Comments

How often do mergers truly improve service, cut costs, help employees? Have there been any studies on other industries besides banking? Thank you for this great post.

Posted by Todd at May 18, 2007 11:32 AM

Tom - please stop being so unreasonable. Serious businessmen need to have big M&A plays to focus on and to talk (or brag) about with Wall Street or The City. If they didn't, they'd have to focus on boring stuff like designing good looking, reliable, useful products that people really want and on offering a tip top service to their customers. And then they'd have to be judged as carmakers or airlines or retail bankers or whatever. How boring is that when you can be a businessman...!

Posted by Mark JF at May 18, 2007 11:38 AM

I think Mark is on the right track. Ego,ego,ego. I left a company after 17 years due to a merger (actually we were acquired by an inferior competitor). The men (and they were all men) that were responsible for the deal were so proud of themselves and bragged about being the gorilla in the market place. Needless to say the much larger company is under performing in just about every category. Especially talent retention.

Posted by Bwd at May 18, 2007 11:55 AM

See Tom...posting business ideas are cool. I wasn't so far off on my "issues" a few days ago. Water books and hiking can fit in with the ideas that built you...
Now a little Pride Cabernet with my Les Paul should cap the week off~

Posted by Scott Swift at May 18, 2007 2:40 PM

"So why oh why oh why oh why do these "leading lights of management" do this shit over and over and over and over?"

Do you think it is just the execs that are the problem here?

Maybe the question should be asked who sets the goals for these Execs. What is the role of boards in these scenario's? Isn't it their role to provide the checks and balances, provide strategic guidance etc etc?

Posted by David Koopmans at May 18, 2007 5:26 PM

The merger also tanked the Mercedes Benz brand; Mercedes vehicles didn't fare well in Consumer Report's latest round of reliability tests.

Posted by DavidH at May 18, 2007 9:22 PM

do not forget schrempp's leadership style. he did not only give a damn about customers - he did not care for his people either. the ultimately unapproachable ceo - protected by a group of external advisers and by his wife who was running his office (and by the way is still running the office of the ceo-emeritus for an annual pay of around 300KEuro per year). schrempp was famous for informing his management through the press about important decisions. - an ice-cold chain-smoker from humble origins with an unpleasantly sharp presence.
'mr. shareholdervalue' as he was called in germany in his good days was the second topmanagement-star we had after alfred herrhausen at deutsche bank. schrempp was a person from a different world - he brought the american concept of shareholder value to germany and by now probably burnt the term forever.
in a famous speech to the business nation two years ago wendelin wedekind - ceo of porsche - said that german management must forget these idiotic dreams of short term profits that had never been in our thinking anyway. customers first, he said, employees and their families second, business partners third ... - and only if these groups are all satisfied the shareholders can be satisfied too.
- during the final period of the recent economical depression we germans did some heavy cleaning up. and we also threw some freshly adopted ideas and priorities overboard. - and schrempp as negative example had his share in that. think of the clean up at VW for example and think of the recent fall of siemens ceo klaus kleinfeld and the coming radical cleanup in germany's biggest technology group.
it will be interesting to observe germany's change in the coming years. one can sense a substantial change in BACK TO SUBSTANCE already. after heavy cleaning up and reconfiguration german economy is shifting up into second gear right now. and we will become the economical motor of europe once again!!!
after years of darkest depression now there is euphoria and brightest optimism all over the country. - hey, but that is the way we germans are... all or nothing, up or down, either or - ... we are - i think - a little bit extreme.
come over and enjoy our recharged batteries and fresh spirit. or just keep on buying our wonderful products which will even get better now!

Posted by jens at May 19, 2007 3:07 AM

Jens, I'm more optimistic than you. I fervently believe that the heart of the German economy are the Mittelstand companies. Not in the press much, but the Kings of Export Excellence in particular. I think the mittelstand values have stayed remarkably constant over the years. (If you go back to my 1992 book Liberation Management, you will see a big section on the Mittelstand, perhaps the first by an American "guru," albeit one of primarily German descent.) (Liberation Management, Chapter 35, "The Market's Will Be Done: The Mighty German Mittelstand," pp 528 to 553. Featuring Goebra/Playmobil and Trumpf. I also did a Public telivision on the Mittlestand.)

