Merger Mania

More

A reader describes his experience with a corporate merger, vividly highlighting some of the costs and conflicts:

I once worked for a company that was taken over by another, larger, company. The argument was that there were major synergies, that would make the combined company better than the sum of the parts. We spent a lot of time after the merger looking for synergies, and trying to document them (I think management wanted to convince shareholders that they had really done a good thing).

And there were significant synergies. We were both technology companies, and each one had technologies that could be applied profitably to the other company.

But there were major losses, too, that generally were overlooked. For starters, one of the "synergies" that were expected was elimination of redundant personnel. This meant that lucrative severance packages were offered to people who were considered redundant. The upshot of that was that the company paid a huge amount of money to entice some of the brightest, most-experienced people to leave. I know for sure that we lost an enormous amount of knowledge and skill, and there is no way of calculating how much that cost in the long run.

Also, there were some clear negative synergies. The company that took us over had some policies, procedures and technology that were clearly worse than ours, but were imposed on us because "we have always done it that way." It was very frustrating to have things rammed down our throats that were obviously making things worse.

I myself (and a colleague who had become a good friend from working on this project) had been working on a project for several years, that used a completely different type of technology to address a common, longstanding problem. It took a long time to get the bugs worked out, but we finally got it to the point that it was implemented in one plant, working pretty well, saving us lots of money, and was also better environmentally. I was really looking forward to presenting this, because none of us knew if we would have a job with the new company, and I felt sure this would establish in their minds how brilliant I was. Right...

The first talk I gave to our new overlords was on the new approach we had developed. I spoke for about a half hour, and at the end, a high ranking manager literally said, "Well, that's very nice. But we have never done it that way, and we will never do it that way. Next talk, please." My colleague and I looked at each other in stunned silence.

Maybe it's different for companies that are not technology oriented. But, for situations like ours, the new company has to make a serious effort to understand what the acquisition has to bring to the table. It is a very long, hard process, and can be humbling if you realize that the smaller company you just took over has been doing something much better and smarter than you were. The company which acquired ours was too arrogant to do that, and in my opinion, lost a lot as a result.

Jump to comments
Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

Get Today's Top Stories in Your Inbox (preview)

A Fascinating Short Film About the Multiverse

If life is a series of infinite possibilities, what does it mean to be alive?


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

The Death of Film

You'll never hear the whirring sound of a projector again.

Video

How to Hunt With Poison Darts

A Borneo hunter explains one of his tribe's oldest customs: the art of the blowpipe

Video

A Delightful, Pixar-Inspired Cartoon

An action figure and his reluctant sidekick trek across a kitchen in search of treasure.

Video

I Am an Undocumented Immigrant

"I look like a typical young American."

Video

Why Did I Study Physics?

Using hand-drawn cartoons to explain an academic passion

Writers

Up
Down

More in Business

Just In