Merger and Acquisition Failures (2018)

If you exclude the M&As involving large software companies, which seem to be the usual topic around here, then I could tell you that such processes - if companies are, for example, in segments such as manufacturing, finance, insurance, consumer products or media (that I know of), one of the most difficult parts consists/ed in systems (back end, front end, end users) convergence or absorption, with people aligned and committed to assist/support the efforts. In all scenarios, without exception, I was part of an M&A (and even divestitures, at time), on the IT side, the companies lost quite a few players (on the "acquired" side), due to frustration of not being able to create or produce as prior to such events, allegedly because of new IT environments. We tried everything - from spending days at the side of critical engineering or R&D or Sales & Marketing departments, to attempt to comprehend and create similarly supported new systems, to preserving parallel systems, for a while - and some people still didn't feel compelled to "change" how they were doing things. Unfortunately some of those were the ones in critical positions, which may have originated the ideas behind the desire for acquisition, and also able to choose alternatives, outside, i.e. changing jobs - as individuals - even if to then change IT systems in a new company, appeared as more acceptable than learning alongside the "acquiring" teams.

At least in the defense business, selling means "I'm Done". Whoever is buying is hoping to get some prefunded R&D - it is damn hard to fund R&D in a traditional contractor - and whoever's selling is all done developing and is ready to cash out. It's value extraction and destruction, nothing more.

There's a dark side, of course. If you're a small contractor, and you deny the offer, you're going to get chased out of the marketplace by not just the guy with the offer, but by all of his friends as well. They've got their corporate office within driving distance of every whorehouse servicing Logan Circle, and you have a research block and maybe an airfield lease. Unless you've been squatting on a personal fortune, in which case maybe you can run some Towncars to the Circles yourself.

So if you're ever in the situation, just sell the thing. Yeah, they'll crush any value left in your magic widget, but the whole edifice is effed, and it's not worth trying to fix a house from the bottom of the shitter.

Hmm, while these may be the emotional pangs of going through the process, there is a much greater failure that destroys much more value (both monetary and tangible benefit).

Joining a large company prevents expanding total addressable market.

The acquirer wants to tap an existing resource. While growth is commendable, it's only perceived as an option within a narrow customer base or market segment. It's increasing ROI, not capitalizing on new changes in the market.

This looks like a failure to innovate, but that's correlation not causation; not the root cause. There's plenty of innovation, it's just constrained by a limited business model.

I've never seen a company break out of this trap. If you make money from ads, b2b users (Slack), or b2b management (Oracle), it's impossible to change those stripes.

Microsoft could make a video game unit because they think "software in a box." Amazon never will.

It's not usually the giants where this really plays out, but the middle tier. Adobe, Atlassian, Intuit, PayPal, Salesforce, Walmart labs. Like trading Bitcoin for pizza in 2015, they made a great financial deals that paid off, even legitimized the space and were ahead of their time, but lost out on underpinning entire future markets.

I'd like to nominate Portugal and Spain. Look on a map and it seems so logical.