According to Yahoo! Finance, the AT&T $86 Billion acquisition of Time Warner would find its way into the top-10 all-time list of acquisitions. In fact, it will tie for 5th place with another AT&T acquisition--that of BellSouth in 2006. It will be the second most expensive acquisition in 2016, following Anheuser Busch's purchase of rival SABMiller PLC for $104 billion.

"We are both convinced that as we innovate in this way and as we accelerate the pace of this innovation, it's going to attract others to want to do the same on these platforms," said AT&T's CEO, Randall Stephenson.

First of all, I must bring up the grim statistic that 70-90% of all acquisitions fail. According to a 2011 Harvard Business Review article, different reasons are cited for those failures, including:

  • The acquisition was done for the wrong reasons;
  • The price was wrong and does not present a positive ROI;
  • The business model didn't work out; and--
  • The integration failed (due to business model and process mismatch).

There are additional, more people-oriented reasons why acquisitions fail, that may include:

  • Forcing integration. The AT&T people may be telling Time Warner people: "this is how we do things around here," forcing them to change their processes and workflows, which would typically slow things down.
  • Nonexistent trust between teams in AT&T and in Time Warner that will have to start working together the day after the acquisition is finalized. It takes time to build that trust, but the starting point will be lack thereof, which would cause strife and destructive negativism rather than constructive positivism;
  • Power games by the AT&T team, who might treat the Time Warner people as "second-class citizens," in an attempt to establish superiority;
  • Arrogance of the Time Warner people, that might result from their company being valued at the 5th highest acquisition valuation ever. This will certainly not help building trust early or fast.

The CEOs, and all levels of management in both companies must be aware of those potential scenarios and do everything in their power to avoid them, or no creativity or innovation should be expected after the acquisition.

Finally, AT&T should remember that the acquisition of one company, with its entire range of products, services, processes, and business models would not increase AT&T's innovativeness. Increasing the latter requires an intentional, consistent, organic effort.

Published on: Oct 25, 2016
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