What's the big deal with mega-mergers?

EVEN when they are seeking to describe the big issues for 1999, management consultants cannot resist statements that are either so obvious or so ambitious that they are in danger of being ignored.

Vic Luck, leader of the Europe, Middle East, Africa region at the PricewaterhouseCoopers management consulting practice, kills both birds with one stone in his turn-of-the-year effort. "The greatest challenge for leaders in today's global business environment is achieving sufficient size to compete on a worldwide scale, whilst creating agile and flexible organisations which can respond to individual cultures and customers and react to fast developing new business oppor- tunities," says Mr Luck. Then he moves on to outline 10 business trends for 1999 that look a lot like those for 1998.

Well, of course, Mr Luck has tapped a good deal of experience of this sort of thing by going through the creation of "the world's largest professional services firm". And at least he appears to know what his job title is - even if it is one of those US-style mouthfuls. But there are many senior people in his own organisation who seem confused about where they fit in. And doubtless they are more than matched by the hapless executives in all kinds of other organisations - PwC clients and others - that have gone down the mega-merger route recently.

Yes, in certain industries - aerospace, defence, pharmaceuticals and automobiles - size and global spread do matter. But there are plenty of other businesses - many of them niche operators with which Mr Luck and his colleagues are probably unfamiliar - where such factors are not criteria for success.

For them, the agility, flexibility and readiness to respond to individual cultures and customers mentioned by Mr Luck are far more important. And, more to the point, they are far more likely to be achieved by smaller organisations than the mighty behemoths that the financial markets and captains of industry seem intent on creating.

We have all become used to the rallying cry "Think global, act local". But how many organisations have come even close to achieving this? Not many. Even those that have made some progress, such as ABB and Unilever, would accept there is a lot more they could do.

For the rest, the challenge is to move beyond the rhetoric - or to accept that this aim is largely unachievable.

Not so long ago, there was supposedly a trend away from outright mergers and takeovers towards strategic alliances of various kinds. Although nothing much seems to have come of this theory, that does not necessarily mean that it is a bad idea.

Networks of relationships would not only give organisations the global presence they crave, but they would create a more realistic chance of balancing that international coverage with the intimate knowledge of individual markets and customers that is increasingly seen as crucial for success.

Moreover, they would make it easier for organisations to manage the human factor that they insist is so valuable and yet continue to sacrifice in the name of growth.

The only problem, of course, is that such a solution does nothing for the executive ego. Who wants to be one of a collection of equals when you can be head of the whole shebang?

We all know the answer to that one. But we can be confident that the majority of those determined to go down the mega-merger route will not enjoy long-term success. Rare are the deals of this sort - whether involving Price Waterhouse and Coopers & Lybrand, Citicorp and Travelers Group, or BP and Amoco - that are born of strength. They are almost always born of the desire to put off the inevitable.

And the inevitability is that, in the modern age, big business is seeing its markets steadily eroded by little guys - a process that the arrival of the euro and the expansion of internet commerce can only hasten.

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