Hewlett-Packard’s $8.8 billion write-down of its $11 billion purchase of Autonomy Corp. is a stark lesson for all mid-market company CEOs who plan to grow via acquisition: Do your homework and then do it again because (unlike H-P) your firm’s survival may depend on it.
The odds of successful acquisitions are dismal. A Federal Trade Commission paper says 50% of deals for companies large and small are not successful. This is troubling news for mid-sized firms, which can’t afford the losses of a bad deal as easily as a Forbes Global 2000 company can. In fact, it’s especially troubling because many mid-market CEOs assume they merely need to avoid acquiring sizable companies and opt for small, “bolt-on” firms instead. I wish it were that simple. But it isn’t.
Beware of acquisitions for the sake of diversification. Such acquisitions carry significantly higher risk and complexity for middle market companies. Read about how to assess the level of complexity, and what you can do to mitigate that risk.
Some CEOs are too passionate—too religious about their company’s vision. They stick to it and refuse to change even when it’s apparent to many that the strategy must be adjusted. Read about structures and processes that can help introduce reality into a passionate CEO’s thinking before it’s too late.
Justice is generally NOT served when a big company does battle with a middle market company. Legal fees can crush the mid-market company long before any “just” outcome occurs. To a mid-market firm, the risks of waging legal war with a big firm can be enormous.
Making an ill-advised acquisition can be deadly. Buying a company is a massive decision, often with high complexity and risk. But how risky and complex is your deal?
If half of all acquisitions fail, how can mid-market CEOs pick the winners and avoid the flops? This is the fundamental puzzle I am looking to solve with my recent research, and I’ve identified 12 critical risks CEOs must assess in a potential acquisition before they commit.
Assessing the complexity of risk of different types of acquisitions is a critical mid-market CEO skill. My Forbes.com post this week explains the importance of being able to forecast the complexity of planned acquisitions, and gives insights about how to do so.
Mid-market acquisitions fail 50% of the time and even those that succeed face a rough ride. Here’s how to cut your risk by using a big-company practice.
For a mid-market company, choosing where to place your innovation bets is a dangerous game. Where you spend your time and invest your dollars are decisions that can make or break you. How much time should a CEO and his team invest in looking at “new ideas?” And how does a CEO select the most promising innovations and ignore the rest?
Robert Sher is founding principal of CEO to CEO, a consulting firm of former chief executives that improves the leadership infrastructure of midsized companies seeking to accelerate their performance. He was chief executive of Bentley Publishing Group from 1984 to 2006 and steered the firm to become a leading player in its industry (decorative art publishing).