Don’t be quick to judge acquisition strategies…but be clear on intentions

Implications: Over the past several years, many (even countless) analysts have discredited HP for their acquisition of Compaq. The companies are too big to merge, the products aren’t compatible, the management is not compatible, they will loss more than they gain…What makes this acquisition unclear, and many others in question, is their intention. If companies who are actively acquiring would spell out their strategies, unanswered questions and potential devaluation could be avoided.

Analysis: When HP acquired Compaq, immediate success was never predetermined. Over the past several years, some glimmer of gain has been seen. During this time, executives have been discharged, stock valuation has been discounted, and employees have been discouraged, even questioning the acquisition’s purpose. HP doesn’t stand-alone. Many acquisitions that don’t make strategic sense have cost investors money. Sometimes the lose is correct, sometimes not. During the acquisition process, one of the first steps for a publicly held company to accomplish after disclosing the purchase is to clearly state why the acquisition was made and how gains will be achieved. So many companies are in fear that they will disclose to their competitors their intentions. More importantly, they may be withholding valuable information from the public. By discussing a company’s purpose on an acquisition is not disclosing trade secrets. The secret is how well a company integrated the acquiree. This will clear the air on why the purchase was made and will end potential questions on management’s ability to run the company. Had HP properly discuss their strategy with Compact, their recent history would have been more rosy.