Page 188 - (DK) The Business Book
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Synergy and
other lieS
Why takeoverS diSappoint
ompanies have to grow in scale: overhead costs are shared
in Context order to survive. One way and money can be saved from
C to make an organization increased buying power. Fixed
FOCus bigger is to buy (acquire) another costs can also be reduced because
Mergers and takeovers
and make it part of the original the combined business needs less
Key DATes company. Alternatively, two staff in functions such as finance,
1890–1905 The first “takeover businesses can agree to merge, human resources, and marketing,
wave” occurs in the us and forming another organization than the two separate entities.
europe, triggered by an with an entirely new identity. The Companies’ also buy businesses to
economic depression and purpose of an acquisition or merger acquire new technology, reach new
new legislation. is often to increase shareholder markets, or increase distribution.
value beyond the sum of the two
1960s Abraham Maslow companies. These benefits are Corporate divorce
applies the idea of “synergy” known as “synergy”; the concept In practice, takeovers and mergers
to the way that employees in being that one plus one equals three. are rarely marriages made in heaven,
organizations work together. The reasons for two businesses a fact underlined by Harold Geneen
2001 us companies AOL and joining together might seem in the books he co-authored in 1997
Time Warner merge in a deal compelling. The new, combined and 1999 on the pretence of synergy.
worth $182 billion. It does not company increases sales, market Mergers can fail to deliver the value
share, and revenue. It should also
promised, with one plus one often
work out, and in 2009 the be a more efficient operation. Bigger equaling less than two. There are
companies become separate companies also enjoy economies of many reasons for failure. Hidden
entities.
2007 In the us alone, 144 Synergy is the
takeover deals worth more additional value that
than $1 billion take place. is created when two
business units are
2009 Only 35 takeover deals joined. A holy grail in
worth more than $1 billion business circles,
take place in the us. academics Campbell
and Goold concluded
that “synergy
initiatives often fall
short of management’s
expectations”.
