Wednesday, March 02, 2005
The Way to M&A
As a follow-up to my last entry, currently Blue Ribbon is also in the process of purchasing a company that we'll call Edge Health Care. The normal procedure in an acquisition is this: Company A buys Company B. Company B and Company A become the same company, and B's identity is subsumed. A gets B's assets, jobs and overlapping functions are merged, and life is good. However, here at Blue Ribbon, we don't do that so much. Instead, Edge will be moving into our building. So far, so good, right? Well, then they'll become a separate company, with some merged back office functions. The reasoning behind this is because people who wouldn't go with a big company like Blue Ribbon will go with a small company like Edge. Here in the area, word will certainly get out that Edge is part of Blue Ribbon. Therefore, people won't refer to the small company that's part of a big company, and you lose the small company advantage as well as the opportunity to show that a big company can treat you well. On top of that, a lot of operational efficiencies won't be realized because we're still 2 companies in many respects. Mergers and aquisitions pay off through operational efficiencies as much as anything else, and by making sure that we don't get those efficiencies, we're making sure that we'll merge like a bunch of retarded monkeys who have fallen out of the trees one too many times. Eventually this will change - they will be completely integrated, but that's been put on hold indefinitely.