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Subject:  Re: say no to financial engineering distractions Date:  11/29/2013  4:43 PM
Author:  Goofyhoofy Number:  198156 of 208444

What examples do you have of great, focused businesses which became better by an enormous acquistion?

Cap Cities --> ABC
Procter & Gamble --> Gillette
Johnson & Johnson --> Medical devices
Ciba --> Sandoz (=Novartis)
JP Morgan --> Chase
Citi --> Travellers
Nations --> BankAmerica

Additionaly there have been tons of rollups or serial acquisitions which have paid off handsomely. Comcast grew out of Malone's TCI acquisitions, many of which were larger than what TCI had at the moment. IBM transformed itself from mostly hardware to mostly services via acquisitions (aided handily, obviously, by their reach into corporate America and sterling reputation.)

GE didn't grow to its enormous size organically, nor did Westinghouse (until their debacle.) Sears wasn't Kenmore or Craftsman at the beginning. Larry Tisch almost "focused" CBS out of business; luckily he left and allowed more prescient managers to move into cable, then came Viacom, Universal, etc.

Acquisitions have a bad rap, often deservedly so, but sometimes they are the only way to leverage into an allied market where there is no (realistic) organic pathway. The P&G acquisition of Gillette is one such example. While there were growing pains, it gave P&G entre into foreign markets where Gillette already had a foothold, and gave distributors increasing clout in a fragmented market. Both product lines have greater share and profits than either alone had before.

And using the "Disney" example, as unlikely as it is, suppose you could convince yourself that owning such a major content producer would knock Chromecast, Hulu, etc out of the box and ensure capture of the counbtry's digital delivery system? Would that be worth it, going forward? (No, I don't think that one is likely, it's a thought experiment.) Recall that the iPod achieved it's stunning success with the "ownership" of the paid music market via iTunes, not just the iPod hardware itself.

Perhaps there are other markets to conquer (auto dashboards, smoke detectors, credit card substitutes) but I wouldn't rule "major acquisitions" off the table, even if those were actually a list of smaller ones in a bundle (as Cisco has successfully done.)
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