Mergers: The Good, The Bad, and The Ugly

You’ve been acquired how many times?

In my career, I’ve been fortunate enough to have worked for a number of small software/hardware companies, several of which were absorbed by much larger companies. I though tit’d be interesting to compare and contrast some of the ways the various mergers went good and bad, and what acquiring companies might be able to learn from my experience.

Here’s the timeline so far:

  1. I started working for NeXT Software in 1994, they were acquired by Apple in 1996.
  2. I left Apple in 1999 to work for Silicon Spice. They were acquired by Broadcom in 2000.
  3. Broadcom laid me off, and I went back to Apple for a while.
  4. I left Apple in 2005 to work at Zing Systems, which was acquired by Dell in 2007.
  5. I left Dell to go work at Palm in 2009. In 2010, Palm was acquired by Hewlett-Packard.
  6. Hewlett-Packard eventually sold the entire WebOS group to LG.
  7. I left LG to go work for Citrix on GoToMeeting. After 2 1/2 years, the GoToMeeting business was spun off and merged with LogMeIn, Inc.
So I’ve been part of 6 different merger/acquisition processes at this point, and I feel like I’m getting a feel for how you can tell when an acquisition is going to go well, as opposed to going poorly.

Why do big companies buy smaller companies?

When a big company acquires a smaller company, it can be for a variety of reasons. Sometimes it’s to acquire a potential competitor, before they can get large enough to threaten the larger company. It can be an “acqui-hire”, where they buy the smaller company strictly for its human resources, and have no real interest in the technology or products the smaller company has developed (this happens with social media companies frequently, because skilled developers are hard to find). Or, it can be a case of acquiring a new technology, and a team of experts in that technology, in order to either kick-start a new product, or to kick new life into an existing product. That last reason was the primary reason for all of the acquisitions I’ve been involved in.

What’s the most-comon mistake acquiring companies make?

Understandably, big companies often look to smaller companies as an engine to drive innovation. There’s a perception that small companies can move faster and be more nimble than larger companies. So there’s often a desire to let the new acquisition run itself, as a sort of independent entity inside the larger company. Being hands-off seems like the obviously-right thing to do if you wanted increased agility to start with, but this is generally not as good of an idea as it’d seem at first blush.
Yes, you absolutely don’t want to break up the functional team you just acquired, and spread them out willy-nilly throughout your company. You don’t want to drag them into the bureaucracy and infighting that has marred all of your internal attempts at innovation. But guess what? If you don’t make an effort to get them at least nominally integrated with the rest of the company, you will, at best, end up with an isolated group, who continue to do their one thing, but don’t meaningfully contribute to your larger organization’s bottom line. And the smaller group will also get none of the benefits of scale of being part of the larger group. It’s lose-lose.

Examples of the Good, the Bad, and the Ugly

Tune in next Monday (and the Monday after that) for real-life tales of integrations gone well, gone poorly, and gone horribly wrong.

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