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Chances are, if you've spent any time in Corporate America, your company has either been acquired, acquired another firm, or been part of a merger. Like a shark that must propel itself through the water to capture life-giving oxygen, so our corporations must move forward. The corporation's reasons for continuous advancement, though, are a bit more murky than those of the shark.

In today's corporate world, every fourth person seems to have an MBA. They're brimming with cookie-cutter ideas on how to grind out just the right financial metrics to continue staying on the sunny side of Wall Street. Sometimes this requires some financial sleight of hand, because numbers are very pesky things and without constant vigilance, they can get quite ornery.

Like any good sleight of hand, the skill is in the distraction, keeping the audience mesmerized so that they don't notice the smell of cooking books in the back room. One way to do this is growth, and the easiest way to grow a corporation is by absorbing other corporations through merger or acquisition.

Sure, you could try to grow organically by providing a quality product or service, adding customers, booking more orders, hiring more people, and generating more revenue, but that's so 19th century. Nowadays, it's just so much easier to muddy the fiscal waters by going on an acquisition binge and buying up other firms in your market sector.

On the face of it, this makes a lot of sense. You're capturing more market share (assuming the customers of your target company will stick with the new combined firm). You're neutralizing competition, since the acquired firms are now on "your side". It's a great time to make acquisitions, as companies fall on hard times and you can scoop them up for pennies on the dollar. Wall Street loves this sort of growth story. Any chart that keeps going up - whether it's sales, revenue, profit, market share, manager bonus payouts, heck, even global warming - is the drug of choice for Wall Street.

Mergers and acquisitions offer tantalizing opportunities to move money around the corporate balance sheet. All sorts of costs can be lumped into "restructuring" expenditures. Those at the top of the executive food chain always make out quite well. Stock grants are made, bonuses are paid out, corporate perks are awarded. It's all good... if you're in the corporate one percent.

Unfortunately mergers and acquisitions often they wreak havoc on employees and customers. Follow along below the logic gap for the rest of the story...

Employees know all too well the stresses of mergers and acquisition. Despite the colorful e-mails emanating from "corporate communications", it's the same sh*t, different day. We'll be joined by these wonderful, top-notch people from "NewCo", bringing with them great customer relationships, plenty of backlog, and great innovative thinking blah, blah, blah. I'm sure you're as excited as we are to welcome them into our Dysfunctional fold here at "DysCo". In the weeks, ahead, you'll be hearing more about the synergistic [insert stream of buzzwords here].

The message as received by the employees is a lot less upbeat: every time we go through this crap, there are layoffs and office consolidations. Either way, we're screwed. We're supposed to be all buddy-buddy with those people from NewCo? After they beat us out on that big contract for MegaPetrol? I don't think so.

Customers aren't usually all that happy either. At best, the merger or acquisition will be a major distraction. DysCo's employee's will be too worried about their jobs to pay attention to their work. New corporate entities require lots of legal work on contracts. When competitors merge, it gives the customer fewer options, and less opportunity to play one bidder against others to compete for their business. There's also the fear that customer service will go by the wayside when DysCo's a giant corporate behemoth.

Managers are the only group for whom these corporate perturbations may offer some positive outcomes. If they survive the merger or acquisition with their job intact, they might be able to cobble together a better role in the organization.

While Wall Street is being dazzled with emerging numbers suggesting that the merger or acquisition is yielding exactly the hoped-for benefits, employees - from the technicians through the ranks of the managers - are being dazzled with the internal story line. Now that we've acquired NewCo, we have the opportunity to upgrade our systems and processes. Translation for the overoptimistic: we'll get some cool new programs. Translation for everyone who's been through this before: here we go again.

In an ideal world, every new acquisition really could improve the growing company. Maybe they a better accounting system, a more robust safety program, a better suite of medical benefits, a stronger reputation for corporate giving, a more generous bonus program, nicer office locations, or more comprehensive training programs. Certainly they'll bring new customers, new technologies, new geographic reach. You'll have access to all this and more.

