Wednesday, May 24, 2017

Acquisition and merging of companies and manager's jobs and challenges

It is a very healthy and productivity improving activities for the society and for shareholder and requires special skilled people to manage the process and make it smooth.  The goal for management is really about how to make the values from the acquired company to form the synergy, so one plus one is not just equal to two but greater than two.

This is about the value, which is a lot of times measured as Return on Investment.  From shareholder perspective, in a standard financial term, it is the EPS.  This is not about the size of the merged company.  The number of employees may increase or decrease.  The number of sites may increase or decrease.  The number of customers may increase or decrease.  The number of products may increase or decrease.  The point is the share holder's value should be increased.

Whether you within a merged and acquired company are on the increased or decreased sides, it really depends on what is the net contribution you and your organization are is on the equation.


Increased ROI = (Increased RETURN) / (Decreased INVESTMENT)

If your organization's RETURN on INVESTMENT is high, for example, without adding further maintenance costs, the return increases, you are on the increased side.  Typically this comes from integration or coming from reaching new locations or new markets of existing product.

In the software and service industry, clients and IT departments do not want to deal with multiple vendors.  They do still want the flexibility and still want to control the dependencies.   They appreciate the openness of the technologies and the availability of the talents on the market to serve the product.  They are happy with the chance of introducing new product with new technologies.  However, they do not want the confusing messages and would follow the market leaders.  I found almost all industry under the modern capitalism, tend to become imperfect competitions, not perfect competition as Adam Smiths described.  The software and services provided for corporate and non profit organization follow as well.

With this in mind, the acquired products are expected to be consolidated.  Finding the value of each product and finding how to integrate them, finding which product to be eliminated is the technological managers' contribution to the process.

The challenging is that some people are so loyal to the acquired product and forgot the professionalism.  They forget that they are working on a different company now.  They are protecting each others.  The selected people who are on the increased side is trying to protect the people who are on the decreased side.  I am surprisingly hearing a statement - if you let A goes, B will go too.  Since B is so important right now. You should let A stays.  Shouldn't we work based on performance and based on contributions?  Keeping B happy so the company needs to pay double salaries?

I won't buy this story.  I won't.

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