Innovate or Perish: Managing the Enduring Technology Company in the Global Market

Merger Mania vs. Tech Transfer

The urge to merge is back. Apparently, the mergers and acquisitions (M&A) world still possesses the same seductive powers that lured so many companies into disastrous relationships during the 1980s and 1990s. Never mind that every study conducted, including those by leading consulting firms like McKinsey & Company and PriceWaterhouseCoopers, have documented the shockingly high failure rate of this strategy.

“The stats on M&A failure, in fact, might be gloomier than the American divorce rate,” observes the Caxton Group, a Cleveland consulting firm specializing in the needs of emerging companies. “Depending on whether success is defined by shareholder value, customer satisfaction, or some other measure, most research places the merger failure rate somewhere between 50% and 80%.”

Flanagan Consultants of Stamford, Connecticut, places that figure even higher. “Depending on the particular time period and industries studied, the failure rate for M&As ranges from 60% to 90%.”

There’s not a lot of room to succeed in those percentages, which argues that smart CEOs would realize it imperative, as Santayana cautioned, to learn from history so they are not doomed to repeat it.

Interestingly, the Flanagan report noted that one in-depth study of 497 companies concluded that CEO overconfidence was the primary culprit. While other studies posit numerous other reasons for the demise of so many business entanglements, my own experience in this field prompts me to believe ...