Straight Talk

Dec. 21, 2004
Being bigger doesn't always make you better

Daily reports of megamergers and colossal consolidations have spawned a dangerous game of "can you top this?" among corporate managements worldwide. We went through this is in the 1980s only to see a slew of giants shrink back down to their "core competencies" in the '90s. What's motivating today's "bigger is better" mentality? I believe it's a management malady called executive egoitis. Big, it seems, is no longer big enough. Big must now be huge, immense, enormous, whopping, gigantic, elephantine, leviathan, humongous. Why must things we treasure be bigger? Why larger, wider, or taller? Why can't things we cherish be teeny? Thinner, shorter, or smaller? Why must things be stupendous? Why can't they be small and comfy like a family? I believe they can be. And that's why I believe it's time to introduce an ounce or two of common sense into this "bigger is better" nonsense. Instead of encouraging the urge to merge, I'm going to decry your urge to buy. Why? Because too much emphasis is being placed on the need to grow and not enough on the need to practice restraint. Acquisitions are not true growth. They are merely proof of one company's ability to buy another company's assets. The act of acquiring merely proves a management's ability to make deals. It says nothing about management's ability to manage. Most mergers should never have happened. Most acquisitions cost more than they are worth. Most mergers fail. Why? Because most managements fall victim to the "dog chasing a car" syndrome. The dog doesn't know what to do with the car after he's caught it. I recommend this list of "don'ts" to all company-acquiring, merger-happy, growth-at-any-cost-minded managements:

  • Don't buy a company just because it's available.
  • Don't buy a company if you can't afford it.
  • Don't buy a company if you don't understand its business.
  • Don't buy a company if it doesn't have good management.
  • Don't buy a company if it's in a dying market.
  • Don't buy a company if you can't improve it.
  • Don't buy a company if its competition is smarter than you are.
  • Don't buy a company if it has pending litigation.
  • Don't buy a company if it has a questionable reputation.
  • Don't buy a company if new technology threatens to make it obsolete.
  • Don't buy a company just to make your company bigger.
  • Don't buy a company just because its cheap.
  • Don't buy a company if you don't know its suppliers.
  • Don't buy a company if its manufacturing processes are out of date.
The best mergers are those in which both parties agree to the deal and, after leaving the negotiation table, both feel they have gotten the better of the deal. I've been writing this column for three years now, and your response has been overwhelmingly positive. Some of the ideas I wrote about early on still hold true, but my editors won't let me write about the same thing twice. So, from time to time, I'll drop a few hints here at the end of my column. Let's call them "lessons you can learn from my mistakes." Here goes:
  • Persistence is an admirable quality, but beating your head against an immovable object is more likely to give you a bloody head than a victory.
  • Practice gives permanence, not perfection. Perfection comes from practicing perfection.
  • Narrow minds and big mouths tend to be connected.
Sal F. Marino is chairman emeritus of Penton Media Inc., anIWcontributing editor, and the author of the recently published bookManagement Rhymes and Reason. His e-mail address is [email protected].

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