Seems that only about 17% of corporate mergers studied by KPMG created real value, while more than fifty percent destroyed value. This is apparently no big secret; when CBS announced it was buying CNET, the Tiffany Network's stock took a quick dive.
So why, after decades of failure -- or, heck, after AOL/TimeWarner -- is M&A still a common strategy? Surowiecki has a couple of ideas. In some cases, it really is good business, as when two banks merge their assets and cut their "back-room costs," meaning staff, to save money. But many more cases can be explained by corporate myths, including the myth of synergy, which, Surowiecki writes,
appeals to executives’ sense of themselves as magic-workers. As Warren Buffett once put it, executives see the companies they acquire as handsome princes imprisoned in toads’ bodies, awaiting only the “managerial kiss” to set them free. Unfortunately, most toads turn out to be as warty as they look, and magic kisses are harder to bestow than executives think.
In other words, it's about executive ego. But its also about the closely-related matter of investor expectations:
C.E.O.s of public companies often feel what you might call the “grow or die” imperative .... It’s the rare C.E.O., of course, who’s comfortable presiding over a shrinking empire, and running a public company creates a bias toward action, if only as a way of convincing investors that you recognize your problems and are dealing with them.
Wait. "Grow or die" -- this sounds familiar. How many churches, when a pastor or worse yet outside consultant is talking to them about evangelism, have been hectored to grow or die, usually with the image of a shark that can't stop swimming lest it drown? (Which is, incidentally, a myth. Sharks do sleep. And incidentally, the Chinese word for crisis is not a combination of danger and opportunity).
Bishops, like CEOs, are often taken by the myth of synergy. St. Rigomortis' is a declining urban parish, ever since the Bohemians moved out of the neighborhood. And O.L. of Aquavit has been hurting for years, ever since the Danes were replaced by Yuppies. But if we merge them -- argue the bishops, and other judicatory leaders -- if we merge them, then we'll have one nice big healthy parish. Right?
And sometimes it works. Father A. knows very fine congregations formed by merger. Saleable real estate makes a pretty good dowry, and will see the new family through a lot of tough times. But often it fails (and we at the Egg don't know the success/failure ratio -- yet).
Of course it does, because synergy is a myth. Two congregations, like two companies, are the sum of both their assets and their liabilities, human as well as financial. But in the case of churches, unlike that of companies, if both were thriving, there would be no merger. Which means that at least one, and often both, have more liabilities than otherwise. This is (and watch for another 80s allusion here) risky business.
Merging two truly moribund congregations is sometimes remarkably like beating a dead horse, and makes onlookers want to cry "Just give the poor thing a decent burial." And the executive ego-trip is matched by the myth of "the right person" -- that is, a pastor whose kisses can work magic on a frog. Frankly, it's fun to watch the poor bastard keep kissing, until he finally leaves the synod to do the same work somewhere else.
For both churches and businesses, there will always be times when a merger makes sense. But as Surowiecki writes,
... history suggests that, when it comes to mergers, the best response is often to just say no. In effect, deals like the CNET acquisition are a bit like an aging outfielder taking steroids in order to stave off the boobirds. The difference is that steroids usually work.
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