The Right Way To Merge And Purge

When a press release appears in my inbox about a large technology vendor acquiring some 20-man, niche technology company, I can surmise the contents of the release without even reading it. Large Company A will take Small Company B's technology. The technology will be integrated into Large Company A's existing product that ostensibly lacks some functionality. Now complete, Large Company A will offer a "total solution" or "industry-specific solution" to you, the end user. It's a pretty straightforward transaction that happens all the time.

What about when Larger Company A acquires or merges with Large Company B? Well, in this scenario, the equation is not quite so simplistic. In this equation, you have to factor in several intangibles like politics and culture. When it comes to the technology that will be kept and that which will bid adieu, the jostling for position gets especially fierce. At both large companies are staffs of employees that have staked reputations in what they think are the best technology investments. Unfortunately, when large companies merge, not everyone will go home happy. Near-and-dear projects will be halted and implementations will be scrapped as the now single entity attempts to do what is best for the newly formed company.

Opting For Validation Over Vanity
It's a situation that confronted Dal-Tile (page 32) when it merged with American Olean six years ago in an effort to open another sales channel for its ceramic tile products. Instead of taking the might-makes-right approach, Dal-Tile opted to scrap its order processing system in favor of the legacy order processing that was in place at smaller American Olean. "American Olean had spent 10 years developing a set of systems and processes. When we merged with American Olean, it was a case of the smaller company's system really being a survivor as the core business processing system for the post-merger company," recalls Dan Cooke, vice president, information technology at Dal-Tile.

Now, Dal-Tile finds itself in a case of role reversal as the billion-dollar ceramic tile manufacturer and distributor plans to merge with $3.5 billion Mohawk Industries. The merger will result in a diversified company that will be one of the largest manufacturers of tile and carpeting products in the world. But, which technology will survive in this post-merger company? To the folks at Dal-Tile, the answer appears to be obvious, even though it's not stated. Dal-Tile continues to embark on several supply chain initiatives that put it at the cutting edge of the distribution environment. When the merger is complete, Mohawk Industries will inherit a company that is already doing same-day order shipping, working with the NTE (National Transportation Exchange) to establish new B2B processes for automated order shipping, and is simultaneously maintaining high-level customer service while cutting associated costs.

When you're acquiring a company for its technology and people, then that is all you really want out of the deal. When you're acquiring a company for the business it has established and served for many years, then you must pick and choose what to keep. If your decision to keep certain enterprise technologies is based on vanity and validation, your newly formed, much larger company will certainly suffer in the marketplace.