The corporate communications folks will dangle these enticements as proof that this is going to be just awesome, but in reality, it's just more sleight of hand. No, little employee, none of these things will come to pass. DysCo will still be a soul-less corporate behemoth whose only concern is the enrichment of its executives and continued gullibility of Wall Street. The only upside to this debacle for the Great Unwashed Masses is the possibility that someone will spring for a few pizzas for one of the interminable PowerPoint presentations. Most likely, though, it'll be brown-bag time.  Oh, and you'll need to work an extra hour to make up for the time you spent at the corporate presentation.

Viewed in the rear-view mirror, many mergers and acquisitions resemble a slow-motion train wreck. Those employees and managers who have their doubts will bail early rather than sticking around to see what happens. Those folks are often the brightest and most entrepreneurial (leaving the less bright/entrepreneurial colleagues behind to pick up the pieces). Customers will be lost in the shuffle as shoddy work, half-hearted customer service, and general chaos lead to broken relationships.

Countless employees will be laid off or will quit when they find that their new role or new office location is unpalatable. Folks in accounting will be set for a while, as will those in Human Resources, but everyone else will find their lives upended with no improvement to follow.

Meanwhile, the executives will have their hands full looking for ways to shelter their new wealth and keeping that sleight of hand going with the next deal. Sharks gotta swim, corporations gotta grow. In my next life, I'm hanging out with the sharks.

Originally posted to cassandracarolina's fossil record on Wed May 15, 2013 at 08:24 AM PDT.

Also republished by Community Spotlight.

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Comment Preferences

  •  Heh<sup>tm</sup>! (7+ / 0-)

    I came on board with a large consulting firm that had been merged into what I'd heard was "Beltway Raider", back in 1979. They had been a major engineering firm in the Chicago area. Supposedly the parent company went belly-up, and the firm I'd worked for merged with another engineering firm (which itself had been the result of previous mergers). By then I had been put on the street, hired by yet another firm (founded by principals from one of the firms that had been part of the previous merger of the second firm), and put on the street again.

    Confusing, ain't it?

    Float like a manhole cover, sting like a sash weight! Clean Coal Is A Clinker!

    by JeffW on Wed May 15, 2013 at 08:55:01 AM PDT

  •  To prepare my personal 2012 taxes, (9+ / 0-)

    I went online and used an interface maintained by a software manufacturer that's been a trusted name in the tax preparation field for a long time. You've heard of them.

    My experience this time was awful. There is no other way to describe it. Their interface was buggy and confusing. I couldn't get through on their damn customer service number. In the end, my returns were "rejected" by Feds and State(s) (first time this has ever happened) and I ended up doing them by hand and filing paper returns!

    A friend said, "Oh, __ (the tax preparer I used) was bought by __ (a huge software corporation of dubious reputation, with ubiquitous products)." I thought, "Well, no wonder. Too bad, all good things come to an end, I guess."

    It's here they got the range/ and the machinery for change/ and it's here they got the spiritual thirst. --Leonard Cohen

    by karmsy on Wed May 15, 2013 at 08:59:31 AM PDT

    •  Wow, I'd say I was surprised and shocked... (9+ / 0-)

      but this is exactly what happens in many acquisitions. Some good product or service provider is bought by some company that ruins a good thing.

      Sometimes, I think this is by design. Look at Yahoo buying something like a dozen start-up firms in the past year. Sounds great, but I am willing to bet they are squashing as many of these (or more) than they're incubating. Gotta kill 'em off before they out-compete Yahoo (which won't be tough to do).

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

      by cassandracarolina on Wed May 15, 2013 at 09:02:41 AM PDT

      [ Parent ]

  •  As one of those accountants who is all set :) (12+ / 0-)

    I love M&A!

    Synergies! Right-sizing! Rationalization!
    Market alignment! Vertical integration!
    JIT inventory & distribution!
    Leveraging core competencies!
    Thinking outside the box!
    Agents of change! Actioning!
    Value - added capacities! Increasing employee bandwith!

    I'm slobbering all over myself, I'm so excited by M&A!

    Of course, it all means we're fucked, even the accountants who now have to work 100 hours a week adding even more useless reports to the bin, but hey, it all sounds good, doesn't it?

