Skip to main content

View Diary: Corporate Life In The Rearview Mirror: Mergers & Hackquisitions (57 comments)

Comment Preferences

  •  In my industry (6+ / 0-)

    There were 200+ players when I started my career.  Now there are three.

    A lot of it is that it is a brutally competitive business (and it didn't start out that way...the first couple decades the industry existed anyone could hang up a shingle and do it).  After 1990 or so though, that was no longer true. We would LOVE to be limited only to Moore's law.  Our products are literally obsolete in 6 months after introducing them, and that relentless schedule and product turnover has been going on for over 20 years, with margins typically razor-thin.     This kind of manufacture requires a R&D expenditure and control of supply chain that has become too expensive to just lose money on it (the way a lot of the "big guys" did for decades just to keep a hand in) or to go it on your own as a "me too" company.

    I've seen mergers done every possible way, plus a leveraged buyout.   The LBO actually made sense because the market was valuing us at less than our book value, and the years we were private were some of our best in terms of innovation and company health.

    Mergers - you've nailed it pretty well.   Good reasons include getting a capability your company needs to be competitive that you don't have, or taking out a sick competitor that is doing destructive actions in the marketplace as it dies (such as dumping products below cost).   Even when you have a good reason though, it's always scary for the rank and file.

    If you screw up the new capability it can kill your company.  My company almost died that way the year before I joined, and most of our big competitors that no longer exist failed that way.   They tried to stop being a niche player and try to service the whole market and discovered it isn't as easy as it looks.   The three survivors have the two who did it right, and one who is being kept alive primarily out of anti-trust concerns.

    When you gain a new capability you have to actually listen to the guys from the company that just merged in.   Failing to do so can kill your company dead.  It's very hard to get over "not invented here".

    The other scenario...taking out a weak competitor...I saw it done the usual way, as you describe, and also what is probably the right way.   When the merger was announced, the CEO said to the healthy company "Not a single employee of this company will be laid off as a result of this merger".   The dying company was not so lucky.   Essentially the healthy company got the top 20% or so of its employees and the rest were out of work.  OTOH, their company was going to be dead with all of them out of work in likely under 2 years.  So while it was a fairly brutal approach, it was the least distracting merger I've ever experienced from the standpoint of a healthy company employee, and we got a lot of REALLY good people from that company.  Not a single dud that I've encountered.

    •  Great job explaining the need to manage (3+ / 0-)
      Recommended by:
      ozsea1, radarlady, nchristine

      the new entity after the consummation of the deal. Sadly, there is an art to this that eludes many management teams who sonehow think that things will fall into place, and all the workers will join hands and sing "kumbaya". In reality, there can be some serious efforts at internal sabotage through infighting and entrenched loyalties.

      Those who do not understand history are condemned to repeat it... in summer school.

      by cassandracarolina on Wed May 15, 2013 at 08:07:07 PM PDT

      [ Parent ]

    •  Very good points (2+ / 0-)
      Recommended by:
      cassandracarolina, nchristine

      In my experience, if a company in the tech industry is not growing then entropy sets in.  One way or another that company will most likely not be around in a few years.

      Sometimes M&A is the best option for preserving customers and employees.  

      The opposite of "good" is "good intention" - Kurt Tucholsky

      by DowneastDem on Thu May 16, 2013 at 05:09:37 AM PDT

      [ Parent ]

    •  I don't know what the mood is like down there... (3+ / 0-)

      But my employer just signed an agreement to buy one of it's (international) suppliers. Not gonna lie; I saw the news and just about cheered, the supply and price situation is eternally tenuous, and we've got a ton of low end competitors.  

      Also, there's a flip side to acquiring for technology: "Not invented here" gets met by "I'm not going to work for them!" When the wrong people spook and bolt from the acquisition, you can end up with a bunch of machines with no one that knows how to fix the process that runs on them if something goes wrong, or how to extend it to a new product. We had this happen some time back: we bought a company for its technology; their engineers bolted. We managed to get one of our guys trained in the basics and pointed in the right direction of how to deal with the recorded info before all of them left, thanks to ye customary two week notice, but it was tight.

      Even when you're doing it smartly, things can go bad in so many ways, and I think that a lot of people forget it's a risk.

      •  Orakio, you raise a key point: people (2+ / 0-)
        Recommended by:
        nchristine, Creosote

        You can buy a building full of machines, patents, projects, or orders, but if you lose the key people, it's a waste of money. I've seen several situations in which key people were offered "stick-around" bonuses or asked to sign work agreements committing to stay for a year or two. Even that doesn't always help, if those people feel that their goodwill is being strained by having to work with former competitors or under new (mis)management.

        Those who do not understand history are condemned to repeat it... in summer school.

        by cassandracarolina on Thu May 16, 2013 at 06:40:05 AM PDT

        [ Parent ]

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site