Skype, Dodgeball and Other Acquisition Disasters
Posted on: March 17, 2010 by Alexander Haislip4 Comments »
It’s common knowledge in academic circles that acquisitions seldom provide the benefits that acquirers initially expect. Most researchers blame this on a principal-agent problem, where executive incentives diverge from shareholder interests.
That can take two major forms: The first is executives awarding themselves major bonuses for making deals go through. The second is manager demand for higher salaries that come with larger fiefdoms and more cubicle serfs.
But there’s another school of thought blames executive hubris for synergy disappointments. The theory is that executives systematically over-estimate their ability to unlock the potential of corporate assets. They believe that they are superior managers than the schmoes running the acquisition target. Call it a crime of excessive self-esteem.
Yet deals keep getting done.
