THE spotty success rate of mergers and acquisitions in creating shareholder value has long dogged investors who must try to decide whether a proposed acquisition by a company they own makes sense.
But with the advent of employee bloggers on the open Internet, especially those who work for leading technology companies, investors may be getting valuable insights into at least one factor that can make or break a successful deal: corporate culture.
In one global study (PDF 472KB, 24 pages) pre-dating the modern Web, KPMG found that 83% of mergers were unsuccessful in producing any shareholder value benefit. Other studies reach similar conclusions, though the numbers vary widely.
A key issue, as highlighted in the KPMG study, is post-deal integration of the two companies. This is where the ‘softer’ people and cultural aspects of the deal come to the fore. As the study says, it is “the delicate balance between financial drivers and people aspects which underpins success.”
So it goes without saying that the more investors know about the two cultures before a deal is done the better. It can help them judge the likelihood of a combination succeeding and delivering value.
Yahoo! employee blogs that 10% will quit if Microsoft succeeds
This is where employee blogs could now prove to be a useful tool. A great example of this is playing out right now in the unfriendly takeover offer from Microsoft Corp. to acquire Internet giant Yahoo! These two companies have starkly different cultures, most importantly in their deep-seated differences on technology.
This was borne out last week when a Yahoo! employee posted an item on his blog headlined Yahoos won’t work for Microsoft.
In the post, the author states:
There has been a lot of talk about “cultural differences” between Microsoft and Yahoo!, and analysts seem to trivialize this as just a difference in the level of professionalism or “fun” at the respective companies. The perception is that Yahoo! doesn’t want to be owned by Microsoft because they are stuffy and Yahoo! is fun. This may be true, but it’s only the tip of the iceberg. The cultural impacts are far more severe — I estimate that 1 in 10 Yahoos will refuse to work for Microsoft.
A New York Times article published four days later gives credence to this estimate that 10% of Yahoo employees will quit, including some of the most respected ones. It quoted an unnamed source at Yahoo! saying that “5 percent to 10 percent of the employees, would not work for Microsoft under any circumstances.”
Blogs by employees gain greater resonance when management and investor relations departments fail to use the Web in their communications around a deal.
Of course, employee blogs also give insight into a company’s culture, expertise and morale even when they are not in deal mode.
For better or for worse, you can learn a lot about a CEO from how he writes. They don’t even have to reveal any material market-moving information for their blogs to have an impact on investors.
They just have to be themselves.