According to the self-assured analysis of McKinsey, there are only six types of successful acquisitions. Cutting directly to the chase, they are:
- Improving the target firm’s performance;
- Removing industry excess capacity;
- Creating market access for services;
- Acquiring skills faster or cheaper than they could be developed internally;
- Exploiting economies of scale; and
- Picking winners early.
We’ll get to these momentarily but first McKinsey volunteers a few harsh words on how most acquisition “strategies” are mere cosmetic puffery, including “growth” per se, They also voice skepticism about the strategy “of record:” “the stated strategy may not even be the real one: companies typically talk up all kinds of strategic benefits from acquisitions that are really entirely about cost cutting.” A more recent column asserts that “at least 60% [of mergers/acquisitions] are expected to fail” and provides the author’s own analysis of our Six Type taxonomy.
But shall we look at each of these categories and map whether it does or even can make sense in Law Land?