Corporate Mergers and Acquisitions: New Game, New Goals
Excerpt from Mergers: Growth in the Fast Lane
Mergers Redefined
| 1980s | Today | |
| Reasons | Financial Play | Performance Jump |
| Risks | Over-leverage | Assimilation/Integration |
| Targets | Diverse | Similar |
| Prizes | Tangibles | Intangibles |
| (Plants, Equipment, Inventory, etc.) | (Core Competencey, Customers, Channels, Content) | |
| Success Factors | Transactional | Operational |
| Pressure Points | Sequential & Staggered | Parallel & Overlapping |
| Assets | Financial (Hard Capital) | Intellectual (Soft Capital) |
| Info. Technology | Centralized | Decentralized |
| Organization | Functional | Process-driven |
| Supply | Shortages | Over-capacity |
| Mandate | Stabilize | Exploit Instability |
| Market | Forgiving | Merciless |
The Big Shift
In today’s business world the game is growth. Ramping up. Getting bigger to get better. Some companies go at it conservatively, in incremental fashion. Other outfits shoot the works. Their game plan aims at exponential growth, and that usually means mergers and acquisitions . . . growing by leaps and bounds . . . combining operations to get maximum market share, economies of scale, payback on technology investments.In other words, major upsizing, in high gear.
What’s driving this big shift toward dominating instead of downsizing?
Well, it’s that same old one-syllable word: change. But instead of struggling to cope with change, companies now are trying to conquer it. Today’s focus is on building. Buying. And because the world’s new, faster metabolism is catching hold, mergers are back.
Sure, shrinking and trimming will continue. We still need to squeeze out costs and soup up performance. But everybody’s doing that. And most folks have figured out that cutbacks, by themselves, won’t make you competitive for long. Having done some serious pruning, the corporate world now needs a good growing season.
Today’s Deals are Different.
In the 1980s, many deals were “financial plays.” In the 21st century, to a much larger degree, deal success depends on good integration management. The new game mandates operational effectiveness. So growth via mergers and acquisitions becomes a winning proposition only if the companies can be consolidated successfully. And only if the whole truly is greater than the sum of the parts. Or faster. Or cheaper. Or reaches more customers.
Financial gains are still the final target, of course, but they aren’t achieved when the deal is cut. Unlike in times past, today’s acquirers don’t simply strip away assets and maximize shareholder value in short order. Current mergers are looked at as longer term challenges . . .
