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

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  •  M&A activity also includes .... (0+ / 0-)

    ... divestitures and spin-offs. Not all of these transactions are bad and some actually work great.

    The company I work for (a fairly large MNC) has been through pretty much every flavor of M&A, some not so brilliant, but others really had a beneficial result and one I'd like to remark on.

    This was the spin-off of a division that was originally part of the core business group, which organically grew (Japanese Co. so what they do) to be No. 2 in it's industry sector and then stagnated (grew to lumbering size and did not turn over management enough, aka, tired blood), dropping to No. 5 and was headed for a slow motion crash. The board realized (a) what was happening and (b) that it no longer really fit, so they spun it off as an independent company while still retaining some shares and maintaining the existing internal business relationships. Lots of useless managers were offered and took retirement in the deal, and complain as you will about golden parachutes, just getting rid of the potted plants reinvigorated the younger staff who had a lot of ideas and ambition, and willing to take some cuts to help the cash flow. Additionally, the spin-off also brought them business opportunities that previously did not exist because of the corporate affiliation but materialized after they gained independence. I think they are now ranked No. 4 but still on the up-swing almost 8 years on, smaller but better. Not a unique story, either. Sometimes the good guys get a chance.

    Other common process I would mention is the acquisition of start-ups, particularly in the tech sector. It is quite common for companies to make venture capital investments in start ups to germinate business, and later to buy the companies either because they see a viable opportunity, or because they see good ideas and/or people that might fail on their own but succeed by being absorbed.

    This is particularly the case of start-ups that have gone through 2-3 rounds of VC investments and get to the edge of "the valley of death" where they either take-off or die. Lots of good ideas, in fact, die for reasons other than merit, and acquisitions can save companies, people and ideas. In fact, in Silicon Valley, it's practically a rite of passage to have your start-up fail, die or get saved, and then to move on to make real companies, and I assure you many of the things we like were not invented by whom we suppose, but bought.

    400ppm : what about my daughter's future?

    by koNko on Fri May 17, 2013 at 01:52:23 AM PDT

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