Sooner or later you're going to be involved in a merger, whether as a conquering financial barbarian (Hoist their spreadsheets on the rack!) or as a wimpy, struggling acquiree (Take your stinking paws off me, you damned dirty MBA!). Either way, you'd better learn the ins and outs of M&A, including:
Synergy: Every merger is, at least according to the CEOs, primarily about synergy -- which, roughly translated, means: "Neither one of us could figure out how to run these loser business units on our own, so we decided to lump them together and see if they run any better that way. Oh, and we'll take our bonuses now, please." Although even a child can see that this is ludicrous -- it's like trying to help two drowning men by tying them together, in the hope that they'll swim better -- investors fall for this malarkey every time, mainly because they don't have any clue what to do with the firms' loser shares, either. What this means to you, whether merg-er or merg-ee, is clear: Keep your head down and don't sign anything, not even a pencil request. Sooner rather than later the whole synergy concept will collapse under the gravity of its own stupidity, creating a corporate black hole that will suck every scapegoatable executive within five floors out the window and into the unemployment line. Trust me on this: Pulling lattes is harder than it looks, and your window for looking cool in a green apron closed about five years ago.
Efficiency: Merger-minded CEOs only need half their mouths to pronounce "synergy"; out of the other sides they can easily smarm a twin, er, euphemism: "efficiency." As in, "We have no clue what most of the people who work here actually do, but we're pretty sure there are too many of them." The only logical solution, of course, is to combine all these supposed slackers into an even larger, terrified, more inefficient pool of labor and then indiscriminately fire half of them. Or to move them across the country to another facility where they can't find the bathroom or the project files. Or to fire all of them and send the jobs to a non-English-speaking country, which has the added benefit of helping clients to broaden their cultural horizons as they translate so-called "HelpLine" instructions from a mumbled dialect spoken only in the southeast corner of Thehellwiththecustomeristan.
Integration: One of the keys to merger success is the announcement of management's intent to rapidly execute a well-designed integration plan for a merger of equals. In practice, of course, some partners (i.e., the ones bringing money to the party) are more equal than others, meaning that no matter how bad the acquiring company's financial system, IT backbone or production processes, they will quickly be anointed "best of breed" and imposed on the vanquished (er, less equal) partner with results as comic as they are predictable and disastrous:
- Goofy new overhead allocation formulas will strangle profitable new business lines in their cribs even as they provide relief to aging, low-margin business units gasping for breath in the face of global competition.
- A lightning integration of 357 different IT systems will reinvigorate the IT department's budget, payroll and latent arrogance, creating lengthy waits for new computers and rolling blackouts of e-mail and financial data.
- Corporate antibodies generated by widespread infection among acquiring company managers with NIHS (Not Invented Here Syndrome) will hunt down and kill any potential process improvements that might have been imported from the acquired company. This will have the added benefit of isolating and demoralizing the smartest managers from the newly acquired company, spurring them to leave before they can disrupt the incompetent (but comfortable) status quo at the more equal (i.e., acquiring) merger partner.
Now that's what a CEO means when he says Synergy!
John R. Brandt, formerly editor-in-chief of IndustryWeek, is CEO of the Manufacturing Performance Institute, a research and consulting firm based in Shaker Heights, Ohio.