against each other, competing with each other in the same markets and for the
same customers, operating without coordination and respect for the good of
the company that they, in fact, constitute.
Absorption acquisitionsThis kind of acquisition is fairly straightforward, and it is probably most com-
mon when there are differences in size and sophistication between the two
partners involved in the deal. The acquired company conforms to the acquirer’s
way of working, with a focus on full cultural assimilation.Such deals are parti-
cularly common when the acquired company is performing poorly, or when
the market conditions force consolidation.
Most of the synergies may be related to cost cutting, most likely on the side
of the acquired company, although some may come from improvements in sys-
tems and processes brought in by the acquiring firm. The key to success is to
choose the target well, to move fast so as to eliminate uncertainty, and to cap-
ture the available synergies.
The terms, absorption or assimilation, carry a pejorative meaning in the
minds of many; and at times assimilation may be an ugly process that gener-
ates poor results. However, if managed well, it can be of benefit to the employ-
ees of the acquired firm. This is especially true when these employees are afraid
of losing their jobs and see the dominant company as being a savior; unhappy
with the management culture of their company, and see the acquiring com-
pany as having a more enlightened culture; or see a variety of positive out-
comes in being associated with the acquisition (better benefits, better pay,
more prestige, etc.). Cisco, for example, buys companies for their technology
and R&D talent and then assimilates them into the Cisco culture, but it
attempts to retain most of the employees, including top management. Here,
the emphasis is on finding targets that will match Cisco’s way of managing the
business, increasing the likelihood of cultural compatibility.
Reverse mergerThis is the mirror opposite of assimilation, although it does not happen very
often. Usually the organization that buys hopes to gain capabilities from the
one it bought. The acquired company becomes a business unit that absorbs the
parallel unit in the acquiring firm. When Nokia, for instance, bought a high
tech firm in California for its R&D knowledge, it gave the new unit global
responsibilities, which meant that part of the business in Finland now reports
to California.
Sometimes, the reverse merger is unintended. A few years ago, a French
metal product company acquired its smaller British competitor. Today, to the
surprise of many, the management style and systems of the new company
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