All mergers and acquisitions are predicated on making more from two entities than they would be alone. It's not enough to run the prize subsidiary profitably and independently; the new owners must promise that they will unlock untold riches in the form of synergy and cross-selling.
I don't know whether the CEO and his board really believe this or if they just mouth the words to justify the deal to Wall Street. But I do know an awful lot of time is wasted trying to fulfill this elusive quest.
It's worse still when the head guy believes this balderdash, and the board goes along. The CEO expounds his "vision" of what the new company will look like, and then spends the rest of his corporate career trying to convince customers they should embrace the new direction. Often, CEOs and boards are willing to bet the ranch on mysterious forces that will converge to create cutting-edge products and catapult the company ahead of its competitors. Alas, this alchemy rarely happens.
I suppose there's nothing wrong with top management directing its troops to work closely together to develop joint projects and new levels of cooperation. But such directives waste an awful lot of time that could be better spent achieving more attainable goals. Let me cite two examples.
Covisint, the auto industry's Internet supply exchange, has yet to fulfill its ambitious goals, in large part because the possibilities for it were too great. "There were a lot of pet projects around here," Covisint CEO Kevin English told Automotive News. "There were a lot of grand visions." (There's that v-word again.) "At one point, we were talking to more than 51 companies relative to partnerships. We can't do 51 things."
Then there's much-maligned AOL Time Warner. Frustration levels within the company must have boiled over in recent months. AOL's own Time magazine, in one of the hardest-hitting critiques of the merged companies I have read anywhere, quoted Michael Kelly, the AOL division's chief operating officer, about the misuse of synergy. Time reported that Kelly found "what a senior executive refers to as a `big sandbox,' in which, in the name of synergy, it seemed as if anyone with an idea was suddenly proposing grandiose new projects with Time Warner divisions." Said the AOL honcho: "People are doing crazy stuff and wasting money. Someone has to set priorities."
But who will do it when it was the grandiose dreams that drove the merger in the first place? To put a stop to them would acknowledge the amalgamation was ill conceived.
This gives me hope a small publishing company like ours can compete against the big boys. We have 30 or so publications, but you'd be surprised how little time we spend trying to figure out how they can all work together to squeeze out new revenue-time our bigger competitors are expending on their far-flung properties.
It's just not our style to indulge in such fantasy. In fact, I drew a big laugh at our executives meeting last fall when I urged our publishers, editors and ad directors to stave off the "creeping synergy" that seemed to be infiltrating our ranks.