I've never thought of myself as much of a soothsayer. True, I picked the winner of the 3:00 at Wetherby on Saturday. And I was wise enough to bring a coat to work with me this morning.
But when it comes to prophetic statements, I'm usually about as much use as Mystic Meg.
I do, however, have my moments. Back in July I wrote a piece about mergers. It was a general stream of consciousness about the merits or otherwise of combining companies.
I suggested that not all of them work, generally because the target business does not do as well as expected, cost-savings don't materialise, key people leave, cultures don't match etc.
I didn't predict that any mergers in particular would fail. But I did say it was commonplace for them to do so. And so it came to pass.
Last month, on October 15th or thereabouts, the 'merger' of Soho post houses Concrete and The Facility was ended.
Updated (10/11/08): More about the original agreement here.
The former directors of The Facility decided not to take up their option to buy a stake. And they have now returned to trading under the name The Facility Post Ltd in their building on Dean Street.
The two parties have given vastly different reasons for it ending. Until they sort out their differences, I can't give you a definitive explanation as to why. Suffice to say, Concrete and The Facility are both currently trading [once again*] and planning for the future.
Updated (10/11/08): *To avoid any confusion, I'd like to point out that both companies are currently trading 'independently' once again.
However, while I can't pin down exactly what went wrong there, what I can do is look again at what might generally cause mergers to fail - in case you or your company are thinking about doing something similar.
One person decided to respond to my original stream of consciousness.
He made an interesting point:
“Senior management have to recognize, and have the authority, to action a new plan. This doesn't always happen because the management aren't properly skilled in achieving a successful amalgamation, let alone changing the individuals from competitors to best friends over night. There are merits in scale but mergers in the same market to just reduce cost is floored.”
The bit that interested me most in that comment was the mention of ‘competitors to best friends.' I think that in Soho terms, that is crucial.
In one of the best articles on the net about the subject, Steve Tobak on CNET News says there are ten key reasons for tech-related company mergers to fail. He says:
Flawed corporate strategy for either or both companies
One company sugarcoats the truth, the other buys a PowerPoint pitch
Sub-optimum integration strategy for the situation
Cultural misfit, loss of key employees after retention agreements are up
Acquiring company's management team inexperienced at M&A
Flawed assumptions in synergies calculation
Ineffective corporate governance, plain and simple
Two desperate companies merge to form one big desperate company
CEO of one or both companies sells board and shareholders a bill of goods
An impulse buy or panic sell gets shoved down the board's throat
I'm particularly intrigued by number 8. If there are companies in Soho that have merged - or plan to merge - with this as their raison d'etre, I feel for them.
I can suggest another factor. Something less tangible but equally important. Having seen first hand the fallout and the reasons for various mergers not working out I would suggest that personality clashes are a big issue.
Whether round the board room table or in the machine room, sometimes, faces don't fit, attitudes to business don't match and people do not get on. When this happens, a relationship is flawed from the start.
I've done a bit of web research and - taking into account about 10 different articles on the subject - the key to a successful merger would appear to be:
A shared vision
Respect for each other
The right synergy between people, products and markets
The ability to talk
Without each of these key things being in place or part of the plan, mergers are doomed from the start.