Cisco’s (CSCO) new M&A plan gives units more freedom to screw up
Posted by: in Latest NewsFiled under: Deals, Management, Industry, Competitive strategy, Cisco Systems (CSCO), Employees
Cisco (NASDAQ: CSCO) is changing its M&A habits. Instead of taking companies it buys and folding them into the parent, it will allow many to operate as independent divisions.
The Wall Street Journal reports, “We can’t purchase a company and tell it to do as we see fit if we don’t have a true understanding of the marketplace,” says Ned Hooper, Cisco’s head of business development, who is leading the new acquisition and integration strategy. In plain English that means the huge router company will not purchase companies, fire all of the managers, and suck it into the parent.
While having companies operate as the equivalent of stand-alone entities might make the executives of companies bought by Cisco feel superior and may grant Cisco to have “experts” in the new industries it enters, the new plan has potential dangers.
Part of Cisco’s success is the strength of its management ranks, lead by long-term CEO John Chambers. Allowing companies to stay on their own allows them to make mistakes on their own. Some of that may be fine, at least in terms of learning from errors, but huge mistakes make for massive losses.
Just because a company has done well does not mean it has been managed well. Often success is the by-product of finding good market niches and creating new products.
Nothing beats good top management. Cisco may be forgetting that.
Douglas A. McIntyre is an editor at 247wallst.com.
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