I often wonder if M&As actually deliver what is expected or perhaps my view of M&A isn’t the same as the execs? Reading and listening to the news recently and having discussions at the office got me thinking.
Having lived through one of the largest and worst IT mergers ever, watching firsthand the effects of M&A on the company, staff, management, products and services, clients and business partners I wonder if M&A is a simple means of raising share price and revenue numbers quickly so execs can make bonus and shareholders a quick return on stock?
A well thought out M&A will create compelling value if executed well such as acquisitions that complement existing assets (Products and services) or fill gaps. They create a compelling value proposition that Marketing and Sales can latch onto and increase market share and better retain existing clients.
On the other hand, M&As that are not thought out and executed well lead to damaged cultures, products and services plagued with quality problems (fall behind the market), confused messages on all fronts. For example, buy a services organization and lay off 75% of the staff while the remaining resign due to culture clash, broken promises and mistrust. Not only do this once but three more times…something’s wrong here. Buy another hardware company layoff 75% of the staff and shutdown the services area and then buy a services company a year later. Or buy a software product company and layoff the administration, most the technical staff and sales staff…common theme. The end result? Products and services suffer and most importantly clients suffer.
So I expect the same will happen in this case unless they have learned their lesson and really think about this acquisition and why its of value to clients and shareholders. Otherwise the value they acquired will dwindle away within 1-2 years and the acquired product/service (company) will be a mere shell of itself.