Disney Eats Shark, Survives

Thrives, in fact.

The Merger Verger was looking for his Baked Alaska recipe the other day – in a fruitless attempt to impress a third-date woman friend – and what should drop out of the file labeled “recipes” but an article on Disney’s 2008 acquisition of Pixar. What ho, Malvolio!


So, we provide below a few nuggets from The New York Times piece entitled, “Disney and Pixar: the Power of the Prenup.”

The worries were two-fold: that either Disney would trample Pixar’s esprit de corps … or that Pixar animators would act like spoiled brats and rebuke their new owner.

The Verger says: Respect is a two-way street. Trust is a two-way street. But in both cases someone has to go first. Disney went first and that was the key to getting the deal right: they respected the unique culture and needs of Pixar and made that respect clear in words AND in ink. It makes perfect sense to expect the acquirer to go first. (Side note: that is one of the reasons why “mergers of equals” tend to fail; neither side wants to bend first.)

[Robert A. Iger, the new chief executive at Disney] … won some early support at Pixar by talking candidly and clearly about the [unpleasant] lessons he learned when his previous employer, the ABC television network, endured two takeovers.

The Verger notes: As the leader of the buyer, Mr. Iger knew that he had to convince the unconvinced. He used candor and psugarcoatersonal experience and he did NOT sugar coat it. If your target’s people are smart enough to do something that you want to have, then the chances are good that they’re also smart enough to see through sugar coating.

Don’t do it.

Mr. Iger also agreed to an explicit list of guidelines for protecting Pixar’s creative culture. For instance, Pixar employees were able to keep their relatively plentiful health benefits and were not forced to sign employment contracts. [He] even stipulated that the sign on Pixar’s front gate would remain unchanged.

The Verger notes: While the extent Disney went to may be over the top for industrial companies, for creative companies and service businesses it may not be. Keeping good people is in the details: health plans and signage; Disney even let the Pixar folks keep email addresses with the Pixar name rather than converting them to Disney.com. It’s the little things that evidence to people that you will do right when the big things arise. And this: Iger made a written contract about what he was going to do and not do; but he didn’t make his “new underlings” do the same.

And finally:Elena D'Amario / PARSONS DANCE

The key to successful integration, analysts say, has been Mr. Iger’s decision to give incoming talent additional duties. … “If you are acquiring expertise,” he told The Times, “then dispatch your newly purchased experts into other parts of the company and let them stretch their legs.”

The Verger notes: how better to let your new people know that you value their wisdom and their creativity than to put it to use on a bigger stage?

Obviously there’s some risk of professional dilution in letting people loose on too many projects, but giving acquired staff an opportunity to soar right when they are at their most worried can go a long way towards ensuring that your best talent doesn’t suddenly become your competition’s best talent.

About the art:

Top: Finding Nemo, courtesy of Disney

Middle: DK (who cares?)

Bottom: Elena D’Amario of Parsons Dance Company (photo by Lois Greenfield)

RIP Smith Barney: What’s in a Name?

Ah, branding!  So it’s good-bye to Smith Barney.  Off to that eternal reunion with Harris Upham.

Lots of Wall Street’s legendary names have morphed into history.  Many from their own greed and hubris (Lehman, Salomon, Bear and Drexel come to mind).  But others – and Smith Barney joins this list this week – from an acquirer’s marketing decision.

Rebranding is a commonplace part of the post-merger integration process.  In this case, The Merger Verger agrees with Morgan Stanley.  The Smith Barney name may have been venerable one day but it holds sway today only in the hearts of a small group of graying brokers.

I have watched and at times worked for companies that have acquired strong brands.  Sometimes the names were dispensed with almost immediately.  Other times not.  In the case of HSBC, for example, they owned merchant bank Samuel Montagu, broker James Capel, commercial bank Midland, and several other highly-regarded names in the UK banking/securities industry.  And they kept those names long after their acquisitions. 

HSBC utterly failed to build any degree of cooperative synergies between the units and in fact left the door wide open for tiffs and snits and spats and all manner of productive maturity.

Then one day, HSBC awoke from the Battle of the Logos and – poof! – St. Andrew’s cross was the winner.  All HSBC all the time.  In an article written at the time of the change, the Independent of London observed, “visitors to the HSBC dealing floor will bear witness to a different business logo on virtually every pillar.”  That is an accurate statement, I am here to tell you.  It was a mess.

Conversely, some years ago, Graybar, then mostly an electrical equipment distributor, acquired Hansen & Yorke, a small but successful industrial supply company in the New York area.  The target was to be the launching pad for Graybar’s expansion into the industrial supply sector.  Immediately after closing, the Hansen & Yorke name was jettisoned and replaced with “Graybar Industrial.”  It was a death knell.  Buyers of industrial goods knew the H&Y name, one with 35 years of real customer goodwill.  Sure the Graybar brand had recognition but as a faceless giant, not a service-oriented family company.

You would be wrong to conclude that The Merger Verger views little companies as good and big companies as bad.  This is a question of marketing and customer expectations.  Key word: expectations. 

Disturb the longstanding equilibrium that a target has maintained with its customers at your peril.  Brands and names in particular symbolize – evidence – that equilibrium … for better or worse.

