February 6, 2015

When corporations are like step-parents

On this blog, we've discussed large corporations with bold acquisition strategies. Sometimes, aggressively acquiring smaller companies to boost capabilities, save research and development time and add luster to an existing brand is the best way for corporations to assert themselves in the tech sphere. However, for large companies like Microsoft, Apple, Google and smaller companies with many acquisitions like Blackboard, this creates a corporate relationship that some experts describe as "parental."

Not just parental, some say, but step-parental. The metaphors for mergers and acquisitions are plentiful, but when a large controlling firm acquires a smaller, younger entity, the oversight can be like that of a step-parent. The CEO of the primary company had no hand in the smaller firm's genesis or evolution up to the point of a merger, yet now finds himself or herself in the position of dictating strategy to the acquired company. 

This is why CEOs adopt unique approaches to bridging that relationship. On one hand, companies often buy smaller firms because they're already standouts at what they do. Too much micro-management from above can seem impertinent or counterproductive to meeting the goals of both properties. Yet the smaller company isn't out on its own anymore, and has a corporate structure it must answer to. Striking a balance between authoritarian and permissive "parenting" of the younger company can make or break the success of a merger or acquisition. 

"The power and value of the stepfamily metaphor is found in its ability not only to complement and augment economic explanations, but also to provide a framework for understanding non-economic problems encountered in integrating newly combined organizations," write Brent B. Allred, Kimberly B. Boal, and William K. Holstein in a research paper on the concept. 

What they mean is that sensitive emotions come into play when companies close a merger and then integrate the parts. It's a delicate relationship that begins in primary negotiations.