Merger Mania: The Good, Bad and Ugly

The tech world’s pie-eyed optimists want us to believe that the helter-skelter past few weeks on the mergers-and-acquisitions front is a good omen, a sign of great things to come for the economy in general and technology in particular.

That may be so. After all, with actual deals and would-be deals taken into account, some US$10 billion has been tossed on the high-tech deal-making table in the past month. We’ll know in a matter of months, or maybe years, whether or not this was the tip of a recovery iceberg capable of sinking the Titanic recession.

In the meantime, something else is already crystal clear: Not all mergers are created equal. There are good mergers — though probably not great ones — and there are bad ones. And, truth be told, some are just plain ugly.

Good for Who?

One recent merger seems to have no apparent flaws, and that’s EMC’s purchase of Legato Systems. By all accounts, everyone involved, from customers to employees to shareholders, stands to gain something in the deal.

EMC shareholders get the comfort of knowing their company is doing whatever is necessary to climb back to the top of the storage heap and grow its software revenue significantly along the way.

And the company’s customers come away knowing that EMC is taking steps to make it a better provider of storage services and products. Automated backup and storage make about as logical a fit as you can find. All that and a mere $1.3 billion price tag.

More? How about apparently clear sailing through regulatory waters and the bonus of speculation that Legato was being eyed by some of EMC’s competitors?

Why can’t they all be that simple?

A Fistful of Dollars

Some are, at least on the surface. Take Yahoo and Overture, for instance. No, I mean, take it, please. This deal is another home run if viewed from the boardroom. It’s a shrewd move that gives Yahoo a paid ad search platform, which other firms can reasonably expect to spend several years and millions of dollars working on. The price tag of $1.6 billion isn’t even too tough to swallow, because Overture brought some cash to the table as well.

But this deal has the markings of the beginning of the end — at least the end of Web searching as we know it. So far, paid search listings have been mostly unobtrusive and fairly easy to ignore.

That has to change. As consumers adapt to the new search engine order, so will a company like Yahoo. With Overture in the fold, that adaptation will happen lightning-fast. Yes, consumers have been somewhat spoiled by the free search results we’ve enjoyed since back in the day when Yahoo was cool.

So, the deal’s a win for Yahoo and Overture but a potential bummer for Internet users. Guess you really can’t please everyone all of the time.

Hang ‘Em High

It seems like every year needs its high-profile ugly merger fight. Last year’s HP-Compaq is this year’s Oracle-PeopleSoft. This time, however, the restraint showed by combatants in the HP saga — largely because family was involved — is out the window.

How this will turn out is still anybody’s guess, but if Vegas were taking bets, a ton of money would be riding on Oracle going home without PeopleSoft after the Department of Justice declined to further review PeopleSoft’s J.D. Edwards buy. That deal now will zoom to closure, leaving Oracle facing some tough decisions.

Oracle already has upped and extended its offer, and it doesn’t seem like the kind of company to give up and go home just because things aren’t going its way. But it may have painted itself into a bit of a corner, left itself twisting in the wind, as it were, with about $6 billion in its outstretched hands and a fair amount of mud on its face.

Yes, PeopleSoft has slung some of that mud, but Oracle has crossed the line from determined to nasty once or twice as well. Oracle CEO Larry Ellison’s quip about PeopleSoft CEO Craig Conway — that if Conway and his dog were “standing next to each other and I only had one bullet, trust me, it wouldn’t be for the dog” — reveals just how deep the passions run.

It Gets Ugly

What if Oracle doesn’t win? The dust from that one may never settle. None of the companies involved will ever be the same, but worst or ugliest of all is that Oracle may have been the most damaged.

The real results of these mergers will not be known for years. Future business students will decide which ones were really good and bad. But there’s no better vantage point from which to see the ugliness than right here and now.