What is Microsoft Thinking?

Has Microsoft has gone off the deep end with their bid for Yahoo!? Microsoft is threatening a hostile takeover if the Yahoo! board does not accept its offer. This is a dangerous and slippery slope.

Mergers between companies are a rough road at best. The landscape is littered with high profile failures. Throw on top of that a threat of a hostile takeover. One must ask, does that help?

Microsoft has taken a position threatening Yahoo! leadership to accept ‘or else’. How does that help realize the potential that built into the $40B offer? How does that engage Yahoo! or Microsoft employees to work together if the merger does happen? How does this set either side up for success?

If you truly believe that cultural integration can make or break a merger, doesn’t a hostile takeover start companies off on the wrong foot?

Statistics purport that 75% of all mergers and acquisitions fail to deliver against the claims made in the deals. Classic examples are abound:

· AOL/Time Warner
· Citicorp/Travellers
· Pfizer/AstraZenica
· Oracle/Seibel

The list goes on…..

The best M&A activity, in my opinion, is based on building a solid relationship over time. Start with a small working agreement- co-marketing, cooperative sourcing, cross sales, shared services…. something. Test the waters and see how it goes. With each success have the relationship delve a bit deeper into the organizations. You can measure and test successes, you can address risks. Then, and only then, will it become clear if the two organizations can function better as one.

Over time, you gain a better understanding of true value. You have a better baseline to analyze for proper pricing. You have engaged employees throughout the organizations (not just leaders). You have started the journey down the path of realizing the benefits.

Good luck Microsoft. Do we see another historical case study for business schools in the making? I will be impressed if you prove history wrong.