MAKING MERGERS WORK.

• Author: Wall, Stephen J.

Certain major categories of decisions and actions need to be addressed in every acquisition, but not in the same way or sequence every time.

In 1999, corporate mergers in the United States alone totaled a staggering $3.44 trillion, The Wall Street Journal reported. And despite the well-publicized, much-analyzed fact that many of these mergers -- up to 70%, according to some estimates -- failed to create value, it seems clear that the end is not yet in sight. Globalization, deregulation, the need to achieve economies of scale, the pressure to make substantial investments in technology: all these factors lead to the conclusion that, in order to remain competitive in today's marketplace, many companies will continue acquiring and merging, merging and acquiring.

Yet, unless they learn from the mistakes of the past, they're likely to keep making them. In looking over the failed mergers of the 1990s, what is striking is that they were often so promising. Consider, for example, Union Pacific Corp. and Southern Pacific, or Quaker Oats Co. and Snapple. A study conducted by Mercer Consulting Group, indicated that the problem with recent acquisitions seems to have much less to do with faulty selection -- or with paying too much for an acquired company -- than with what went on after the deal was sealed. While enormous amounts of effort went into hammering out terms and conditions, leaders too often acted as if the integration process would take care of itself; too little thought was given to possible pitfalls, and too few plans were made for dealing with them.

In fact, the most fatal mistake an acquirer can make is to assume that when the contract is signed the hard work is over. In reality, just the opposite is true: it's after the ink has dried and the champagne has flowed that the real work begins.

Warning: Danger Ahead

It is possible to write a history of failed acquisitions based on the statements the acquirers made at the time the deal was announced. If you look back at the accounts of these acquisitions in the press, you'll see that certain types of statements keep recurring -- statements that can serve as warning signs that the integration may be on the road to disaster.

"It's a natural fit." No matter how many complementary strengths two organizations have, it should never be assumed that they can be easily merged into one, or that the hoped-for synergies will emerge, without a lot of diligent, hard work.

"Nothing's going to change." In any...