Samsung-RIM Deal Could Kill Apple (or Samsung)

Samsung is again rumored to be interested in buying RIM. If it does, columnist Rob Enderle says, it can choose two acquisition models -- a full-blown merger or one that preserves RIM. History says keeping RIM intact would be a better idea, but history also says it might not happen that way. That would be bad.

By Rob Enderle
Fri, August 10, 2012
Page 2

In short, if Samsung does buy RIM, it would either be king of the world or extinct. Given the resources involved, there's little chance of a more moderate outcome. That's high stakes indeed.

Integration Mergers: Great In Theory, Catastrophic In Practice

The reason that integration mergers are so popular is the same reason why they commonly fail: They are designed to simplify management by forcing the acquired company into the mold of the acquiring company. If we were talking about a marriage, this would be like surgically connecting the bodies in order to limit the differences. While small mergers, like transplants, can be made to work, large ones tend to be too shocking to the entire entity, and the operations fails.

An integration merger sounds good because, on paper, all the executive titles match up and all the processes are the same. An executive looking down thinks he sees similar things, but the reality is that this process is so invasive that it tends to destroy the asset that was acquired catastrophically.

The process takes a company—Palm, Sun, and (hypothetically) RIM—that isn't healthy to begin with and puts it through a pervasive blender of changed polices, reporting structures, compensation systems, decision systems, a never-ending stream of executives from the acquiring company "who know better and know nothing," and management systems. In effect, it turns the entire company into a new employee.

The (expected) massive decline that follows then puts the acquiring company under massive financial stress. Executives from the acquiring move firm into triage on the acquired firm with no real understanding of what made the acquired firm different. Top employees and from the acquired firm either get shot down for new positions or look for employment elsewhere. What's particularly sad is that the executives the acquiring firm sends over often weren't performing well in their original riles, making them doubly damaging.

At the core of the problem is the fact that the effort seems designed to ensure that the acquiring company's management team avoids having to learn what makes the acquired company unique. The acquiring company also gets to avoid the appearance of employee differences between the two firms such as compensation, title and span of control.

Preservation Mergers Puts Assets Before Executives

Dell and EMC's big mergers, on the other hand, follow a different path Management's desire to avoid special training is subordinated to the need to protect the expensive assets that have been acquired. The first steps aren't to rationalize the processes between the firms but to identify the top human and physical assets (including customer relationships) and make sure they are first protected and then enhanced. This process was first developed at IBM after a huge string of expensive acquisitions that Big Blue destroyed, and Dell and EMC (including subsidiary VMware) have improved on the process. Dell's head of mergers and acquisitions even came from IBM.

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