The Website IntelligentFanatics.com has published a blog article “No Shortcuts to Long-Term Business Success”.
I posted the following comment on this article:
“Absolutely true that there are no shortcuts to success in both business and investing. In both, a learning curve may be involved. Particularly in business, even if an experienced CEO is brought on board, he would still need some time to figure the organization structure, systems, suppliers and customers out. All great organizations have been built up over decades, even centuries, only through the sweat and toil of managers.
In Investing, one can learn the ropes, read all the great books, but one has to have actual investing experience. That can only be gained once one has invested over an entire economic cycle lasting 7-8 years. In other words, one ought to experience at least one bull market and one bear market, and analyze several industries and companies, in order to become a savvy investor.
Personally, I am not particularly bullish on acquisitions. Historical evidence suggests that a majority of acquisitions have either failed, or have not generated any significant benefits to the acquirer company. Acquiring companies may not be difficult, but integrating their operations into the acquirer company usually is. There are cultural differences, different practices and a talent pool which may not be able to deliver under the acquiring entity.”
The website commented as below:
Thanks for reading/listening. Good point on the time necessary in getting experienced CEOs and other talent up to speed on a new company. As you say, company acquisitions often fail, and, what most people don’t realize, experienced talent acquisition often fails too for smaller, growing companies. It’s better to develop young talent within an organization. It takes much longer, but the tangible and intangible ROI is much greater.
We’ll expand on this topic soon.
Most managers don’t have the patience to wait for the right deal, the capital allocation skills to structure it correctly, and the wherewithal to fully understand the integration costs. The irony is although most companies, especially microcap companies, with acquisition strategies fail to deliver, yet many of the best performing stocks had M&A strategies.