The price of dumb deals
“We lose money on every sale… but we make it up on volume.”
- Insolvent Retailer
If you substitute the word acquisition for sale, this quote describes the behavior of more than a few CEOs who pursue expansion without disciplined negotiation strategies in place. The fact is, that in the orgy of acquisitions and mergers at least 50% of buyers lose money. In essence, they overpay. The skillful ones, such as G.E. and Pitney Bowes, who pursue disciplined plays, executed by highly trained staff, enjoy markedly superior results. In the last six years, Pitney Bowes has acquired 70 companies. In the words of their CFO Bruce Nolop:
“For us buying other companies couldn’t be a seat of the pants adventure, it had to be tracked as a business process.”
Manage the process, shape the result. Smart dealmaking is much more about process management than few dealmakers care to acknowledge.
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