. "They didn't take away the effect of age," and by extension, testosterone, Levi says.

This study is directly relevant to the anti-aging industry because of the role testosterone supplementation plays in it. The anti-aging sales pitch is tantalizingly simple: hormones rage when we're young and wane as we age. So if we just replace them back to the levels they were when we were, say, 30 or 35, we'll have as much prowess as we did back then -- both in the boardroom and the bedroom.

Anti-aging doctors believe testosterone promotes muscle and bone strength, stimulates the production of red blood cells and fends off diseases of aging such as osteoporosis. But precious few long-term studies of testosterone in aging men have been performed, making it difficult to substantiate such claims, and to determine what risks aging fellows might be exposing themselves to by rubbing the hormone into their skin every day for life. The National Institute on Aging initiated a trial in 2009, but we won't see results from that until 2015.

And testosterone supplementation has had its share of setbacks. In May 2009, the U.S. Food & Drug Administration announced that it had received at least 20 reports of testosterone rubbing off on children and causing scary side effects such as increased libido and aggressive behavior. The makers of AndroGel and other testosterone products had to revise their warning labels to make note of the risks, and to instruct patients that they had better wash their hands carefully after using the gels.

Even the hormones our bodies make naturally can be dangerous, as evidenced in this latest study on deal making, which the University of British Columbia professors published on Sept. 10 in the journal Management Science.

I asked Levi what corporate boards of directors might learn from his research. "During negotiations for a merger, if you have a young, high-testosterone CEO, make sure he's working in the company's interest -- not his own," Levi says.

Good advice. I have something to add to that: If you're an older CEO who's tempted to use pharmaceuticals to ratchet back your testosterone level back to that of a 30-year-old, perhaps this study should make you think twice.

Arlene Weintraub is the author of "Selling the Fountain of Youth: How the Anti-Aging Industry Made a Disease Out Of Getting Old--And Made Billions."

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