Acquisitions are not a 21st century happening. In antiquity, when a ruler of a land—we call them CEOs today—felt
that they needed to expand their kingdom it usually meant
that they would pursue an act of war against one of their
neighbors in order to make the needed acquisition. Little or
no regard was given to the impact of such an action on the
inhabitants who occupied that land or the inhabitants of
the attacking ruler’s land. Usually there was an act of
reprisal by the kingdom being invaded. The attacking ruler
would spend countless hours plotting with his military
leaders looking at various scenarios of attack (negotiating
strategy). The acquisition plan was simple: strike first and
strike hard (make a preemptive bid); aggressively pursue a
breakdown of the enemy’s fortifications (take a firm negotiation stance and wear them down); end the conflict quickly and install an interim ruler (don’t worry about due diligence, just complete the deal and replace their management structure with ours).
Integration was even simpler. If anyone complained
about the new ruler their complaint was dealt with quickly and severely usually with the complainer losing their
head (loss of key people).
Unfortunately, these acts of acquisition usually proved
costly to both sides. Assets were lost including buildings,
people, livestock, crops and trade while large sums of gold
and silver were needed to pay the attacking soldiers as well
as the defending soldiers (today we call them investment
bankers, lawyers, accountants and consultants). This nor-
mally meant that the two rulers had to obtain financial
support (debt) from other sources which often meant that
valuable items (equity) were put up as collateral (the
ruler’s wife/husband, daughter/son, other things of value,
etc.). Should the war prove not winnable by the invading
ruler the collateral was lost and often the kingdom as well
since the debt could not be repaid. Hence the expression “to
the winner goes the spoils of war.”
As mentioned, integration was simple. Inhabitants of the
losing side either accepted the new ruler or it was “off to the
chopping block” so to speak. Often, there were no clear win-
ners in these acquisition efforts. If one of the rulers were to
be declared an actual winner, they usually had accumulat-
ed an enormous debt and had precious few resources left
with which to pay that debt due to their destruction during
the war. In addition, they would then have the burden of
rebuilding both kingdoms. Somehow, this scenario sounds
all too familiar.
Although a bit crude, this concept and process proved effective for many centuries. Unfortunately, if this strategy
worked for you, it would also work for another ruler who may
be thinking that they needed to expand by acquiring your
kingdom. The good news is that we do things a lot different
today compared to the example just described—or do we?
Although acquisitions are not new to modern society they
only became a viable, sizeable part of most companies
strategic planning process in the last half of the 20th century (see Figure 1).
As can be seen in Figure 1, the total number of M&A deals
Figure 1
was not significant until the 1970s. You might ask, “Why the
big drop off in deals from the 1970s through the 1990s?”
In other words, “What influences the number of M&A
deals at any given point in time?”
Regarding the drop off in deals post 1970, if you recall, on
October 5, 1973 the Yom Kippur War began following an
attack by Syria and Egypt on Israel. When Western coun-
tries like the U.S. showed support for Israel, Arab oil
exporting nations placed embargos on these nations. The
Arab nations cut production by five million barrels a day
and despite other nations increasing their production, a net
loss of four million barrels a day occurred throughout
March of 1974. This action ignited a rapid rise in the cost
of energy for several years, which in fact is ongoing to the
present day (see Figure 2).
As for what happened in the latter part of the 1970s and
early 1980s, the rapid rise in energy cost was part of the
Figure 2
