Soaring on Ridgelift

Merger Mania

Mergers of equally sized companies seldom work – the integration challenges are large, you seldom get the promised (hoped for?) cost structure by eliminating duplicated functions, systems or staff, and it's a huge distraction to management.

I wrote about this a few weeks back in the context of the potential acquisition of Yahoo by Microsoft and was reminded of it again reading the NY Times this morning and its coverage of the Delta/Northwest merger.

In the past this particular challenge tended to occur most with public companies – one of the key words I looked for was "merger of equals" which tended to pre-sage a disaster in which the merged company became a shadow of its two former selves.

Lately I've seen a lot more mergers between private companies. With the IPO market effectively closed and many of the traditional acquirers focusing on their internal challenges because of the economic conditions, there are very few decent sized exits. There's a meme around Silicon Valley at the moment to look at private acquisitions as a way to get to scale faster or expand a market footprint.

In many ways this is a great strategy… as long as you go into it with your eyes open and with focus on the issues that can make the difference between success and failure of the merger/acquisition. Here are some issues to think about:

• Merger of equals is a real challenge and don't kid yourself, it's seldom two "equals" despite how the PR is spun. One company has to lead – with conviction and determination otherwise the result will be a shambles. You increase the probability of success when one of the companies is significantly larger than the other – makes for less indigestion!
• Appoint one individual from the beginning to plan and drive the merger process. This person has to have the power to get decisions made quickly. Give them as much power to make their own decisions (i.e. trust them!) and provide quick access for the bigger, far reaching decisions that need CEO or board review.
• Have a plan that results in ONE company – swallow the smaller one and integrate it quickly. Systems, people, products… everything.
• Make sure that every person affected by the merger knows their future quickly. Don't let people sit around wondering what is going to happen to them. Communicate this to the affected people upfront and preferably one-on-one.
• Streamline the board of directors upfront – this isn't about merging two boards into one – please don't do this, it will be a mess – but instead, figure out the structure of the new board and who will be a director of the combined company. Hint – although the ego of some of the directors will try and drive this, build a board that can help the CEO and management team the best.
• If the combined company isn't going to be profitable on the runway left with existing cash, get the investors to pony up enough capital to give the company the necessary runway.

Once you get part way into the merger, play Sheryl Crow's "No one said it would be easy" and give thought to the chorus…

"No one said it would be easy…
But no one said it'd be this hard."

PLAN, persevere and prevail!

It’s the simple things…

Sometimes it's the simple things in life that offer the most joy! Simple things like… sunny days, clear blue skies, skiing in pristine powder or something more mundane like listening to static free music from your iPhone.

One of the advantages of the iPhone is that you always have your music with you and the battery is usually always charged! I couldn't say that about my iPod – carrying around a second device (and forgetting to charge it) was a hassle. The iPhone provides an elegant solution to both issues.

Unfortunately, my car doesn't have either the support for an iPod via the integrated electronics nor an AUX input. This leaves two options… hack the car (even I draw the limit here…) or using an FM transmitting adaptor to play through the car stereo.

The second option was my historic approach to iPod and car integration – not the best of solutions given the crowded airwaves here in the Bay Area. Every frequency is in use somewhere and often the radio station overpowered the iPod FM transmitter. This solution was a bust when I got my iPhone as not only did the phone give an incompatibility warning, the interference from the GSM RF deck made music listening an unhappy experience.

When iPhone compatible FM transmitters appeared in the local Apple store I gave in and bought one – the interference was gone but the poor reception problem remained. I kept thinking about ways of improving the reception but never thought about the problem when I had a browser at my finger tips… until this last weekend.

A short browsing session later I had a very simple, inexpensive and elegant solution. There are several sites that reference this out on the 'net – here's one of them.

Get a 33 inch length of wire (any wire just as long as its insulated), fold about 2 inches of the wire back on itself in a U-shape about half an inch across… and tape with duct tape (or any other strong tape available) to the back of the control unit of the transmitter.

You are done.

No kidding, this creates a simple antenna that's one quarter wavelength long at 88.3 Mhz that gets inductively fed from the antenna in the unit. No invalidation of the unit warranty, nothing to break, nothing to build, fix, or curse.

Works like a charm and renders music listening static free even in the RF swamp of Silicon Valley.

 

Food for thought – a sobering thought

It was a little over a year ago when I wrote "First oil, next food?" wondering how long it would be before food suffered the pricing pressures we'd seen in oil.

Sadly I didn't have to wait very long as an article on CNN this evening describes rioting over food prices in several countries around the world – "Riots, instability spread as food prices skyrocket".

The last 6 months have seen incredible increases in the prices of commodities as investors poured money into futures. I suspect this speculation is more the cause for rising food prices than the demand for corn to make Ethanol but surely that's also an underlying cause.

As I re-read my original post, this paragraph stuck in my mind…

"But as any investor will tell you, if there isn't a return to be made in one sector, money will flow into a sector that offers the promise (hope?) of a better return."

We've seen the impact of huge capital inflows into specific sectors – the sub-debt mortgage fiasco, the (continued) growth of LBO funds and now the commodities market. The promise of a superior return attracts more and more capital which eventually kills the returns that attracted the investment in the first place.

I wonder where all the capital will go next? I shudder to think!

A long week’s travel…

Just back from a 10 day business trip that included Sydney, Australia. I lugged all my camera gear with me on the trip – glad I did as I was able to get this night shot of the Opera House from my hotel room. The browser rendering of this picture doesn't do it justice – it looks great full size!

Sydney is a beautiful city – sort of like San Francisco without the fog!