"Why So Many Fail!": Article on Mergers and Acquisitions, by Robert Wagman.

Business Editors

WASHINGTON--(BUSINESS WIRE)--March 14, 2000

The following article was written by Washington-based technology editor Robert Wagman:

Today's new economy has become a world of daily mergers, acquisitions, IPOs, buyouts and strategic alliances. Often, disparate enterprises join together amid great fanfare. But, then a year or two later, usually very quietly, it is announced that somehow the corporate marriage did not work out and the partners are going their separate ways.

"Too often these mergers and acquisitions are done solely because they work on paper," explains Richard Rutherford, Vice President of Tenera Energy, and one of the nation's leading experts on organizational change. "Management just expects the two entities will become one without putting into place any process to make it work. They make no effort beyond a minimal joining of bookkeeping and operating systems. I'm always surprised that they are surprised when the whole thing unravels."

Rutherford should know. As an expert in business change support, he has been working in the energy and public utility fields for the past ten years. Like the high tech industry, they have experienced an explosion of business combinations. Some have been hugely successful. Others have failed. Rutherford has been involved in planning mergers that became triumphs. He has also been called in to pick up the pieces in those which are on life-support.

"Mergers and acquisitions are entered into because they make financial sense. But, the two entities may have little or nothing in common. No one has taken the time to consider they may be trying to mix two very different cultures. That cannot happen without considerable planning and without effective leadership," Rutherford says.

The Tenera executive is convinced that corporate culture exists and is not simply a buzzword. It defines who we are and what the values of our enterprise are. Too often, managers see mergers as simply involving incremental change -- merging practices and systems. But, mixing two entities with different cultures can involve transformational change, altering not only how we do what we do, but why we do it.

Few industries have experienced as much change as public utilities and energy companies. They have had to go from being highly regulated monopolies with guaranteed profits, to a competitive environment where they fight for market share and employees have to justify their value. Those who succeed have developed pro-active plans for managing the change they are being forced to undergo. The ones who fail often simply try to go with the flow, but they are eventually overwhelmed.

As Rutherford sees it, these enterprises have been all but guaranteed steady profits. Consequently, their leaders have never been challenged to manage. Now, managers have to begin exercising skills they either never developed or have allowed to atrophy. If a well-tested plan is put in place, these born-again managers are often very successful. But, if the change is tackled piecemeal, the result can be a disaster.

Rutherford sees many parallels between the energy companies he has counseled and the prolific high-tech startups experiencing explosive growth.

"The leaders of these start-ups have also never had to manage. They have essentially been running small businesses. One morning they discover they're not small any longer. Now, they need skills that many of these entrepreneurs never learned. The smart ones know they need help and get it quickly. Some try to limp along and a booming business can suddenly find itself in a tail spin," Rutherford concluded.