"In the end, M&A is about buying more volume. It is a flawed process, invented by brokers, lawyers, and super-sized, ego-based CEOs." With this comment, Ellis Baxter summed up the thinking of the majority of those responding to the April column. Edward Hare put it in more graphic terms: "Acquisitions are a macho exercise, not an intellectual one. Think World Wrestling Federation, not a chess tournament." Stephen Alexander adds: "Those promoting an acquisition are often dealmakers whose interest in the transaction often stops when the deal is closed." Jean-Marc Frion opined that, "Only in certain circles, such as family…where both parties sincerely want the good of the other and are not motivated by greed, can there be deals in which neither of the two loses."
Does it have to be this way? Several respondents pointed out reasons why mergers and acquisitions fail to achieve their objectives, suggesting possible remedies to this "flawed process." Kathryn Yates, for example, cited three primary reasons for M&A failure: "1) Forgetting to plan for the cost of integration… 2) Side deals. Putting the best manager (no matter the company source) in charge is always the best plan … 3) … thinking that a top-down communication, sent once, is sufficient." Marcus Dancer blamed some of the problem on the way that executives are compensated. In his words, "Because executives are frequently compensated in an asymmetrical fashion (for example, through stock options), it is in their financial best interest to do M&A to add volatility to their business."
Is M&A part of the natural Darwinian process of business, or is it rigged to produce inferior species of companies, as measured in terms of value created for customers, employees, and shareholders? If the latter, is it the natural result of a system of incentives geared to short-term financial rather than longer-term business benefits? And what does it say about the overall future strength of industries caught up in consolidation? Or, as some critics claim, are we caught up in research that fails to adequately measure the benefits of M&A (particularly in situations where one of the partners is especially weak) while concentrating on the disadvantages? What do you think? 