Not all Acquisitions or Strategies, Work

Not all acquisitions or strategies work, but you do need to know when to change before disaster strikes. Two recent articles have borne this out. The first is that HP will not sell off their PC unit and Republic Air decides to spin off Frontier Airlines.

Two questions might be asked.

How do you arrive at making an acquisition, and then deciding to sell it off?

Well, even sophisticated organizations make mistakes, but many times it is because of insufficient efforts in due diligence. Not only do you need to look in the area of financial diligence, but in the integration of "culture fit," "core values," and "strategy" integration. While Republic Air blames it on "fuel costs" it really appears to be much more. Most probably on of entirely different strategies that Republic Air has compared with what Frontier was. One is a "feeder line" versus a regional airline.

The other question, is why might you say you are going to sell off a business and decide to keep it?

Sometimes, it sounds like a good idea but when you look into the depths of the financial impact on the company, it doesn't look so great.  There can be hidden synergies within the company. Also, there can be the expediency in wanting to look like you are doing something, but in the end it isn't a good decision. Many times these are created by internal political powers that push or pull decisions or shareholders.

In the end, a good CEO will retract or make a hard decision to change course. One of the hardest had to have been Roberto Goizueta's famous decision to reformulate Coke in 1985. Massive amounts of PR and inventory had been expended. Then, 77 days later, the formulation was returned to it's original, being labeled "Classic." Mr Goizuleta's strategy was to encourage risk taking, and he remained as CEO for many years afterward, in spite of this massive mistake and cost to the corporation. Even most recently Coke changed their packaging back in the article below:
A Frosty Reception for Coca-Cola's White Christmas Cans

On the same day as the "Frosty Reception" above article about Coke, there is one about AT&T and T-Mobile (Deutsche Telekom AG) changing their acquisition strategy:
AT&T, T-Mobile Mull Plan B

So own up to mistakes, and cut your losses sooner rather than later. Hopefully, there will not be too many of them.


Republic Air Changes Course