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Mergers and Acquisitions with a focus on merger integration

Does the Stock Market Hate Acquisitions?

Acquisitions can have an uncanny ability to destroy value. Is it, as Forbes contributor Freek Vermeulen asserts, that Wall St. generally hates acquisitions?

Vermeulen’s article goes on to show that not all acquisitions are created equal. Merger integration, particularly cultural integration, is key. He notes:

Acquisitions are just very hard to do. They usually are fraught with information asymmetries; basically most firms don’t have a clue what they’re buying. And due diligence is not going to solve that problem; acquisition integration is often hampered by cultural differences, incompatible systems and plain mistrust – something you don’t just look up in the company’s books beforehand. Hence, the troubles are hard to avoid.

Getting to know a potential target via a strategic alliance is a great way to reduce the risk of M&A. But, what if you haven’t had a chance to form that alliance and still want to do the deal?

A well planned integration that begins with a comprehensive readiness assessment and cultural benchmarking can be good alternatives to consider.

Is the MySQL Acquisition Changing the Culture at Sun?

On January 16, 2008 Sun Microsystems made this deal announcement:

Sun Microsystems Announces Agreement to Acquire MySQL, Developer of the World’s Most Popular Open Source Database
Sun Growth Strategy Accelerates With New Position in $15 Billion Database Market

SANTA CLARA, CA January 16, 2008 Sun Microsystems, Inc. (NASDAQ: JAVA) today announced it has entered into a definitive agreement to acquire MySQL AB, an open source icon and developer of one of the world’s fastest growing open source databases for approximately $1 billion in total consideration. The acquisition accelerates Sun’s position in enterprise IT to now include the $15 billion database market. Today’s announcement reaffirms Sun’s position as the leading provider of platforms for the Web economy and its role as the largest commercial open source contributor.

Sun’s full press release on MySQL is available here.

There was a great deal of concern in the developer community that this was an attempt to undermine open-source software. Sun, long known for its strong advocacy of its proprietary technology, was viewed with suspicion.

Charles Cooper’s CNET blog has provided an interesting update on this merger integration. MySQL may in fact be a catalyst to change the corporate culture of the acquirer. The article notes:

During a break [at the recent MySQL Conference & Expo], I ran into a Sun employee who told me the question really wasn’t whether Sun would change MySQL but just the reverse. “It’s MySQL thats changing Sun’s culture,” said the employee, who didn’t want to speak for attribution. “In the past, we had all these silly fights by being proprietary. But that’s history.”

It is no surprise that M&A has the power to transform; this will be an interesting development to watch.

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