2016 was another in a long line of interesting M&A years. While it wasn’t as valuable as 2015 from an investment perspective, a number of deals, like AT&T-TimeWarner, for example, were viewed as transformative. With slow, anemic growth in company revenues and activist investors everywhere, deals continued to happen. Only time will tell whether they will succeed in meeting their stated objectives. On the flip side, there also were a number of M&As from previous years that became deal fails from a leadership perspective this year. Here is a list of my top three:
- Alphabet/Google and Nest-Dropcam – What happens when you invest in an egotistical CEO (Yes, I know…a dime a dozen) like Tony Fadell by buying his company (Nest) and allowing him to do whatever he wants, including acquiring Dropcam to expand its networks home products line? Apparently, not a lot financially, but tons on the people side. Fadell’s micromanaging ways and poor company culture made their presence felt. After the Dropcam CEO left because of challenges working for Fadell, and the egotist stating that Dropcam employees “weren’t that good,” the Nest-Dropcam deal implodes, eventually costing Fadell his job, and creating one of the major leadership deal fails in 2016.
- Yahoo and Tumblr – Marissa Mayer came to Yahoo to resurrect it. Acquisitions were a key aspect of her growth strategy. One of those acquisitions was Tumblr for a cool $1.1B. After declarations that Tumblr would not be fully integrated with Yahoo, Mayer and her team made the decision to integrate the two companies’ sales teams. Finally, after losing the Tumblr sales leader, stumbling through multiple assignments of temporary Tumblr sales team members and losing 50% of the Tumblr sales team, Yahoo announced a total write down of over $700M+ of the original deal value. No wonder Yahoo is getting acquired…maybe! As M&A leadership deal fails go, this was the most costly write down of deal value for the year.
- Men’s Warehouse and Jos. A. Bank – Men’s Warehouse freed itself of the company’s CEO to buy Jos. A. Bank. Famous for their “buy one and get [insert huge quantity] of [insert clothing item] free, Men’s Warehouse (Now Tailored Brands Holding Company) effectively killed the one thing that made people come to Jos. A. Bank: the thrill of getting “free” stuff. (Remember: Nothing is really free.) Tailored Brands total lack of customer focus and inability to stem the tide in lost sales continued in 2016 destroying shareholder value to the point that Jos. A. Bank is now unsellable.
M&As are tricky business endeavors. Even the best strategic rationale, planning and execution can’t overcome poor leadership. So as 2017 approaches, what deals will we discuss as epic M&A leadership deal fails? Time will tell.
Change the mindset. Change the model. Change the outcome.
Dr. J. Keith Dunbar is founder and chief executive officer of Potentious. He can be found connecting and sharing knowledge about M&A leadership on Twitter and LinkedIn.