    Liberalism is trust of the people tempered by prudence. Conservatism is distrust of the people tempered by fear. ~William E. Gladstone, 1866

    by absdoggy on Wed May 15, 2013 at 09:23:57 AM PDT

    •  I hear ya! (8+ / 0-)

      I've done due diligence from the environmental perspective for clients looking to acquire or merge with firms that might have significant liabilities (contaminated properties, compliance issues, failing infrastructure).

      In one case, a client wanted full photocopies of all the documents involved with a site, which amounted to several bookshelves' worth of reports plus correspondence, permits, etc. The costs to copy this stuff were in the $ thousands. I asked her how she wanted it shipped - overnight? regular delivery?

      No hurry, she said. The stuff's just going to sit in a warehouse. Nobody's going to read it.

      A lot of M&A activity seems to be much ado about nothing, and then it's off to the next one.

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

      by cassandracarolina on Wed May 15, 2013 at 09:31:02 AM PDT

      [ Parent ]

      •  Its pretty depressing (6+ / 0-)

        my friend to read what you see in today corporate world and the mergers, take overs and how regular working folks are caught in the middle.

        One thing I did note where you sound upbeat is in the last sentence of your diary:

        In my next life, I'm hanging out with the sharks.
        I don`t know who I will hang out with, but I continue to steadfast believe in what you say here. For you though, I would recommend that you hang out with Mermaids instead.

        Its nice to read your work again Cassandracarolina.

        Old men tell same old stories

        by Ole Texan on Wed May 15, 2013 at 10:17:39 AM PDT

        [ Parent ]

    •  Bingo! n/t (1+ / 0-)
      Recommended by:
      cassandracarolina

      “Never, never be afraid to do what's right, especially if the well-being of a person or animal is at stake. Society's punishments are small compared to the wounds we inflict on our soul when we look the other way.” ― Martin Luther King Jr.

      by minglewood on Thu May 16, 2013 at 10:36:38 AM PDT

      [ Parent ]

  •  Bain moved my cheese! (10+ / 0-)

    Once upon a time I worked for an Internet company. Our CEO met the author of Who Moved My Cheese? We ended up running the book-related web site for a time. And everyone was assigned the homework of reading it.

    A year or so later we were acquired by Bain Capital. (Yes, that Bain capital.) And then things really went downhill, along the line of this fine diary.

    So as it turned out, Mitt Romney moved my cheese. (Well, his minions, anyway.)

    Not that I complained, of course, because I learned the moral lesson of the Cheesy book: Good little mice never question the causes or consequences of corporate cheese moving.

    Ah, the memories of attending the business school of hard cheese knocks....

    Thanks for continuing this series.

    Cheers

    Most models are wrong, but some are useful.

    by etbnc on Wed May 15, 2013 at 10:09:51 AM PDT

    •  Oh, that dreadful little book! (5+ / 0-)

      One of my colleagues at DysCo recommended it to me as some sort of panacea for all the change-related crap going on in the company. My view was that if I was that easily redirected in my mental efforts, I should have been fired on the spot for incompetence.

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

      by cassandracarolina on Wed May 15, 2013 at 10:28:41 AM PDT

      [ Parent ]

      •  perspective makes a difference (4+ / 0-)

        If one chooses to read the Cheese book voluntarily, without duress, it's possible to see it as a variation on the theme: if life hands you lemons, make lemonade.

        So it appeals to managers who only perceive that aspect of it. When those managers urge "subordinates" — with all the context and baggage of the asymmetric relationship that goes with the word "subordinate" — those readers tend to perceive the subtext instead: Shut up, little mouse. Follow orders. Don't ask questions. Or someone bigger will squash you.

        It backfires especially badly when the mice, er, staff are in knowledge professions in which they're being paid to think. Telling them to stop thinking about something just doesn't work.

        I was a low level manager when I was "urged" to read it. I could see how it would appeal to some managers. I could also feel how disturbing it was to be put in the position of a mouse who is not supposed to object to the capricious whims and implicit threats behind movable cheese.

