Retail therapy and management
Tuesday, May 10, 2011 at 11:44AM 
Window shopping for business strategies
The business landscape is littered with disasters based on “expansion by acquisition”. What seemed like a great idea to combine two small firms to make a much bigger one often leads to a smaller one, or to none at all.
Sometimes it’s spectacular. America Online and Time Warner merged at the turn of the millennium. In 2003, they wrote down the value of their combined entity by US$99 billion. Small businesses don’t get it right either. When the “dot.com” boom ended, literally thousands of small firms went bust after basing their strategy on rolling up small enterprises with rough synergies.
Yet you only have to look around to notice that many survivors are combined entities. Virtually every major bank has grown through acquisition. Most law firms or accounting practices I knew in my youth now go under the name of some merged entity. What are the drivers behind this growth model? There are three:
competition, strategy