Can you name a successful mega tech merger? If so, you must be a well-versed tech historian.
Actually, there are many examples of disasters, such as AT&T's purchase of NCR or Novell's purchase of WordPerfect. Oh, how about Symantec's recent deal to buy Veritas?
Well, this week, Google's CEO, Eric Schmidt, said that his firm is not likely to engage in mega mergers. Simply put, he thinks it is a failed strategy. Also, it does not fit with the ethos of the Google culture.
True, this is bad news for Wall Street bankers – who salivate over the big fees. But, it should be very good news for Google shareholders.
I had a chance to interview Robert F. Bruner, who is a professor at the Darden Graduate School of Business and the author of the book, Deals From Hell: M&A Lessons That Rise Above the Ashes (John Wiley & Sons, 2005). He cited a study on M&A returns that found that the losses in 87 large deals overshadowed the gains in about 12,000 deals in the 1980s and the 1990s.
So, if M&A is frowned upon, what else can Google do for growth? After all, it's not realistic for all growth to be all organic, right?
Schmidt said that Google will focus on partnerships and joint ventures. In fact, this strategy is already in progress, such as Google's investment in AOL. There was also a recent bundling deal with Dell.
According to Bruner: "Google appropriately recognizes a fact that some companies do not: M&A is just one tactic in a range of possible tactics of affiliation between firms. The range includes joint ventures, strategic alliances, minority investments, and simple contractual relationships. In contemplating a merger or acquisition, companies should ALWAYS ask whether there isn't a simpler way than M&A to achieve the same objectives."
Links:
Reuters: Google sees more partnerships, not major mergers
Interview: Robert F. Bruner
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Reader Comments (Page 1 of 1)
6-02-2006 @ 12:02PM
twx shareholder said...
can you people please only post to the appropriate stock blog? this is google, not TWX related. as a time warner employee, im wondering if anyone has seen the lack of quality of this new blogging stocks venture... sigh.