Why Mergers and Acquisitions Don't Work

John Ward

Look at the business pages of the national press these days, and every week you'll see at least one CEO or finance director 'under City pressure' because of an acquisition or merger that has produced higher costs and lower growth than anticipated.

Recently, for example, Morrisons has been in a deal of trouble, issuing profit warnings that resulted from the accumulated costs of taking over Safeway. Before doing this, the successful northern retailer had grown organically by understanding its customers' needs. What it didn't understand was the southern consumer in general or Safeway's culture in particular.

Initially under marketing director Roger Partington, and then CEO Carlos Criado Perez, Safeway adopted a bold strategy of attracting new customers that won it not only City plaudits and genuine growth, but also Marketing Campaign of the Year and an IPA Silver award for advertising effectiveness. Customers knew and understood its brand offering to be convenience services for harassed families, coupled with excellent offers to help a stretched purse.