Posted by tom peters at May 19, 2007 8:27 AM

thanks tom for your moral support. old europe appreciates that! german mittelstand indeed is a special thing with values remarkably constant as you say. these values have been challenged - by the test of time of course and by people like schrempp, but they have deep going roots.

one key to understand german mittelstand lies in the longterm perspective you find there and the incredible sense of responsibility of the families who own theses companies. they feel responsible for the employees, for the communities they created, for the trust and hope invested in them. - a little bit 'old school' of course but it is a grown - not a trained - correctness. it goes back to our strong german federalist traditions, where a mighty king in a mighty capital did not exist, but everybody was directly dependent on the people he dealt with on a daily basis.

this spirit is also well and alive in companies like bmw and porsche (which are both family controlled companies) with a risk encouraging and can-do culture based on trust.

and at the moment it seems like the mittelstand-spirit has some kind of a well-deserved renaissance. ... - interesting times!

not surprised that tom peters had a flair for that part of the german business culture already 15years ago. - after all: it just feels right.

Posted by jens at May 19, 2007 10:09 AM

In the late 90s, mergers (takeovers) with large US-companies were the only realistic opportunity for German CEOs to increase their pay dramatically (Bankers Trust ./. Deutsche Bank, Chrysler ./ Daimler etc.). A CEO top pay in Germany in the late 90s was approx. DEM 3 Mio., today it’s in some cases nearly 10 times higher, > EUR 12 Mio. Therefore it might be that some big deals were initiated by ego-driven CEOs, perhaps, too, Daimler ./. Chrysler?

At the end of 2007 I had the opportunity to attend an extremely interesting lecture by Mr. Snow. I gained a very good impression from him and Cerberus. I am quite sure that Cerberus will generate a significant profit within a period which is no longer than 3 years. Furthermore I assume that a potential buyer (or at least a framework for a forward-company sale), after a sustainable turnaround has been achieved, exists yet.

Posted by hsl at May 20, 2007 6:49 AM

Do we have any examples of companies where mergers have worked. I work for a software company that does acquire - generally with some success - there must be other examples!!!

Posted by PaulH at May 21, 2007 7:56 AM

PaulH - I recently found out that a particular large network providing company has what I consider to be the right approach to mergers. It is my understanding that they acquire for talent. So simple, yet so amazingly powerful. With talent being the driving force behind any company, why not acquire the companies that have the best (regardless of their immediate impact on the bottom line)? Granted, I'm sure that they make sure there is a strong enough cultural fit to adequately take advantage of this new talent, but I cannot think of a better model for mergers and acquisitions. We are in a "War for talent," or so I've read...

Posted by Nick Adams at May 21, 2007 8:46 AM

paulH. M&As in the high fashion and luxury industry are usually quite successful when they are horizontal integrations (brands of more or less the same market and reputation).

Posted by jens at May 21, 2007 12:28 PM

and why does that work in fashion and luxury? within upcoming fashion and luxury brands there is often a high level of enthusiasm combined with a pretty low level of management know-how. so usually acquisitions can really lift an individual label to a higher level in many ways. on the other hand it also does not seem to matter to the hyper-informed up-market customers when you group several labels under one roof -- as long as they are not on completely ends of the style spectrum -- as long as they are brands that could be found in the same wardrobe. customers in the high-end fashion markets also show increasing loyalty to the actual designers (and not necessarily only to the brand). and so this personal connectedness to an actual person and his or her ever-changing body of work establishes a link often much more important then financial structures in the background.

Posted by jens at May 21, 2007 1:13 PM

It takes courage to go against the crowd. When you expect everyone to sing the praises of an overrated CEO, you're statistically less likely to tell people around you that you think he's a moron... even if it is painfully clear that he is.

Posted by olivier Blanchard at May 22, 2007 1:02 PM

Tell someone he's a moron and you're likely to make him think, probably quite reasonably, "No I'm not." And then he'll crack on with his daft idea. Ask some incisive questions and challenge someone to commit to specific targets and deadlines - then see if everything still stands and everyone is still so confident. Even better, figure out where the doubts are what to do about them.

Posted by Mark JF at May 24, 2007 2:03 AM

Don't forget the disaster and the sunk billions of the Mitsubishi venture of DaimlerChrysler.

I still remember Mr Schrempp's press officer who is an alumni of my university giving a presentation of the DC-Mitsubishi alliance in summer 2000.

She showed some slides with a stylized globe and a lot of arrows orginating from Stuttgart and going around that globe: the master plan for world dominance.

I asked her what they will do when all the world belongs to them - then what? She was less than pleased by this question and so was my professor.

But it was soon foreseeable that this mega-merger would be bound to fail, not least because of intercultural discommunication (Ger - U.S. and Ger - Japan).

My professor pardoned my outburst in 2002 after having worked with some senior executives of this company.

Cheers from Germany

Posted by George at July 21, 2007 3:39 PM