Author Seth Godin has a book in his creative inventory called “Survival is not Enough”. In it, he writes about corporate DNA (he calls it mDNA) which includes everything that makes a company what it is….products, brands, people, IP, et al.
In it, he writes about acquisitions of other companies and that one of the primary reasons for an acquisition is to add new DNA to the acquirer’s corporate DNA to make it stronger.
Seth tells the story of a pride of lions. The dominant male sires all cubs within his harem until he is unseated (i.e. killed or driven off) by a stronger male. The new leader then dispatches all the cubs still with the pride.
This is not because the successor is cruel, but because having cubs indicates the lionesses are still nursing and are, therefore, infertile. So, in order to impart his genes in the pride, he must impregnate lionesses quickly (he doesn’t know when a stronger lion will come along).
The analogy for companies that acquire others poorly is that when an acquisition is made, the CEO typically hands over the ‘captured tribe’ to the operating executives, who recognizes that the acquired company has different DNA. Products and services that come with the acquisition are different and have different weaknesses, which make them very easy to kill off.
The same thing happens with the employees of the captured tribe: They are different; they weren’t hired by the operating executives; the products they know are gone; ergo, they are killed off.
The benefit for the operating executive is that their genes are spread more quickly by killing off the products and employees of the acquired company.
The message is NOT to avoid acquisitions. It IS to reinforce the reason the acquisition was made – to acquire another company’s DNA and make the resulting company stronger and more profitable. Sometimes it happens by accident.
McDonalds Corporation acquired troubled Boston Markets – primarily for the attractive real estate they owned. The Chief Legal Eagle at Boston Markets was given the baby-sitting role of CEO of Boston after the acquisition. He fooled them all…and turned the struggling chain around, growing faster than the McDonald’s stores.
When an acquisition is made, don’t do as a Chairman I once worked for did: 1. Announce to the initial joint management meeting of both companies that he believed in the Golden Rule…”He who has the gold, rules”: 2. Then, continue to refer to the acquired company as, “The Captured Tribe.”
Within six months, the senior executives of the acquired company were gone and we (the survivors) had no clue how to run their business.
Let’s make sure the end game of an acquisition is to make the resulting company bigger, better and, most importantly, financially stronger.
See Seth Godin’s Book: “Survival is Not Enough”. The Free Press. c2002 (with updates). Available on Amazon.