I learned to my horror a few months back that up to three-quarters of all business acquisitions fail to pay back. In other words, the money that is paid for the business is never recouped out of future profits. Can this be true, I thought?
And then I thought about my own experience: when we sold Marketing Principles to Interpublic in 1999, the UK management which undertook the 'merger' made such a horlicks of it that four of our six management team (including me) were gone within a year - and many of the clients followed them out the door. (It's fully documented in "The Unprincipled", as some of you will know).
I will have a large bet that the money IPG paid was frittered away, though I can't prove it. The fact that they were doing many such deals at the time all round the world, and that their then share price of $33 is now around $10 tells you all you need to know.
But why is this? Put simply, most (virtually all) acquisitions are the sole responsibility of accountants, for whom due diligence means doing the numbers. They may say they do a lot more in terms of general business advice, but mention sales, marketing, distribution, operations, HR, IT, and all you get is bluster.
But in an acquisition situation, however important the numbers are (and I am not minimising their importance), the failure to run the rule over operational, managerial and cultural 'fit' is in my opinion the core reason behind that horrific failure rate.
So I've decided to put my money where my mouth is and do something about it. As of the end of this month, there's a new kid on the block, trying to improve the odds of success: we call ourselves The M&A Team