Winning - Jack Welch [83]
But then there was Rick Miller. Rick was the CFO of RCA, and he was a big leaguer—smart, fast, full of creativity and energy. GE already had a great CFO, and it looked like Rick would need to be let go as a result.
As much as we wanted to help out our manager in TV by giving him the job, it just didn’t make sense. We ended up suggesting that both the GE and RCA leaders find new jobs over the coming months, and gave Rick the CEO position. The two who left got great jobs elsewhere.
One last thought on people selection: in the most effective integrations, it starts during negotiations, in fact, before the deal is even signed. At JPMorgan Chase and Bank One, for instance, twenty-five of the top managers were selected by the time the merger was closed. That’s on the far extreme of a best practice, but it is something to strive for.
The main point is, fight the conqueror syndrome. Think of a merger as a huge talent grab—a people opportunity that would otherwise take you years of searching and countless fees to headhunters. Don’t squander it. Make the tough calls and pick the very best—whatever side they’re on.
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The sixth pitfall is paying too much. Not 5 or 10 percent too much, but so much that the premium can never be recouped in the integration.
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This pitfall is as old as the first marketplace. People are people; when they want something that someone else wants, all reason can disappear. Again, blame deal heat. This dynamic happens at yard sales, and it happens on Wall Street.
I’m not talking, by the way, about overpaying by a few percentage points. That kind of premium can be made up for in a well-executed integration. And in fact, leaving a little money on the table can be helpful if it prevents the residual acrimony that can slow an integration.*
I am talking, instead, about overpaying by so much you will never make it back.
The most egregious recent example of this dynamic has to be the Time Warner–AOL merger, in which a giant of a media company, with real assets and products, spent billions upon billions of dollars too much on a distribution channel with unclear competitive benefits. Amazingly, at the time, there was such excitement about an illusory notion called “convergence” that just about everyone jumped on the bandwagon. It was only after the failure of the deal was obvious that Ted Turner, a board member who was instrumental in promoting it, acknowledged on national TV that he had never liked the deal in the first place. By then, such “coolheadedness” was too late for Time Warner shareholders.
Of course, 2000 was a time when everybody was overpaying for everything. In the publishing industry, for example, the German media giant Gruner + Jahr paid an estimated $550 million for two properties, Inc. and the New Economy magazine Fast Company. At the time, the purchase scared the daylights out of other business magazines. But during the recession that followed, the premium could only be seen for what it was—excessive. No integration in the world would ever make up for it, a fact to which a crowd of deposed Gruner + Jahr executives would likely attest.
There is no real trick to avoiding overpayment, no calculation you can use as a rule of thumb to know when a sum is too much. Just know that, except in very rare cases of industry consolidation, if you miss a merger on price, life goes on. There will be another deal.
There is no last best deal—there’s just deal heat that makes it feel that way.
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The seventh pitfall afflicts the acquired company’s people from top to bottom—resistance. In a merger, new owners will always select people with buy-in over resisters with brains. If you want to survive, get over your angst and learn to love the deal as much as they do.
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In October 2004, there was a glowing article in my hometown paper, the Boston Globe, about a “thriving survivor” named Brian T.