Giving in Order to Receive

A recent article in the Harvard Business Review made a perhaps surprising conjecture: that as far as mergers and acquisitions are concerned, those companies that focus on what they’re going to get from an acquisition are less likely to succeed, in terms of the deal outcomes, than those companies that focus on what they can give to the process.

Acquiring companies being in ‘take’ mode was a dangerous place to be, it claimed. Indeed, corporate giants are not immune from this conundrum either, if we think about, for example, Microsoft and Google wanting to get into smartphone hardware in ‘taking’ from Nokia and Motorola respectively.

A buyer in ‘take’ mode means that the fortunate seller can increase price, especially if there is more than one potential buyer in the picture, and effectively remove the future value of the transaction. Buyers on the take, really knowing what they want, are also more prepared to pay top dollar – which, in and of itself, poses a problem in eventually getting a good return. But companies with a ‘getting’ focus also tend to lack adequate understanding of their new markets, making failure even more likely.

Having something to give to the deal, however, really benefits outcomes. This could mean anything that makes the acquired company more competitive in its market, and especially if the buyer is the only partner who can offer this new competitive edge.

The much-talked-about Harvard Business Review article listed four main ways that the ‘giving mode’ buyer can increase the competitiveness of the bought company and ultimately secure better outcomes on the deal: