Across the different technology marketplaces we cover, we always see a flurry of M&A activity. Vendors have different rationales for their acquisitions -- the motives usually range from sensible to silly.
What exasperates me though is the near universal hype that accompanies M&A announcements. Both the analyst community and media tend to become uncritical cheerleaders when vendors go shopping. There's a kind of collective Stevie Wonder moment: "signed, sealed, delivered, it's yours!" (In contrast, workaday bloggers -- especially those at customers implementing the tools -- usually offer more balanced analysis.)
Based on my previous M&A advisory experience and also the history of M&As in general, I typically approach advising our subscribers in two ways:
- Provide an analysis of potential post-merger synergies and overlaps
- Urge caution about the inevitably messy integration road ahead
Here’s what lies behind my healthy skepticism of vendor mergers and acquisitions.
- Firstly, the odds are heavily stacked against M&A success. Years of research shows that an astonishingly large number of M&As fail. Study after study confirms the same, yet hope springs eternal...
- You don’t declare victory just by winning the coin toss. The game has just started. The long and hard work of integrating people, processes, and products lies ahead -- and most of the time, most vendors fail at this.
- Any potential benefits are not immediate for you as a customer. Only investors and employees feel the immediate impact. Yes, there could be short term disruptions but benefits usually take a while to show up on your radar.
Now, let me ask you this: if your technology vendor announces that they intend to add new features -- but not until a year down the road -- what’s your response going to be? You should be similarly skeptical about promises coming out of M&A announcements.
In short, it's signed, but not sealed nor delivered, not yours, yet...