Welcome Baywalk readers to the June edition of Creating Success Viewpoint on Baywalk.com. This month we explore the merger and acquisition mania of today's business world. We hope you enjoy our look at the topic: "Is Bigger Truly Better"

Greetings. In today's world we constantly hear about the MEGA mergers. This company is buying that one, which is then purchased by someone else. Wall Street rubs its greedy hands together and talks about the new heights of revenue for the purchaser and earnings ratios jump exponentially. But after it is all said and done, will the grand total of the new company truly be greater than the previous sum of the smaller companies that were purchased? I think not.

The problem is that bigger has gotten so BIG, the "span of control" is non-existent. Today we rarely hear purchasers use the "economies of scale" theory as their business driver for acquisitions. Why? Because no one is thinking about "operating" their acquisitions. The focus is how will the acquisition impact our reported revenue for the next quarter and what will Wall Street think? It is difficult to obtain "economies of scale" when operations are not our focus. Therefore, the Achilles heel of these MEGA companies is their business focus for growth through acquisition, not through operations.

One Wall Street "high flier" recently discovered its' own Achilles heel as it experienced the downside of "buying companies -- not operating companies." This simple, but telling statement by one of the company's executives, all but brought an end to the finger pointing, accusations and defensive posturing of a 4 plus hour meeting. Those five words uttered during a break in the meeting changed the climate for all attendees. No, there was not a conspiracy to do this or that. No Machiavellian plot. Just a business focus gone awry (In case you missed the three month series entitled "All About Focus", this might be a good time to check the website and read up). I sat back in shock to realize that these men and women who had been at each others throats for the last three hours, had taken five simple words spoken in honesty and accepted it as a viable explanation.

Twenty, thirty, forty years ago no observer of this conversation would have so easily accepted such a simple statement as the reason for this corporate debacle. Why? Because companies in the past had an entirely different business focus when it came to growth. Companies defined their growth strategies with a different priority matrix. First, growth was obtained through expansion of existing operations. We made the plant bigger or we built another plant using the successful model of our current operations. We exported the successful decision making, systems, processes, and corporate culture to a new "plant" where future growth was planned by expanding plant operations.

Growth through acquisition was a studied business option, where the company to be acquired was selected based on similar corporate culture, efficiency of operations, geographic location, and synergy of product line with the purchasing company's existing products. But most importantly, the acquisition strategy was by today's standards, no different than building another plant or expanding an existing plant. Why? Because the growth strategy of the past was a "slow or controlled" strategy that required management to successfully integrate the acquired company operationally before moving to another acquisition opportunity. The key difference between yesterday's and today's business growth strategy is that yesterday our focus was acquiring and operating; today it is a focus on buying companies for their impact on our financial statements today.

So what changed the focus of business leaders, their board members and stockholders? Greed. The NOW mentality. The almighty Wall Street dollar as the source of funding for corporate growth is the "fly in the ointment." Everyone wants to be "publicly traded." It is a great scheme to get rich quick and retire. It is a great way to raise huge amounts of capital for growth based on supposed market financials rather than the old fashion valuations that banks used to qualify corporate borrowers.

What is missing? In this writer's opinion it is the loss of business focus on the long term future. The focus is on making the big dollars today and not worrying about whether the company or its' products will be around in five, ten, or twenty years. Therefore, we do not worry about whether we can assimilate an acquisition successfully, we are only concerned about how the consolidated financials will be received by Wall Street analyst.

I guess I am just old school. But an old school guy staying very busy fixing the problems of new school management focus. I'll see you next month.