October 2015: Tamper at Your Peril

In our industry, mergers and acquisitions are a fact of life. They’re a sign that the industry is maturing, and that entities—be they capital markets firms or third-party technology vendors who serve them—have created something of value that someone else wants.

More than a decade ago, I remember sitting down with Gavin Lavelle, CEO of SunGard’s Panorama business unit at the time, where we attempted to establish the number of technology firms SunGard had acquired since its founding back in 1983 when it was spun off from the Sun Oil Company. We lost count somewhere between 150 and 160, illustrating the extent to which the firm had already grown through acquisition. Clearly, SunGard is an extreme example, but it does illustrate the extent to which M&A activity has shaped, and will continue to shape, our industry.

However, mergers and acquisitions tend to be troublesome beasts. They are often badly handled affairs that in many instances yield divisiveness and an “us and them” culture as opposed to one of unity and co-operation. While pretty much all M&A plans appear simple to execute when they are hatched, when it comes to bedding down one culture—along with its history, idiosyncrasies and objectives—within another, things can go pear-shaped pretty quickly. 

As Investit’s Catherine Doherty explains in David Dawkins’ M&A feature on page 16, there exists a temptation to “fiddle” with an organization once it has been subsumed by a larger entity, an itch that clearly large numbers of technology firms cannot resist scratching. This fiddling might entail repositioning or rebranding products, or it might involve replacing key staff members who appear to be surplus to requirements. It might even involve something as drastic as mothballing existing offerings and migrating clients to alternative platforms.

Whatever the case, fiddling invariably leads to diluting the acquired firm’s secret sauce, which often proves debilitating, if not terminal. In most instances, fiddling tends not to be good for anyone—the acquirer, the acquiree, and especially their clients.    

So what’s the answer? In short, acquirers should keep their fiddling to a minimum. Ideally, products and their owners should be left to operate in pretty much the same environment as they were used to, where they can adhere to their research and development schedules and client-interfacing activities that had served them so well over the years. Naturally, there will be synergies between the two firms and those need to be acknowledged, but in most instances, the rule of thumb is thus: If it ain’t broke, don’t fix it.