Buzz Through Acquisition
Microsoft and eBay? That combination, widely rumored and unconfirmed as of this writing, was only the latest in a silly season of old-line companies striving for buzz through affiliation.
As of last week, the rumor du jour was that Microsoft is contemplating the acquisition of eBay to provide some heft in blocking the rise of all things Google.
The rumblings were driven, at least in part, by Googles partnering with the button-down world of Dell.
Dells decision to allow Google to find some room on the startup screens of its computers was seen as the latest, but largest, blow in breaking up the troika of Microsoft, Dell and Intel.
Dell had already signaled its willingness to stand apart from its old comrades by allowing Advanced Micro Devices chips into its high-end server line.
Whether or not the Microsoft deal comes to pass, it is a good time to reflect on one of those old truths of business combined with the newer realities of technology: It is really hard to make successful acquisitions in any business. And it is doubly hard to make successful acquisitions in the technology space.
Recently, I had a chance to meet with Ken Walters, president of Extensity. Walters has been in the information business for more than 25 years, and while certainly not part of the mega-mergers, he has been involved in nearly 100 mergers and acquisitions as part of Golden Gate Capital; Infor Global Solutions; Internet Security Systems; and, now, Extensity.
Walters rules for a successful acquisition can be boiled down to three axioms: (1) Dont overpaythat is the one mistake that cannot be corrected. (2) Focus on integrating the new companies into the old. (3) Act fast and avoid committee decisions. "Committees will kill you in an acquisition," Walters said.
Theyre all simple rules but important for the big companies to remember if the current spate of rumors and hand-holding turns into something more than corporate dating.
The history of the technology industry is replete with acquisitions gone bad. In the ancient past, IBMs acquisition of Rolm and AT&Ts acquisition of NCR were bungled.
The Hewlett-Packard acquisition of Compaq has been sufficiently bumpy to be instrumental in having the architect of that acquisitionformer HP CEO Carly Fiorinabumped from the company. It remains to be seen if current HP CEO Mark Hurd (who is well-acquainted with the AT&T-NCR debacle) can get the company back on track.
The Dell-Google, Microsoft-eBay and Yahoo (with anyone who can counteract the Google steamroller) partnerships appear more driven by looking to build marketing buzz through affiliation, rather than by the creation of any fundamental new strength.
Do I think Microsoft could fulfill the axioms of Walters to not overpay while moving quickly and avoiding management by committee? In a word: no.
The actions and motivations of the tech giants hold meaning for their user communities as well. Acquisition-and-partnership fever does not confine itself to the technology space.
Big banks are acquiring smaller regional financial institutions. Consumer packaged goods companies such as Procter & Gamble are acquiring companies like Gillette. Regional building and office supply retailers are constantly weighing going it alone versus becoming part of some larger organization, such as Home Depot, Staples or Wal-Mart.
The success of a corporate acquisition rests in part on the success of integrating technology platforms, including the financials, customer management and the Web, upon which the companies operate. Maybe Walters three axioms of acquisition success need a fourth caveat: Make sure your systems can grow as fast as your ambitions following an acquisition. Microsoft and eBay? I dont know, but the reason for such a combination would have to be much more than acquiring buzz through acquiring companies.
eWEEK magazine editor in chief Eric Lundquist can be reached at email@example.com.
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