        In the real world its effects seem to make it — generally, as you said — a dreadful little book.

        Most models are wrong, but some are useful.

        by etbnc on Wed May 15, 2013 at 11:16:48 AM PDT

        [ Parent ]

        •  The whole issue of "embracing change" (10+ / 0-)

          wears thin pretty thin. It's as though there was a period of time during which complaints would be tolerated, then everyone had to "get with the program".

          My idiot boss (who himself is now no longer with the company - finally) felt that all the company's challenges seemed to stem from "negative attitude" on our part as employees. I asked him one day: "So... if you could get rid of everyone with a negative attitude and replace them with someone with a positive attitude, things would get better?"

          "Absolutely!", he said.

          "Even if these new people have no relationships with our customers, don't have any institutional knowledge of our projects, and will take months or years to ramp up to full efficiency?"

          "Absolutely!", he said.

          I didn't bother pointing out that nearly all of us had GOOD attitudes when hired, and that the negative attitude was the result of things the company was doing. The next batch of happy people would soon be demoralized once they looked around for a while. Oh, well.

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

          by cassandracarolina on Wed May 15, 2013 at 11:34:22 AM PDT

          [ Parent ]

        •  we cant be squashed (4+ / 0-)

          we are the workers after all. Managers don´t work. If a company makes profit, we make it. If they squash us then the company is dead. OK, let them come squash me. I´m in corporate R&D. So now I´m squashed and fired, what then, will the manager sit there and do the R&D work? Dont think so. They dont have the brains for that - if they had brains they´d be unsuited for their job.

          thats why unionization is a must. A single worker is easy removed and replaced. The Workforce is not - it rules. If it organizes.

          •  Years ago, my dad worked as a design engineer (3+ / 0-)
            Recommended by:
            Youffraita, Vatexia, radarlady

            and was one of the first people laid off when his company (now manufacturing his invention) wanted to cut costs. They were making electronic components for the early days of the space program.

            When one of the components was made a little too large to fit into the housing manufactured by another contractor, the morons at my dad's company came up with a plan to squash their component in a vise to get them to fit.

            As my dad used to say: "never time to do it right; always time to do it over."

            Knowledge workers are vital to corporate success, but quickly thrown under the bus.

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

            by cassandracarolina on Wed May 15, 2013 at 12:11:41 PM PDT

            [ Parent ]

            •  most galling (7+ / 0-)

              is the incompetence of the managers on display. my life in the corporate world has been a learning experience - and thats one of the basic lessons I learnt: a competent manager is a rare breed indeed. Worth their weight in gold. Unfortunately, most of them are incompetent. Their salaries I dont mind, but the damage they do is boundless.

              this is still not ceasing to astonish me. All the public idiotologues are yammering about how capitalism is meritocratic yet if you look inside a random large actual company you find its higher ranks filled with mediocrity at best and glaring incompetence at likeliest.

              It wont astonish you if I tell you that I have seen two large international mergers in my company :)

              •  It's incompetence by design, unfortunately (3+ / 0-)
                Recommended by:
                marsanges, llywrch, radarlady

                If managers are consumed with only one thought - their bonus - they will conduct themselves with single-minded focus, doing what's necessary to get the money. They won't do anything extra.

                At my former firm, they hired many of the middle managers from "outside". Thus, they had no love for/allegiance to our employees, and weren't bothered at having to lay them off.

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

                by cassandracarolina on Wed May 15, 2013 at 01:10:31 PM PDT

                [ Parent ]

    •  I got told to read that (4+ / 0-)

      by someone who a few years later was charged with distributing child porn.

      Guess they moved his cheese.

      The thing about quotes on the internet is you cannot confirm their validity. ~Abraham Lincoln

      by raboof on Wed May 15, 2013 at 12:39:12 PM PDT

      [ Parent ]

      •  Yikes! (2+ / 0-)
        Recommended by:
        raboof, radarlady

        I worked with a guy who transferred from another office to my office. Folks at his original office tipped me off that when this guy had some computer problems, IT looked at his computer and found all kinds of child porn photos, which they deleted. He was not terminated or disciplined, just moved to another office like a pedophile priest. In fact, he accused the IT folks of stealing "his" files!

