When Acquisitions Fail By Keeping The Status Quo

recently helped out a friend that finally found a seemingly great fit for his marketing company up in Vermont. The Buyer was a large US wireless carrier that wants to have more control over targeted and social advertisement. Because I’m usually sitting on the other side of the table, it actually happened that I knew the guy who was sent down to “jumpstart the collaboration” (yes, synergy is such an 80ties word, right?).

Acquisitions and mergers can go wrong for a number of reasons, but this one was new for me.

Never Assume Anything.

So we’re sitting at the table, the new guy from the big company right at the head end, my friend and founder on my right together with the co-founders (CFO and CIO), and the main stakeholders from the different division across the table. The new guy starts right away:

First thing I want to say is that I’m not going to change anything — you’re doing an amazing job, you don’t have to worry.

uch. I stare at him in amazement. The CFO smiles, the CIO gets white, some of the stakeholders red in their faces. “Are you freakin’ insane?!” I blurb out (I actually wasn’t that polite, but it’s always good if everyone hates the consultant, so the newly wed have at least a common enemy). “Have you looked at the numbers at all?” I continue, starting to pull up some slides I printed out.

We’re at the end of the line. People worked their booty off to get things pulled off, we haven’t had a raise in two years, and we’re at the end of our capacity to grow organically. We also are pretty much in all possible markets to our maximum extent. People have worked double shifts to make this acquisition happen for you and secured the accounts so our clients will stay with you, too. Our data center is maxed out, our servers run on Crazy Glue, and you don’t want to change anything?! You’ve got to be kidding me….

The new guy thought he made everything right, assuming that people would be most scared about their job after the acquisition, but people were actually most scared that nothing would change. They waited for the big buyout, many of them having stocks or options that don’t grow anywhere anymore, with no raise in sight. But the new guy snaps back (and I’m paraphrasing here, I’m telling a story, I’m not a historian”):

What do you expect me to say? You know as well as I that we’re bleeding employees right now. I had to let go 30% of my division, we have a spending freeze for all external consulting, while I still have to hold up operations and keep the promised timelines for all new products. And if that isn’t enough, my boss sends me to Vermont to oversee operations here - what do you want me to say? That I came with a million dollars for your data center? I’m happy if I can get your office connected to our Intranet, if at all, and I don’t really know how to schedule yet another product development with my already overbooked developers…

I’m an idiot. Never assume anything. But the problem remains: we’re at the end of growth and operating not as profitable as we wish at a roughly 25% profit margin, pretty low for a pure service company. And the growth potential through our new Mama can only be realized with some real cashola and people putting time into it.

he meeting lasted a long time, with lots of long phone calls over the course of the next week. Long story short: the solution was quite unusual and we are just at the beginning of the roadmap. My friend and his co-founders are taking their buyout money back into the company. The plan is to get a couple of evangelists and lobbyists on board that will work on the new money, with no costs for the new guy. In return he will take some time away from running projects and will guarantee that the new developments get some space in their data and network center, not easy to manage in a big company with many handles to polish…

I hope I can work a bit on the strategy part, outlining a new vision and market approach. That will spur some controversy, and not everyone will be happy with the new positioning and strategy. But there can be only one direction the company can keep going healthily, and if that direction is not the same direction some employees are willing to take, it is time to say goodbye - unemotional and professional. One thing I learned over time is that every job is just a marriage for a phase in the personal life and life of the company, and not always “through good times and bad times, until death will separate us.”

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