Why most mergers turn sour: They're not a natural combo

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Most mergers don't work because (1) the companies are not a natural fit; (2) the acquiring company tries to push synergies the acquiree doesn't want any part of; and (3) the companies are not entirely forthcoming about their true intentions once the merger is consummated. Add the rather pathetic need for the acquiring CEO to build a monument to himself, and his or her colossal arrogance in changing things that made the acquired company successful (and worth all those billions) in the first place, and you begin to wonder how any merger ever works.

Take star-crossed Quaker Oats. Its acquisition of Snapple was such a disaster it put Quaker into play. Now PepsiCo has agreed to take on Quaker, mostly to get its hands on Quaker's powerhouse sports drink Gatorade. But will PepsiCo management screw up Gatorade just as Quaker screwed up Snapple? Quaker, you remember, changed the very essence of the Snapple brand by disrupting the quirkiness of its advertising and altering its distribution pattern to quirky places. In trying to make the brand more mainstream, Quaker almost destroyed it and was forced to sell Snapple for a tremendous loss.

PepsiCo, theoretically, could make the same mistakes with Gatorade. Gatorade's advertising is almost mystical, very un-Pepsi-like. Obviously, PepsiCo doesn't understand how to market sports drinks or it would have done better than its own All-Sport brand, which has a miserable market share of about 3%.

How will Pepsi bottlers handle Gator- ade? By pushing it into every vending machine where Pepsi is sold-in malls, offices, schools, everywhere. And can the Pepsi brass resist selling Gatorade at the soda fountain? Pretty soon Gatorade might be just another beverage, not a sports drink with a special mystique. Quaker lost the quirkiness of Snapple, and now Pepsi-Co could easily lose the mystique of Gatorade because the pressure is on to grow the brand to justify that $14 billion price tag for Quaker.

Another merger that looked good on paper was Daimler-Benz and Chrysler Corp., but it's turned out to be the mother of failed mergers. Everything that could have gone wrong has gone wrong, and it's my feeling both sides had their own (opposing) agendas from the beginning. Chrysler must have known about the problems with its costs and product lines, which have cropped up this year, at the time Daimler-Benz was wooing the company. And we all know Daimler chief Juergen Schrempp never intended the "merger of equals" he talked about so effusively.

You could say both companies are equally guilty of conning one another at the outset (not a very good way to begin a relationship). After the deal was sealed, key Chrysler people either bailed or were fired, leaving nobody there responsible for its profitability. As for any possible synergies, there are none. The Daimler-Benz side doesn't want to pollute its Mercedes-Benz brand name by putting any Mercedes components on Chrysler cars. What a mess!

Closer to home, look at what happened when Winn-Dixie bought Goodings, a high-end central Florida supermarket chain. To get the acquisition off to a good start, Winn-Dixie is offering "buy one, get one free" at Goodings stores. But when my wife Merrilee tried to take advantage of the deal, she couldn't find any of the three items she wanted and each time had to go to customer service for help. Twice she had to take a substitute at a different size. A customer-service woman said Goodings made up the ad and Winn-Dixie never sent some of the items. Merrilee has vowed not to return to Goodings, once her favorite supermarket.

Another central Florida deal, involving a Winter Park, Fla., jewelry store, fared better. The acquiring company bought 40 or so local jewelers and in each case has pretty much left the local stores alone. They kept local names and encouraged the previous owner and staff to stay, so Merrilee has been able to keep and build on her relationship with the former owner and the representatives sent down by the acquiring company.

What's most important in any deal is that the two companies share a common culture on how to conduct business. The bigwigs can dictate anything they want, but if the people in the trenches on both sides don't like it they will treat the coming together as an alien virus and expel it.

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