Sleeping with the enemy

obama.jpgMerging with competitors. Does it make you stronger? Barack Obama obviously thinks so. Today’s news is that he's making Hilary Clinton secretary of state.Getting an old rival on board can help in one of several ways. It can highlight weaknesses in your company that you haven’t noticed but they’ve been strategically attacking. It can decrease the fierceness of the competition you face, giving you a stronger hold on your market, as well as increased market dominance through sheer size. It gives you access to a double-whammy of market-savviness, drawing together two approaches, two strategies, two huge heapfuls of research and two bank accounts. And it often also pulls up share price too. Look at Nokia and Siemens 2006 merger to form Nokia Siemens Networks - the new company’s value was around a whopping £15 b. The announcement of the deal saw Siemens shares jump 8.3%, whilst Nokia went up a slightly more modest but still desirable 3.1%.On the downside, job cuts are often in the pipeline when companies merge. Big job cuts. The 2007 Thomas Cook and MyTravel merger cost 2,500 employees their jobs, whilst when HP and Compaq pleased shareholders with the announcement they would combine to form a £17.5 b company, they terrified workers by slipping in that they would simultaneously by axing 10% of the total work force – a cool 15,000. And let’s remember that the increases in share price that would seem to justify such cuts are by no means guaranteed. You have to look no further than the crumbling ruins of financial institutions around us now to see that.Damaged brand and factions between different ideas-mongers from the two original camps can also lead to nasty boardroom spats.What all this means for Obama and Clinton is that they should be aware that their merger is very much like that of any business: full of hope but still unpredictable, an increased powerhouse but with job losses still almost inevitable, and very much still vulnerable to fall-outs and negative reactions from investors and the public alike. Not to mention the difficulties involved in handling a complex new mixed brand. Just a word of warning.

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