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Intelligent Horizons, Inc.
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The ‘growth through acquisitions’ boom from 1998 through 2001, is beginning to heat up again, if you look at M & A results from 2004. Healthcare, computer security, construction, banks, and business service sectors did well. Telecom is starting to build in 2005, as is consumer interest in the technologies.
In the late nineties an industrial and construction equipment leader saw an opportunity to form an alliance with a global construction engineering and design company. They both worked in similar process, utility, and energy production environments and they both owned competing industrial equipment manufacturers selling into similar market spaces. So they formed a five year alliance, and began a process of acquiring and integrating additional equipment companies throughout the world. At the end of five years, hardly anyone predicted that the thing wouldn’t work out for both parties. In the third year, the integration was not doing as well as they predicted. Lots of factors came into play. A couple of studies by consultants raised more questions than were answered. To really find out what was going, a large-scale global qualitative research endeavor was launched. Customer interviews were conducted onsite with process plant users and maintenance people, and with plan design/build engineering and construction firms. Interviews were also conducted onsite at facilities owned by the alliance, talking with plant mangers, sales and marketing, service, engineering and plant operations. On-site interviews with key distributors and repair organizations were also conducted, and in many cases direct onsite interviews with their customers. Finally, a large sample, telephone assisted quantitative survey was conducted to measure customer satisfaction. In the end, the alliance wasn’t going to work. In the ‘roll-up’, some of the product acquisitions were not niche leaders. The acquired manufacturing plants continued to operate like separate companies. The distributors and repair organizations were taking delivery of new equipment that often needed repair, were incomplete orders, didn’t arrive on time, or failed on startup. The engineering and design customers found it extremely difficult to have designs delivered on time, product quality suffered, and new plant startups were often delayed because of problems with the industrial equipment itself, or in delivery delays. Key components were outsourced and the quality suffered. To compound these errors, the alliance customer service engineers were ill-prepared to handle all the complaints and issues, and communication breakdowns among all the alliance locations and staff. There just wasn’t enough time in the 5 year “alliance window” to fix what was wrong. Fortunately, there was an end date. Those industrial equipment companies were sold off. For the organization, the qualitative research produced the stories, the living examples, and vivid remembrances of the impact of strategic decisions on everyone involved. Together, the financial evaluation and the corporate and market research painted a troubling picture for the alliance. |