M&A Integration: The challenge of preserving trust

Agreed that without trust the integration will fail. But there’s a lot more to integration than just trust.

Over the course of nearly 4 decades in a tech role in the tech industry, I saw a lot of acquisitions, both by other companies and where I worked.

Four examples which I think can be learned from:

In the first year of my career, two autonomous (almost internally competing) divisions of a computer company were merged. The surviving Software Director interleaved people from the two organizations almost desk by desk, making sure at the lowest level every team had people from both sources. The surviving Hardware Director kept 5 teams, three from one division and two from the other, intact. The software organization survived intact for decades. The hardware organization was dissolved piece by piece over the space of 4 years until the last remaining team became the basis of a new team, which lasted 10 or 15 years.

A multi hundred million dollar acquisition where the seller had done such an extraordinary job selling that the big company buyer paid top dollar for essentially no revenue, a lot of technical debt, thinking that combining the acquisition with internal assets would yield a billion dollar a year business in short order. Total write off. If I brought people involved in this into a room to post mortem, there would not be agreement on the facts, much less on why it failed, but I offer a suggestion: if at any time the leadership of the buying side team becomes so enamored of the brass ring they think they’ve got hold of that they are no longer able to hear what people they’ve asked to do due diligence are saying, the buying company CEO and CFO should call a timeout and make sure what’s being bought is reality and not a fantasy created by a superlatively skilled seller.

A competitor I respect highly reacted to a transient state of the storage business by buying an encryption box supplier, not realizing encryption boxes were a transient business. Revenue in the segment went to zero, as far as I could tell, so I assume the competitor had to write off at least $100M.

Carly Fiorina hasn’t been treated well by history, nor has the HP/Compaq merger. I would point out, however, that the “clean room” process for integration left a staggering size company with a complete integrated organization, management team carefully balanced between blue and red, and product families rationalized (decision made on how overlaps would be resolved) on day 1 of operation of the combined companies. Of course some of the decisions were wrong in hindsight, but paralysis would have been far worse. I hold up the integration process Carly set up for that merger as best in class. Even if it did phase out my role.

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