Cicso used to be held up as the best example of a company that was “good” at making acquisitions. There are a lot of things that can go wrong, particularly in the software & services fields where the people are the real asset being acquired. Picking the right target, making sure that the company is more valuable with you than without you, and making sure that things don’t disintegrate after you get them are all tough. Robert Holthausen, who teaches courses on M&A strategy at Wharton was quoted as saying that there have been “hundreds of studies” conducted on the long-term results of mergers and notes that researchers estimate the range for failure is between 50% and 80%. I found a neat blog post holding up IBM as just such a model.

IBM and the Art of Acquisitions from Massachusetts based Xconomy, writes:

It’s a balancing act, but one IBM seems to have mastered, says Mike Weider, founder and CTO of Watchfire, a security company that joined IBM last year. “If you integrate too quickly you smother the fire that made [the acquired company] special,” Weider says. “But if you don’t integrate fast enough then you don’t leverage the synergies. I think IBM has figured out a nice balance between those two things.”

I found the article a nice read, though perhaps a bit slanted toward IBM (though the author maintains that IBM has a particular talent at this so it stands to reason that the article is flattering). Anyhow, my opinion has been that IBM has been growing a little bit too quickly and needed to chew a little more before moving on but maybe I’m off track.

Another quote I found interesting:

But synergies between products don’t mean much if the people who actually make them aren’t happy. So IBM says it puts a lot of thought into the human side of the acquisition equation. “You are acquiring the people—that is the asset in most of these cases,” says Hebner. “The code base, without the people who understand what it does, is not very useful. So we’ve put a much bigger emphasis making sure that the people are happy. We do a lot to make sure that we celebrate the culture of the company coming in. We actually try to assimilate things from them—and IBM has become a much more flexible place because of all these new people.”

I guess I only hear the squeaky wheels, but the feel I get is that in the US, morale is dangerously low. Perhaps that’s not the case in newly acquired divisions… I can’t tell that from my seat. Anyway, it’s worth 5 or 10 minutes.

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