Watching the daily Spanish novela play out on the AOL-TechCrunch saga (here, here, and here), it seems that the sheer public nature of this example of Post-M&A indigestion makes it a good poster child for understanding why most M&A fails.
First, a disclaimer that I neither know any of the principles at either TechCrunch or AOL, nor any of the "inside stories" on what is really going on, nor do I really care.
What I do care about is the fact that this process of "pre-M&A hopes" transitioning to "post-M&A hangover" plays out over and over, and over again, and as such, it seems like an incredibly ineffecient, ineffective process; something that I know firsthand, having participated in four different M&A outcomes (Tribe Communications to Zoom Telephonics; Whistle Communications to IBM; Rapid Logic to Wind River (Intel); and Me.com).
So why do most of these deals fail to realize their ambition? Here's my take:
- Pre M&A v. Post M&A Disconnects: Acquiring companies spend an inordinate amount of time on pre-deal sourcing, due dilgence and integration plans, YET seemingly burn those plans or fail to hand them to the actual operating team, post M&A. To say that it is common for disconnects to occur post deal close is to miss the larger point of how common it is for the people who negotiated the deal to be DIFFERENT than the folks that you will be working with on a day to day basis.
- Pissing off the 3-4 Core Keepers: Everyone knows that in every M&A scenario that while technically a company, line of business, brand and team are being acquired, in truth, the deal's long-term success typically comes down to successfully retaining and engaging the 3-4 core keepers that make the company unique. Thus, it is shocking how often these people are either not locked in to a long term plan, have post-deal incentives out-of-whack with the long-term goals of the deal, or worse, are abused, ignored or insulted to the point that they self-select out of the game. Happens all the time.
- Failure to Communicate and Coordinate: You hear the platitudes over and over about how "people" make or break a company (in media, and especially in journalism, that truth is exponentialized). Yet, you see it repeatedly where there is a failure to pick up the phone, hop on a plane, grab a beer and make engaged dialog happen. Smart people forget this one repeatedly, which may be a simple by-product of the unhealthy marriage of conflict-avoidance and passive-aggressiveness that propagates throughout so much of the tech biz.
- The Conqueror's Mentality: Pure ego and org chart truth dictate that the acquirers tend to feel like conquerors rather than cultivators and trusted keepers. And while there is a pragmatic truth that to acquire is to conquer, there is an emotional truth that EVERYONE wants to feel like a winner, and when you fail to keep that truth front-and-center, good, smart people with other options will check out. They always do.
