Companies of all shapes and sizes are looking for ways to save, stabilize and grow their business.
In many cases, they consider merging with competitors or related-service companies as a way of gaining market share or cutting costs.
Vertical or horizontal integration? They're not fussy. Business owners post-rationalize either as a way to convince themselves the deal is smart and will lead to a new world order.
AOl-Time Warner stands as a beacon of the humility that follows hubris when it comes to most M&A deals.
A recent analysis of the biggest deals of the last decade illustrates how often the owners get it wrong. And the cost of doing so.
Since January 1, 2000 there have been 316,657 M&A deals done around the world.
Their total value - $25.2 trillion. Put another way, that’s half what the world creates in a good year.
And the returns? On the simplest level, the bigger the company the greater the likelihood the deal will cost the shareholders money. The largest transactions destroyed more capital than they created post merger.
Intuitively it makes sense that smaller companies are more likely to do more valuable deals. It’s easier to see the pros and cons and for all the principals to be involved.
But the majority of M&A deals still fail for one simple reason.
Social issues.
These come in many forms. Culture. Beliefs. Embedded influences. Local norms.
Subtle. Nuanced. Uncomfortable to address.
Instead negotiations focus on the tangible. Ownership percentages, board membership, management control and compensation.
But if you don’t take cultural differences into account when you examine the pros and cons of a merger or acquisition you ignore the thing most likely to undermine its success.
Your staff believing that this is their company.
Energy that is always the difference between the average business and the great.
Merging two cultures into one can be done. We did it to enormous and long-lasting effect at the Whitehouse.
But you have to take the best of both to make it work.
Which takes time, focus, commitment and a long-term vision that the costs of the effort are worth it. Patience is helpful as well. And a bucket or two of being willing to see the other side. A trait which requires you have enough confidence in your own view to set it aside from time to time.
Put all that together as the foundations of a new business model and you might change the world.
Otherwise, you're just wasting time. Yours and everyone else's'.
