When the financial goal falls short of the desired number, mergers or acquisitions should not be used to fill the difference and round out the plan. The tendency to use an acquisition to make the numbers is a dangerous flaw in thinking. Repeatedly we see the use of an acquisition as a planning convenience. This gets the team off the hook of explaining how they plan to make up the long-term goal. This is either an avoidance behavior by management to avoid the planning pain or just capricious business behavior. Given what is known about mergers and acquisitions failures, this avenue of revenue must be given careful thought. A wealth of intellectual capital exists on the problems of bringing two organizations together. The information is very clear. Billions of dollars are spent annually on acquisitions with very little return. In fact, the lost ground is a hidden cost that needs to clearly be studied, published, and taken to heart. Yet we read the papers daily and find fanfare and much-heralded stories of mergers and acquisitions.
Companies are going crazy with the combinations. Give those managers a year and revisit the story. Ask IBM how much was spent on the Rolm acquisition, the Wilkerson Group acquisition, or the Chem Systems acquisition. Check the status of the three today. In a few years you can probably add Chrysler and Daimler to the list of unsuccessful mergers and acquisitions. Before you include an acquisition to make up numbers for your plan, consider four problems usually found in conjunction with the deal.
- Problem 1: Culture Clash
- Problem 2: The Clash of Management Egos
- Problem 3: The Human Factor
- Problem 4: The Process Itself