It's amazing to me how often this story repeats itself in tech, yet the results are almost always the same:
1. Old, hugely successful company needs to find new growth areas.
2. Company acquires company in high growth area (sometimes innovative, sometimes not)
3. Taking from the MBA playbook that higher investment equals more growth, acquired company is given aggressive targets but also a huge budget to meet them.
4. Company goes on a massive, usually relatively untargeted hiring spree, things become a major shitshow, acquired leadership team is eventually canned.
Instead of finding some realistic product targets and then setting a budget around what resources will be needed to attain those goals, the budget is allocated based solely on desired revenue and somehow hiring all these people without a clear plan will make that happen.
The number I have heard (from maybe 15 years ago) is that "2/3 of corporate mergers meet their goals." That was across a range of industries. Tech in 2020 might be different, there is a certain kind of mindlessness around acquisitions that happens around technology sectors. For instance, AOL bought Time Warner, regretted it, AT&T bought Time Warner, now the vulture funds like Elliot Capital Management are circling and they will have the CEOs head.
AT&T's mistakes were made by people who were more technical than MBA, but it's a consistent trope that "Google bought Company A" and then Company B brings their salespeople to muster the next morning to inform them what's going to happen at Company A, and the next sales retreat is fistbumps all around.
I wonder if we could put a break on mergers and acquisitions, not for the sake of communities, workers, and competition, but just for the poor stockholders!
Again it depends. Look at Church & Dwight, more known as the Arm & Hammer company. Their strategy of expanding all over the grocery store cleaning isle seems to have worked as they have a whole team of brands and brands at different price premiums. They have bought smaller cpg companies successfully
yes, certainly there are successes, but it's good to realize that that's only about half of attempts. if you're an involved shareholder, it's eminently reasonable to be skeptical of executive strategies that feature m&a centrally.
And even with the half rate "successes" ( Success in terms that is actually defined by the executive themselves ), most of them were done with a miraculously talented team that normally has little to do with the executives.
Because in an ideal world you expect M&A to provide synergy, but it is often where 1+1 = 1.5 or less, and at best successes are 1+1 = 2. What people should be aiming for is 1+1 = 2.5 or more.
And recent Intel ( Post Andy Grove or Post Patrick Gelsinger ) has a track record of both poor strategic decision, acquisition and execution.
Note: That is M&A with respect to diversification.
Perhaps when the acquisition target is a smaller but fairly mature company who is being asked to scale existing processes. I think this is much more difficult for a startup when you’re essentially asking them to scale both their output and shrink their time to maturity by orders of magnitude.
But I didn't ask "when was there ever an acquisition of a small startup by a large incumbent that was successful?" I'm specifically thinking of when that small startup was then flooded with budget and people to meet aggressive growth targets.
I don't know about every item in your list, but I do know at least in some of those cases that the acquired company was largely left alone. They were perhaps given some integration goals, but the parent company specifically "left them alone" to not kill the secret sauce that made them successful in the first place.
From what I see in the B2B space, acquisitions are a major avenue for quick innovation. Large corporations buy smaller startup, do some integration into existing solutions and come out with a new product (If they don't just keep the new company as a separate costumer-facing identity (Look at NetApp + SolidFire, or the whole Dell-EMC conglomerate)
I'm so thankful that big corporations tend to be lumbering, clumsy giants like this - otherwise there wouldn't be room for any smaller companies, and we'd already be at the point where all the commerce in the world was owned by a handfull of megacorps (we might still get there).
1. Old, hugely successful company needs to find new growth areas.
2. Company acquires company in high growth area (sometimes innovative, sometimes not)
3. Taking from the MBA playbook that higher investment equals more growth, acquired company is given aggressive targets but also a huge budget to meet them.
4. Company goes on a massive, usually relatively untargeted hiring spree, things become a major shitshow, acquired leadership team is eventually canned.
Instead of finding some realistic product targets and then setting a budget around what resources will be needed to attain those goals, the budget is allocated based solely on desired revenue and somehow hiring all these people without a clear plan will make that happen.
I'm genuinely curious, has this ever worked?