        When my boss was looking to lay off one or more people from the group, this guy wasn't on his list. I decided to inform the boss of this information and he was gone right away. He'd been kept all along because he always had plenty of work on his plate. I guess that's all that matters in the corporate world.

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

        by cassandracarolina on Wed May 15, 2013 at 12:46:38 PM PDT

        [ Parent ]

        •  The Corporation, a documentary (1+ / 0-)
          Recommended by:
          cassandracarolina

          I would imagine you've seen the Canadian documentary, The Corporation. If not, you might consider it. It's worth watching, although it can be depressing as well.

          The Corporation

          Netflix may not offer the extra disc with extra material. Really interested viewers may want to seek out the second disc.

          Cheers

          Most models are wrong, but some are useful.

          by etbnc on Thu May 16, 2013 at 10:14:15 AM PDT

          [ Parent ]

          •  I hadn't heard of that documentary, etbnc (1+ / 0-)
            Recommended by:
            etbnc

            but I will check it out. Having spent 37 years in corporate America, I think I've seen the worst of things, but I'm sure there's more ;-)

            Thanks!

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

            by cassandracarolina on Thu May 16, 2013 at 11:16:13 AM PDT

            [ Parent ]

  •  I worked for a mutual health insurance company. (4+ / 0-)

    The CEO decided to take it public, and retired with a fat deal.  The new executive team shopped the newly ublic company around, engineered an acquisition by a national health insurance company, and then got a golden deal for themselves.  Then the new owner was itself acquired by another national health insurer.  

    All this in the space of three years, with each new acquisition shaving a portion of the staff while doling out huge payouts to the redundant executives.

    Play chess for the Kossacks on Chess.com. Join the site, then the group at http://www.chess.com/groups/view/kossacks.

    by rhutcheson on Wed May 15, 2013 at 12:45:43 PM PDT

    •  Ouch! That's one reason why (3+ / 0-)
      Recommended by:
      rhutcheson, ozsea1, radarlady

      I refer to these events as "hackquisitions". Once your firm gets pulled into the corporate chop shop, it's often worth more for parts than as an intact company.

      The sorrow of these acquisitions and "rebranding" is that corporate names and reputations that have endured for decades (or in some cases, over a century) are stripped away as part of the employee "reprogramming". The new company has no name recognition, bewildering the customers and the marketplace.

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

      by cassandracarolina on Wed May 15, 2013 at 12:50:33 PM PDT

      [ Parent ]

  •  Analysis indicates that most mergers (3+ / 0-)
    Recommended by:
    cassandracarolina, ozsea1, radarlady

    are not successful from the shareholder's viewpoint.

    Economics is a social *science*. Can we base future economic decisions on math?

    by blue aardvark on Wed May 15, 2013 at 12:48:59 PM PDT

  •  And you know, despite the evidence attesting that (2+ / 0-)
    Recommended by:
    cassandracarolina, radarlady

    merger-mania is not a good idea, corporations never learn.

    I wish there were a way that people could earn a living without being debt slaves.  But I can't think of one.

    "Religion is what keeps the poor from murdering the rich."--Napoleon

    by Diana in NoVa on Wed May 15, 2013 at 01:52:19 PM PDT

    •  The reason they don't "learn" (3+ / 0-)
      Recommended by:
      Diana in NoVa, radarlady, native

      is because they're rewarded only for short-term fiscal metrics. It they were rewarded based on:

      Employee retention
      Client retention
      Repeat business and referrals
      Effective client account management
      Innovation and patents
      Contributions to humanity

      they'd get nuthin'. Nuthin' at all.

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

      by cassandracarolina on Wed May 15, 2013 at 02:00:09 PM PDT

      [ Parent ]

  •  I hear you. (9+ / 0-)

    I started my career with Digital Equipment Corp back in the 80s. Ken Olsen was the ideal boss. There were no layoffs, and I paid zero for health insurance. Zero.

