Advanced Search

Companies consolidate when they can't compete.

Paying with stock is a strong signal that not only do you think your shares are overvalued but that you are not totally confident about the success of the deal.

Everything that effective managers do is sandwiched between reflection and action. In other words, managers work where reflective thinking meets practical action. This interaction is clearly visible on three levels. A first level concerns people and their interpersonal relationships, where the orientation often has to be collaborative. A second is that of the organization, where we find the greatest attention to analysis. The third is context, encompassing the world around the organization. Although managers may need to understand global issues, they themselves need to become more worldly.

Companies tend to give attention to those innovation acquisitions which are complex, but underestimate, or are unsure how to handle, those deals surrounded by uncertainty.

Values, by definition, are virtuous, noble benchmarks for behavior. You would be hard pressed to find two groups that disagreed with each other's value statements. True cultural integration, however, requires a focus on both organizations' actual behaviors-not on rhetoric surrounding their conceptual values.

To a large degree, jumbo-sized acquisitions are simply a response to the pressure CEOs feel to deliver above-average growth in revenue and earnings -- a pressure that is more easily relieved via deal-making than through the arduous task of developing strategies that might rev up internal growth. This pressure is particularly acute when a company feels it has lost ground to a larger rival.

But while an uninspired or impatient CEO may have a penchant for a big acquisition, investors should be highly skeptical of any growth strategy that relies on aggregation. Peer-beating growth, when achieved organically and free of accounting trickery, is an undeniable testament to the quality of a company's underlying strategy and the competence of its management... Aggregation via acquisition carries with it no such implicit warranty. A company that expands via acquisition grows not because it's good (although it may be), but because its investment bankers are good. Sometimes the strategy is sound...more often, it is not.

Two large companies that join together are typically so focused on market domination or operational integration that they have no time to think about strategic innovation. Instead of creating entirely new business models, post-merger supersized companies prefer to use their new bulk to coast on the fumes of past glory and brand name. Mergers of equals often turn out to be mergers of the equally uninspired.

Many managements apparently were overexposed in impressionable childhood years to the story in which the imprisoned handsome prince is released from a toad's body by a kiss from a beautiful princess. Consequently, they are certain their managerial kiss will do wonders for the pro…tability of Company T[arget]...We've observed many kisses but very few miracles. Nevertheless, many managerial princesses remain serenely confident about the future potency of their kisses - even after their corporate backyards are knee-deep in unresponsive toads.