The Dealmaker's Nightmare
What a coup! Wired magazine called it "a marriage tasked in heaven." The Wall Street Journal called it the "boldest technology deal in years, preempting competitors and ushering in a new era of convergence." And you're the dealmaker who pulled it off. Industry watchers called you a strategic genius. The Financial Times called you a visionary. Even your competitors were impressed. You didn't mind. Not a bit.
So, congratulations, if they're in order. And that's a very big "if."
The story started well. Your aging baby, Global Computer, had seen the future and blinked. Saddled with fading technology and fierce competition, you counted up your mercifully huge cash kitty and went shopping for a brilliant young partner. Nexus Technologies was ideal, a Seattle prodigy with the hottest networking concept in the industry. Founded by Johnny Wu, a twenty-something Cantonese immigrant with a doctorate from Cal Tech, Nexus's wunderkinder were front-runners in a whole new market niche, but the cost of heading off hungry rivals had loaded them with life-threatening debt. Their recent IPO had soared for three months, enriching their investment bankers and some fast-thinking arbitrageurs, but had then inexplicably (though not to the bankers) sunk to single-digit oblivion.
So you had what Nexus coveted: quick cash and survival, albeit as a junior partner. They offered what you coveted: Global Computer's reincarnation as the sharpest blade in cutting-edge computerdom.
Business Week initially labeled you the "dealmaker of the quarter." Other CEOs were generous with envy-spiced praise, and you suddenly acquired a dozen new best friends. God knows, you earned that glow. Inventing Global-Nexus wasn't easy. Twice you had to revise the offer, juggling the cash and stock payment mix and massaging the executive roles and compensation packages. The way those Seattle prima donnas acted, you'd never know they were bleeding and desperate for your cash transfusion and marketing savvy. Then came the board approvals, endless press briefings, employee announcements, and the pitch to Wall Street.
In justifying the merger to the board, you waxed eloquent about strategic and economic opportunity, complementary products, overlapping accounts, new market channels, reduced costs, scale economies, and-best of all-that hot new technology in the near future.
But months have since drifted past-almost four, in fact-and the truth is no longer beautiful. It's not ugly, but there's a little secret gnawing in your belly. Your heavenly marriage is not going well. It hasn't even been consummated.
Three months ago, you told the world what you then firmly believed: Global-Nexus was about to become a spectacular whole far greater than the sum of its already impressive parts. Unfortunately, you may have hoisted expectations a bit high. Within weeks, impatient customers and anxious software developers began asking when they would see the technology breakthroughs you promised. Analysts wondered aloud about your earnings estimates. One business columnist printed some vicious gossip. Competitors smelled blood. Corporate buyers were publicly taking a wait-and-see position.
Back at Global's headquarters in Palo Alto, you began to hear disturbing rumors about Johnny Wu's Nexus kids up there in Seattle. Lots of preening about who was indispensable, suggesting lots of worry about who was getting fired, whether the survivors would have to relocate, and, indeed, whether you "old guys" in Palo Alto knew what you're doing. More and more, Johnny Wu doesn't return your calls, sometimes for days. His voice mailbox is invariably full; he's supposedly too frantic to glance at his E-mail. So now you clearly have a generation and communication gap as well as a geographical one.
What if some of those Nexus wizards jump ship before you even leave port? Will the new products ever be developed? How will you keep the few Nexus customers that signed on early if the people they relied on depart? And don't forget your own customers. Ravenous competitors are already soliciting them, while shamelessly courting your best people and attacking your reputation in the marketplace.
As time flits past with no real integration occurring, no leveraging of channels and customers, no technology transfer, no new breakthroughs, and no cost savings captured, uncertainty begins to skyrocket. It breeds anxiety and backbiting. Your new two-company sales team is united only in blaming Hart-Scott-Rodino, the entire legal profession, and Congress for stopping them from sharing data essential to pursuing new customers. When they're not ranting and raving, they're attacking one another, engineering, and product management.
How will you ever bridge the cultural gap? Suits versus T-shirts. Design review meetings versus food fights. Planning retreats versus white-water rafting trips. Even your corporate colors don't fit-teal and kelly green?
Everyone is leaning on your information systems people for customer, product, and market data. They say they have other priorities. If you step in and order them to switch priorities, what other projects will you obstruct?
So far, the critics-internal and external-have monopolized the conversation. Unencumbered by facts and gripped by paranoia, they've been describing the deal's downside to anyone who will listen. How do you quiet these naysayers? How do you prove to your customers, employees, shareholders, suppliers, vendors, and the communities in which you operate that the deal is good for them? And what about those acerbic analysts? How do you convince them you won't become yet another merger casualty?