Oct
31

Mergers and Acquisitions (Part 1)

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With the current state of the economy I decided to speak about the inevitable merger and acquisition activity that will take place.  I will do this in a two part post because of the length of the article and hope that as always you find the information useful.  Don't forget to join our newsletter for free stuff and more content and as always Like us on Facebook because we like you.  🙂

Mergers and acquisitions are a normal course of business.  Generally these activities are meant to gain some competitive advantage, but history has proven that there are good and bad mergers.  Competitive advantage usually comes in the form of economies of scale like consolidation of facilities and reduction of work forces, but competitive advantage can also come from acquiring something of value like intellectual property.  However, what needs to be understood before going into any merger or acquisition is its impact on the employees.  Understanding these impacts will greatly affect the outcome of the merger or acquisition and could very well keep a business out of serious trouble.

This is a very important issue because several Fortune 500 companies are consolidating as the economy becomes more competitive.  Every merger raises a number of key issues that include the corporate culture of both companies, the competitive position of the company, the communication of the merger, and the potential cost savings of the combined company.  As a project manager with Compaq Computer Corporation when Compaq and Hewlett Packard became the world’s largest IT company merger in history, I saw first-hand the impact of cultural clashes within the company and its affects on employees, stock holders, and consumers.  This merger was studied by many Fortune 500 companies considering this growth method and some analysts feel that while Hewlett Packard may again be a good investment one day, it may not ever be a good company again.  All over the world eyes have been focused on Hewlett Packard as they continually realigned and re-focused their post merger strategy and they are but one company that represents the difficulties of high-level mergers and acquisitions.

Several times it seems as though from the very beginning of a merger and acquisition announcement that employees begin to build stress.  The place that they have called home and the team that they have come to know is somehow, someway about to change.  Nobody at first, it seems, can even think of a better way to conduct business or good that can come from a merger and frequently at least one of the two companies in a merger or acquisition is feeling some competitive pressures to push them into an M & A environment.  I have witnessed first-hand many of these symptoms and been asked to give my accounts of one of the toughest mergers in history.  That was the merger of Hewlett Packard and Compaq Computer Corporation.

Many didn’t know the legacy of intellectual property that was an underlying factor in the merger of these two companies, but white room papers told the subtle story later.  Hewlett Packard once had an opportunity at the intellectual property that became Tandem Computers and was later acquired by Compaq.  This is because Tandem was founded by a former Hewlett Packard employee.  Tandem ultimately went on to become the supplier of what many believe to be the world’s largest fault tolerant platform computer.  These computers were responsible for 3 out of every 4 credit card transactions and ran over 80% of the world’s telecommunications infrastructure.  If it absolutely, positively had to be turned on and never turned off it came from Tandem and that included computers in the Pentagon.

As with any situation though, when you can finally get your hands on the crown jewels everything changes.  In fact, the crown jewel is exactly how the Tandem product line was spoken of in the white room papers for the merger of Hewlett Packard and Compaq.  The Tandem division at the time of the HP and Compaq merger was barely over three thousand people, but they were three thousand people with the kingdom’s crown jewels.

The next post we will conclude this article, but I hope you find the above information useful.

Your path to business success.

Categories : General Info

Comments

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