Why I hate M&A?

On the morning of March 28, a horrendous news broke about Best Buy closing all the Future Shop locations in Canada. Eventually that day which was feared for a long time by many Canadians loyal to Future Shop finally happened. Future Shop was a Canadian-only brick and mortar consumer electronic store, which was purchased by Best Buy years ago. I was a frequent visitor at both these shops,  but the better terms and conditions meted out to the Future Shop employees made it a better place with a great customer experience over Best Buy. If you have visited any Best Buy location in North America you would know why the company is in red mainly because of the poor customer service. Sadly Future Shop is no more and the brand has been terminated with 500 full-time and 1,000 part-time positions that will also be eliminated. I am a big, big opponent of mergers and acquisitions and no matter whatever is being promised,  most often people who spend day and night striving to build the company end up paying a heavy price.

The true reason why a company gets bought in majority of cases is purely commercial in nature. When a big company gobbles up a smaller company,  it’s a period of transformation for both companies. If proper infusion of talent is allowed between the companies, often it ends up being a good business proposition. When two companies with different cultures collide and amalgamate,  most of the time it ends up acrimoniously. The last company I worked with was gobbled up by a large state owned foreign company.  Even though promises were made to retain all employees, hundreds of people were sadly laid off eventually. I moved on quickly before anything like that happened to me. But I personally witnessed the bloodshed of the culture,  values and the spirit of the company that I once was proudly part of. There are many examples like that all over the world. One good example would be when Microsoft took over Nokia’s mobility division, it led to one of the most beloved names in cellphone business ceasing operations for a while and in the name of consolidation, it butchered the livelihood of thousands of people.

Another fact that you must have noticed is that M&A might be designed to stifling competition but  doesn’t always achieve the desired outcome. I hate monopolies created by M&A and most of the time they falter after a while as they forget to innovate. Sirius and XM were two satellite radio companies. Today they are one company that was formed when Sirius Radio purchased XM radio. Recently I was reading how the company is faltering as no one cares about satellite radio anymore and would only day prefer a music streaming app like Spotify. When Best Buy monopolized the Canadian electronic market,  it wasn’t able to match up to the nimbleness of an Internet giant like Amazon.com, which rendered the brick and mortar shops to the status of window-shopping centres. It would be years before Best Buy could come up with a coherent strategy to counter the latter.

I have always believed that each company has an agenda for profit making, set of values and culture that it wants to follow to conduct the business and the humans who toil to perform and achieve the business outcomes or objectives. The leadership sets the culture and the vision to steer the company forward. Most of the time, I have seen that once the leadership runs out of ideas, instead of gracefully stepping aside, they end up selling the company, with deals mostly done over a  round of golf (P.S:- I am being figurative here :)).

Today everyone speaks volumes about wireless charging.  Did you know that over a century ago an amazing man called Tesla discovered wireless charging? Since he was unlucky to stand against the might of Thomas Alva Edison, many of his inventions today are sadly footnotes. If the mighty utility companies had the courage to adopt his inventions,  we wouldn’t be seeing these ugly electric transmission lines in our eyesight in today’s modern towns and cities. Also energy would have been made available seamlessly to millions of people who till date live without the benefits of energy.

I have read tales of how Google buys up independent apps, absorb the developers,  shut down the app and move on by trying to incorporate it as a feature in one of their offerings. Most of the time the app developers,  fattened with a huge paycheck leave after couple of years to a relaxing life elsewhere. This pattern has seen itself manifest again and again in the Silicon Valley with all the major companies. Hence due to this profit motive, M&A renders any technology disruption initiatives to a mere whimper.

I understand that the true nature of a business is to generate profit and also to maximize it’s potential to generate greater incomes year after year. But I do believe that it can only happen with a leadership that has the vision and a nimble, inspired workforce that can execute the vision and in fact exceed the expectations demanded by that vision. The company should always keep disrupting it’s field of business through continuous innovation and relentless pursuit of creative, sustainable and meaningful ideas. It should take calculated risks and learn quickly from them to become bigger and better each year. This is the hard way.  M&A is the easiest. Which one would your company take?

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