The Synergy Trap [Hardcover]

Mark L. Sirower (Author)

Book Description

Publication Date: January 23, 1997

This study explains how companies often pay too much - and never realize goals of increased performance and market strength - in their quest to acquire other companies. Sirower investigates mergers across 28 measures of performance. He reveals that if the high risks taken by acquirers are to pay off, chief executives must act swiftly in making improvements to management and resolving corporate cultural differences, or face steep and debilitating losses to the parent company's own value. By examining such variables as method of payment and strategic relatedness, Sirower also provides a formal definition for synergies, or the specific increases in performance which the combined companies can realistically expect through acquisition. This expose argues that the tendency of managers to succumb to the "up-the-ante" philosophy in acquisitions often leads to disastrous ends in the hyper-competitive marketplace, and that companies must meticulously plan - and account for huge uncertainties - when deciding to enter the mergers game.

Editorial Reviews

Review

Alfred Rappaport The Leonard Spacek Professor Emeritus, J. L. Kellogg Graduate School of Management, Northwestern University; Co-Founder, The ALCAR Group Inc. An excellent antidote for the CEO willing to pay steep acquisition premiums without fully acknowledging the increases in performance required before any value is created. As Sirower's many examples demonstrate, the winning bid too often materializes as a significant transfer of value from the acquirer's to the seller's shareholders. -- Review

About the Author

Mark L. Sirower teaches business strategy and competitive analysis at the Stern School of Business at New York University. He speaks frequently on creating value through mergers and acquisitions for major corporations and in a variety of public forums. The Synergy Trap is based on his pathbreaking Columbia University doctoral thesis. He lives in Manhattan.

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Product Details

• Hardcover: 304 pages
• Publisher: Free Press; 1st Edition edition (January 23, 1997)
• Language: English
• ISBN-10: 0684832550
• ISBN-13: 978-0684832555
• Product Dimensions: 9.1 x 6.2 x 1.1 inches
• Shipping Weight: 15.2 ounces
• Average Customer Review: 4.2 out of 5 stars  See all reviews (4 customer reviews)
• Amazon Best Sellers Rank: #1,469,250 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

16 of 19 people found the following review helpful:

3.0 out of 5 stars Interesting reading about how synergy can be a trap, October 26, 1999

By A Customer

This review is from: The Synergy Trap (Hardcover)

This is a very easy to read book about how easy you can fall into the trap of paying a high premium for a company without having any concrete plans for how to achive the value gains through the value chain. He describes with some very good examples how to fall into the trap if you dont have a number of conerstones in place before the acquisition. The major cornerstones of synergy are stratigic vision, operating strategy, system integration and power&culture. These four cornerstones are linked closely together.

Chapter three has a discussion about the premium that the acquirer pay.

Part two in the book is an analysis of corporate acquisition strategies. In this analysis i didn't find anything new that I didn't know in advance

So my conclusion would be: an easy to read book with some very good examples of how wrong it can go (eg. sears, AT&T, Time Warner TBS,...), and he put a lot of emphasis on the importance of having the cornerstones of synergy in place before the acquisition as well as a discussion of competitor reations to acquisitions.

8 of 9 people found the following review helpful:

4.0 out of 5 stars The Acquisition Game, May 28, 2000

By 

Franco Arda (Palo Alto, CA) - See all my reviews
(VINE VOICE)    (REAL NAME)   

This review is from: The Synergy Trap (Hardcover)

Dr. Sirower does a remarkable job in showing how easy it is to lose the acquisition game by failing to define synergy in terms of real, measurable improvement in competitive advantage. By analysing the acquisition premium with his Required Performance Improvement (RPI) formula, Dr. Sirower shows how to determine in advance when the price is far above the potential value of an acquisition. The way managers who analyse the acquisition premium and concept of synergy can avoid to get caught and how to predict the probability of shareholder losses or gains (although the probability formula is not flawless). Regardless the good work done by Dr. Sirower, I wouldn't be surprised if M&A professionals don't like the book because of its highly critical approach to synergie effects.

4 of 5 people found the following review helpful:

5.0 out of 5 stars Packed With Knowledge!, August 31, 2001

By 

Rolf Dobelli "getAbstract" (Switzerland) - See all my reviews
(HALL OF FAME REVIEWER)    (TOP 500 REVIEWER)    (REAL NAME)   

This review is from: The Synergy Trap (Hardcover)

Mark L. Sirower's thought-provoking and complex book is actually a critically acclaimed academic study that challenges the reasoning behind corporate acquisitions. Pointing out that acquisitions usually devalue the acquiring companies (a loss from which they rarely recover), Sirower delves into management fundamentals and mathematical analyses to get to the bottom of merger and acquisition problems. Three detailed appendices feature plenty of financial calculations, performance measures and data from various corporate acquisitions to back up his assertions. We [...] recommend this book to those involved in mergers and acquisitions and to other readers intrigued by the inside view of this "carnivorous quest."