These are issues of brand reverence, in the HSBC case too much for the target’s brand; in the Graybar case too much for their own.  HSBC’s mistake was to let the old brands linger too long, let the culture of uncoordinated independence take root under the new ownership structure.  Graybar’s mistake was to disrespect the degree of customer goodwill that a little guy’s brand can represent.

When you boil a name change down to its purest essence, there are two constituencies that matter:

  • Customers
  • Employees

The Merger Verger does not see this issue as a chicken/egg problem.  I believe that the interests of the customer should carry the lion’s share of the weight in any name change discussion.  (I have no doubt that there were plenty of old-time brokers opining fervently against dropping the Smith Barney name but, believe me, they’ll get over it.)

For a small-to-medium sized business, the core question to address before making the decision to keep or change a brand is this:

  • Which brand can be best leveraged to pull the combined companies toward their long-term strategic goals?

I would ask that question in the immediate context and in the context of how the strategically expanded business should look two, five, ten years from now.  THINK CUSTOMERS.  If the change is appropriate within any of those horizons – even the very long one – I would either make the change now or set the path down for doing so over a known and finite period of time.

If that decision is made with objectivity and strategic vision, your next step is communication: sell the change, making clear what it stands for and how stakeholders will be better off for the combination charging forward under the new flag.

Oh, right: then deliver on what you’ve said.  Don’t forget that part.

Consider Graybar.  Obviously in the face of using a small acquisition to launch a new, potentially national business unit, the Hansen & Yorke name had to go.  They just did it too fast and communicated their intentions too little.  Don’t make those mistakes.

Personal Note:

Speaking of final good-byes, I said mine today to my long-dead father’s best friend, Chillie Callman.  I remember him fondly from my growing up years and again from my years back home as an adult. A good man gone but after a life lived fully and generously.  Thanks Chillie. RIP.


Saying “Nothing” versus Saying Nothing

Question: What should you say when there is nothing new or substantive to report?

Answer: Something.

Professional integration managers know that frequent, open communication is one of the cornerstones of a successful acquisition.  But they sometimes get paralyzed in those inevitable periods when the process is moving along according to plan but without crossing any new milestones.

The Merger Verger was talking recently with the CFO of a regional chain of apparel stores that found himself in just such a position.  He wanted his team to be communicating with key stakeholders (especially employees in this instance) but he didn’t see anything really pressing to tell them.  Things were proceding more or less as hoped, with nothing particularly positive or negative to report.

I asked my contact whether he was pleased with the way the integration was going. “Yes,” said he.  I then asked him whether the fact that the integration was proceeding as hoped might be of interest – reassuring, motivating, etc. – to his employees. “Yes,” again.

So that is the news.

It is essential for executives to remember that the turbulence of an acquisition reverberates through lower levels of the employee infrastructure over and over and over.  People do not stop talking with each other.  And if they have no new information about which to talk they will frequently assume the worst.  Saying nothing just because there is no landmark event to report on opens the door to uncertainty and misinformation.

One of the most positively-charged pieces of “non-news” that you can communicate to stakeholders is that the integration process is on track and that you are making steady (if uneventful) progress towards the objectives of your acquisition.

All major projects cycle through periods of high-profile events and followed by others of steady but unremarkable progress.  People get that.  But don’t underestimate the   reassuring value of a simple “we’re moving along just fine” update every now and then.  It can be powerfully good news.

Question: What other forms of “non-news” have you found useful to communicate to stakeholders?  How does this type of information differ from group to group?

Meredith: Focus on the Fleet Feet

The recent acquisition by Meredith Corporation (NYSE: MDP) of Allrecipes.com strikes The Merger Verger as a strategically brilliant deal.  It doubles their digital revenues with the top food website in the world and brings them enormous digital media and social networking expertise. The leverage potential is high, with opportunities to create value from Allrecipes to Meredith and vice versa.

But, having made four acquisitions in the last eight months, the company needs to settle down and make these deals work … now.

Meredith is buying two distinct forms of fleet-footed assets: customers and tech expertise.  Blow the first few months of integration and the acquisition’s value proposition could deteriorate rapidly due to site visitors or employees taking flight. 

Allrecipes.com is a very strong site that has generated a powerful brand.  That suggests a degree of customer stickiness that would in turn suggest focusing first on retaining talent within the organization. 


Recommendations for Meredith:

  • Turn the new-deal tap off (or way, way down).  I know that Meredith Chairman & CEO Stephen Lacy sees a host of great media properties available in this post-recession environment but now is the time to “get right” those that he has already done, not get more to do.
  • Communication will be a key part of the integration puzzle.  With such a strong strategic intent, they should be telling anyone who will listen about the benefits available to both organizations by thoughtfully executing on it (and telling it over and over).  Touch the Allrecipes employees, particularly the key IT folks. Get down with them where they are.
  • Having purchased a company with a strong social media component, respect that society.  However alluring the opportunity might be to start selling their other products to Allrecipes customers, do not rush around stuffing them with offers.  Instead, contribute to their social experience, demonstrate the potential of cross fertilization with the other properties and invite them into the expanded world of Meredith.  Pull, do not push.
  • Incorporate Allrecipes.com thought leaders (at multiple levels) into the larger game planning for Meredith’s digital future.  It will send positive signals about the role of “new media” in a historically print-based company and increase the flow of expertise and ideas.  Oh, and listen to the ideas from the Allrecipes guys; their input is not just for show.