Winning - Jack Welch [75]
Fox News is an example of everything going right at a new venture: a high bar for people, outsize spending on resources, and lots of noise about it all. Its results tell the story. Fox quickly beat MSNBC and eventually surpassed the longtime cable news leader, CNN.
Legendary entrepreneurs like Henry Ford, Dave Packard, and Bill Gates are undeniably examples of the excitement and glory of starting something new from scratch and watching it grow to astonishing proportions.
But in each of your companies, opportunities of every size and variety await.
Grab them. Pick passionate, driven people to lead them, resource them with everything you’ve got, and give them oxygen to breathe.
Growth is great, and in business, it doesn’t always have to start in a garage. There is nothing like the fun and the sheer thrill of starting something new—especially from inside something old.
14
Mergers and Acquisitions
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DEAL HEAT AND OTHER DEADLY SINS
YOU’VE SEEN THE BIG PARTY when two companies announce their merger. There’s the early morning press conference on CNBC, the chatter and the buzz, the vigorous pumping of hands, the TV lights glaring, the glossy banner proclaiming the new company’s name. It’s all there but the confetti.
And then there are the stars of the show—the merging CEOs grinning widely, slapping each other on the back, and talking about a brave new world of synergies, cost savings, and increased shareholder value. At particularly jovial merger announcements, the CEOs wrap each other in a big bear hug, like Steve Case and Jerry Levin on that fateful day of the AOL–Time Warner deal.
With the excitement, there’s exhaustion too, and sometimes you don’t have to look very hard to see it in the faces of the CEOs at center stage. They have been working around the clock for weeks, if not months, fighting over every last nickel, not to mention who will run what.
But usually, all you see at merger announcements is elation and relief. The battle is over, and now it’s time to reap the deal’s rewards.*
In reality, as the veteran of any merger will tell you, the battle has just begun, and the deal’s rewards won’t come without a lot of blood, sweat, and tears.
If the first day of the merger is a big party, on day two, the cleanup begins. For people on the acquiring side of the deal, mountains of work stand in front of them, and while they may be pumped with optimism, there is always an undercurrent of nervousness in the room. Every deal promises cost savings, and even if you’ve been part of the deal team, working night and day grinding out numbers to justify doing it, a little piece of you has to wonder if the savings you’ve articulated will come to mean the loss of your job, or that of your boss, or your best friend down the hall, or the employee you’ve been mentoring for a year.
For the acquired, the nervousness in the room isn’t an undercurrent, it’s a tidal wave. Everyone is terrified of layoffs. But even if you think your job is safe, life has just gotten very complex. A merger can feel like a death. Everything you’ve worked for, every relationship you’ve forged—they’re suddenly null and void. Your sense is that nothing will ever be the same again.
On top of it all, day two media coverage is filled with business journalists and Wall Street analysts questioning the rationale for the deal and reminding everyone that many mergers fail.
Mergers do fail. In particular, it is a hard road for mergers forged primarily to capture industry convergence benefits or revenue synergies. It’s easier to succeed when a merger is based on cost reductions from the combination, with any upside from revenue synergies considered a pure bonus. But either way, merger success is never a layup.
And yet companies persist in merging—and they should.
In the last chapter, we looked at why organic growth is great. Every company must have the patience to consistently focus on and invest in the innovation that drives it.
But mergers and acquisitions give you a faster way to profitable growth. They quickly add geographical and