Mergers

Grant McCracken muses over the not-likely-to-come-to-fruition MicroHoo merger, and finds that the evidence is that most mergers don't work out:

Mergers and acquisitions are fraught with difficulty and Mary was pointing out that the failure rate is sometimes as high as 60%. And this is after tough minded MBAs have examined the deal with their own particularly sophisticated, sighted, numerate version of due diligence.

When things go bad in a merger or an acquisition, the problem is sometimes not with the mechanics, not with the infrastructure of the deal. The problem is with the superstructure of the deal, the ideas, practices and cultures that must now be brought together for things to work. We are still inclined to suppose that mergers and acquisitions are straight forward, that the individuals who must now work together need merely resort to an instrumental logic to find common cause and a shared modus operandi.

But of course the truth is often otherwise. Corporations are cultural, drawing their answer to the Levittian question (what business are we in), and the Druckerian one (what customer are we for) from the vision of the founder, the history of the enterprise, the region of the country. Even the business school that supplies the C suite can make a difference here. I think it's safe to say Microsoft and Yahoo see the world differently and that a rapprochement would have been challenging.

One company that I used to work for was acquired by a similar-sized firm, and six years later the two organizations still were not working smoothly as a single entity. Most of the management from my original firm had left (in waves, rather than as a single "die-off"), and new managers were brought in, but the two firms' cultures never coalesced. When the combined firm was taken over by a third organization, almost the first thing the new owners considered doing was re-splitting the two original groups back out into separate entities again.