    I witnessed that great company ruined from the top down. Along came HP and Carley Fiorina. The hope was the two companies could prop up each other like two drunks.

    Carley didn't do well. She got a lottery ticket for her troubles. CEO fail after CEO fail ended with each failure getting their lotto tickets on their way out the door. That doesn't count the lotto tickets they received when we hired them, and the lotto ticket they are given each year disguised as their  regular salary.

    Twenty five years later, jobs have been shipped to Costa Rica and India. My last two years involved training our replacements. We had no choice. Train them, or hit the road. Every benefit was cut. Vacation hours were stolen where states allowed it. Wage cuts, you name it.

    Last year my number finally came up. Kicked out with out fanfare. No health insurance, yet suffering all the wear and tear a body can imagine. I can't even purchase private health insurance. My cobra expires this month.

    I can tell anyone who will listen. Those jobs are never coming back. It's no longer just help desk and customer service positions. It's project manager positions. It's account manager positions. It's new product development. Greed can place a PC and internet, anywhere in the world. Cheap, too!

    Enjoy your time off if you can. I didn't realize it at the time, but leaving that toxic back stabbing environment was good for me in some ways. I hold onto that. US companies are no longer amoral, they are immoral. The stories I could tell.

    It's time.

    What is so unnerving about the candidacy of Sarah Palin is the degree to which she represents—and her supporters celebrate—the joyful marriage of confidence and ignorance. SAM HARRIS

    by Cpqemp on Wed May 15, 2013 at 02:05:58 PM PDT

    •  Thanks for this account, Cpqemp (5+ / 0-)

      I knew a few folks from Digital, including my neighbor, who had worked their for 20+ years. She was out on medical leave after a knee replacement, but was told that she had to report to the office for an important meeting. Yeah, you guessed it: it was to be summarily laid off. That was before Carley's days, so I can imagine that it got even more brutal then.

      You're right: these jobs are never coming back. Really, if corporations could find a way to outsource everything, or just make money buying back and reselling their own stock, they'd do it. Employees are the last thing they want.

      You're also right about the palpable relief of being away from that backstabbing environment. I've made much much less money working as my own boss, but thanks to my husband's job and benefits, I've been able to continue my indoor lifestyle.

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

      by cassandracarolina on Wed May 15, 2013 at 02:12:42 PM PDT

      [ Parent ]

    •  OMG, Cpqemp (3+ / 0-)
      Recommended by:
      Cpqemp, cassandracarolina, radarlady

      Sorry you were treated so badly. That was so nasty of them.  Here's hoping you'll find a new way  to make a living and that Obama care kicks in soon enough to help you.

      And I hope with all the stress lifted you'll find yourself happier.  It was that way for me.  Of course, there's always the delicate problem of eating and paying the rent, but do take advantage of networking and Daily Kos' Unemployment Chronicles for help with resumes and so on.

      "Religion is what keeps the poor from murdering the rich."--Napoleon

      by Diana in NoVa on Wed May 15, 2013 at 02:52:17 PM PDT

      [ Parent ]

    •  HP (4+ / 0-)

      Years ago JP Morgan ran an ad campaign promoting "The Empty Tombstone" - the message was sometimes the best deal is not doing any deal.

      If only HP had followed this strategy with respect to Compaq, EDS and now Autonomy.  I can't think of any company that has destroyed so much value so fast.

      In the other hand, Cisco has created a lot of value through M&A (I'm a John Chambers fan). It comes down to a disciplined M&A process.

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

      by DowneastDem on Thu May 16, 2013 at 05:06:51 AM PDT

      [ Parent ]

      •  You got that right, DowneastDem (3+ / 0-)
        Recommended by:
        Orakio, nchristine, Creosote

        Seriously: I think that some of these acquisitions are done more for reasons of "look at us! We're a huge, powerful company! Watch out or we will buy/destroy you next!"

        Logic would suggest that acquisitions are accretive: they add value in terms of customer base, product lines, intellectual property, geographic reach. However, given the bloated executive salaries, and the golden parachutes that deploy even in the face of complete incompetence, I think many deals are done simply to show that they can be done. Kind of sickening...

