Most acquisitions don’t work out.
“M&A is a mug’s game,” Roger Martin writes in the June issue of HBR, “in which typically 70%–90% of acquisitions are abysmal failures.”
Is there any reason to think Microsoft’s $26 billion acquisition of LinkedIn, announced this morning, will beat the odds?
It’s hard to know, but Martin’s article offers a simple rule of thumb: “Companies that focus on what they are going to get from an acquisition are less likely to succeed than those that focus on what they have to give it.”
The question, then, is whether Microsoft bought LinkedIn because it had a plausible theory about why it could make the latter more valuable.
Martin suggests four ways acquirers typically do this:
- Being a smarter provider of growth capital
- Providing better managerial oversight
- Transferring valuable skills
- Sharing valuable capabilities
To Read the entire article, visit the Harvard Business Review to read The One Question That Matters in Microsoft’s Acquisition of LinkedIn, by Walter Frick.