Google has been finally cleared to buy Motorola. Unfortunately, I think Mountain View will kill the company in short order.
Over the years I’ve been asked to write a lot of merger post mortems, yet not a single one has been on why the acquisition Google attempted with Motorola succeeded.
That is somewhat of a shame because Intel’s acquisition of McAfee didn’t break either company, and clearly EMC’s acquisition of VMware
left both corporations standing. Yet, neither firm is substantially stronger.
This points to the problem with big acquisitions: done right, they are more like dedicated partnerships, but the latter path is relatively rare because the acquiring firm wants more.
Now, in this particular case, Google is primarily interested in Motorola’s patents so a hands off process could actually work. However, few firms can help "fixing" their acquisition and Google - being both young and having a tendency to ignore history - probably won't take such a path. So let me walk you through Google’s likely murder of Motorola.
Phase One: We Are Here To Help
If there were ever 5 scarier words from a new parent company, well, I just don’t know them. In the first phase of killing a company, the acquiring party - which "just wants to help" - supplies smart executives to take over key responsibilities in the new firm.
Yes, these folks may be smart, but are typically completely unqualified to work in a very different kind of company. To make matter worse, they tend to be very inflexible and insular in a rather transparent effort to protect status and assert their new title. In short, they are ducks out of water who, to protect their authority, feel the need to cover up their inexperience. These incompetent executives often run around breaking things that work perfectly fine - just to make the acquisition look and feel like the firm they just left.
Phase Two: Consistency
I’m watching this happen right now with a software company that has been acquired by a hardware firm. The acquiring party is making sure titles, compensation, and other attributes are consistent between the two firms to make both easier to manage. This tends to gut the acquired company of top talent and forces it to backfill using hiring methods consistent with the acquiring firm. Alternatively, the departed workers may be replaced by employees the acquiring firm wants to get rid of but simply can’t bring itself to fire.
This scenario tends to create a growing mass of functions inside the company that fail to integrate or function well. As such, the financial performance, which likely started to slide in phase one, picks up negative momentum.
Phase Three: Integration
The final phase just before pulling the plug is full integration. This is where the now crippled and failing firm is slammed into the acquiring firm and becomes a division. In this particular case, it will both destroy whatever is left of Motorola and likely cause the Android licensees to run for the hills feeling totally betrayed.
So you would think this phase should or would be avoided, right? But it generally isn’t - simply because the acquiring company typically concludes the only way to protect the now failing (but supposedly valuable) asset and keep the stock from cratering is to reverse the hands off policy and do something really stupid
Now we can certainly hope that Google has read the tea leaves or at least looked at other mergers (the classics remain IBM/ROLM and AT&T/NCR but include most of Netscape’s and Microsoft’s similar acquisitions as well). However, Mountain View hasn't exactly felt the need to analyze history in other instances, so I highly doubt they will this time around.
It is said those who fail to learn from history are doomed to repeat it again and again - which has been Google's narrative over the last several years. Frankly, I wouldn't be surprised if Mountain View had a list of Microsoft’s mistakes and are going down the list to ensure they repeat every one of them and more.
So be prepared for the upcoming Motorola RIP piece because there is little doubt yet another eulogy is on the way.