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

        by cassandracarolina on Thu May 16, 2013 at 06:37:26 AM PDT

        [ Parent ]

  •  four new owners in five years... (3+ / 0-)

    after departing my former job during a venture capital "re-alignment".  Sheesh...it just never stops.  Each time around the new owners squeeze and slice a little more from the workers...guess that's what passes for investment.  Hard to tell where it all will end.

    "For the world is in a bad state, but everything will become still worse unless each of us does his best." V. Frankl

    by Wonton Tom on Wed May 15, 2013 at 02:59:35 PM PDT

  •  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 ]

  •  I went through a corporate merger in 1999 (2+ / 0-)
    Recommended by:
    cassandracarolina, Creosote

    that eventually resulted in the loss of my job. Our company brought in a "business psychologist" to hold group meetings and supposedly help us deal with issues related to the merger. This psychologist told us that mergers were happening because consumers, such as ourselves, were demanding cheaper, faster, better products. So it was actually our own fault that we were losing our jobs. Brilliant! And some of my colleagues actually bought this line of crap.

    If a free society cannot help the many who are poor, it cannot save the few who are rich. - President John F. Kennedy

    by laurel g 15942 on Thu May 16, 2013 at 06:19:03 AM PDT

    •  You have GOT to be kidding! (4+ / 0-)
      Recommended by:
      Orakio, laurel g 15942, llywrch, Creosote

      Blaming the victims is so 1990's.

      That "business psychologist" should have realized that loss of work identity requires grieving, and grieving requires some time and space.

      At my former dysfunctional employer "DysCo", all newly bought companies were stripped of their former identity, logo, messaging, branding, and heritage. As cuts were being made, and cost control was enforced, they published a hardcover book heralding the wonderful growth of the company over time, like some sort of corporate march to the sea, destroying everything in their wake. Then they wondered why morale was in the toilet, productivity was down, cynicism abounded. Oh... and customers of the former entities were also dazed and confused.

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

      by cassandracarolina on Thu May 16, 2013 at 06:44:18 AM PDT

      [ Parent ]

    •  Meeting the consumer's needs (2+ / 0-)

      is the primary point of a corporation. We let them exist so we can meet each others needs while protecting the shirts on our own backs. Everything else is an obligation the corporation takes on in the process of taking those needs.

      The first and primary among those obligations is taking proper care of your employees. This is the essence of good business; labor is one of the hands that feeds you, don't bite it, and you don't blame it when you pick a piece of glass up off the floor and treat it like bubblegum, or it might stop feeding you.

      If a corporation is unable to meet its primary obligations, then the corporation is failed. There are lots of reasons, but if the corporation is hawking a product the consumer doesn't want, it's the job of the corporation to change the product to something the consumer wants, not to blame the consumer, or to sleaze it onto the employee!

  •  Are comp plans for execs part of the problem (3+ / 0-)
    Recommended by:
    cassandracarolina, llywrch, Creosote

    I've reviewed some very sweet golden parachutes in my time, and worked at a place that went through a few takeovers.  From both sides I wonder if comp isn't part of the problem: leaving aside the wall street reaction/dump your options components there are "pay for performance" criteria that are deemed "met" in a change of control.  If it is clear that you aren't going to succeed, finding another sucker to take over your company is often in the best interest of the top executives.

    •  Compensation plans are part of the problem (2+ / 0-)
      Recommended by:
      mygreekamphora, Creosote

      As you say, there are golden parachute deals, and nowadays, you can be paid millions as a CEO for simply stepping aside, much less "achieving" anything.

      Organic growth (and the associated transparency) can be difficult in a tough economy, so acquisitions allow executives to create the illusion of a robust company that's thriving. In reality, they may have leveraged the company to do a deal, or a deal will go sour for some reason. However, given Wall Street's short attention span, it might be worth a few quarters' worth of positive press while the next deal is incubating.

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

      by cassandracarolina on Thu May 16, 2013 at 07:09:24 AM PDT

      [ Parent ]

  •  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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