Book Review: "Billion Dollar Lessons"

This is another recommended read…

Here is the boilerplate stuff:
“Paul Carroll (Big Blues) and Chunka Mui (Unleashing the Killer App) collaborate to perform an autopsy on some of the most spectacular business failures and corporate disasters in recent times, hunting down the fatal strategies responsible. The authors examine more than 750 inexcusable corporate collapses, neatly cataloguing them into eight common failure patterns: doomed practices, including the Illusion of Synergies, as illustrated by the ruinous merger attempts by Sears and Dean Witter; Faulty Financial Engineering, as conducted by Tyco and Revco; Staying the (Misguided) Course Too Long, a sin committed by Kodak, which missed the boat on digital photography; and Consolidation Blues, as depicted by U.S. Airways, which crashed as a consequence of buying up too many companies too quickly. While there are assuredly lessons in defeat and the authors’ detailed analysis and bracing honesty is welcome, readers hoping for a more encouraging or inspirational business book might find Carroll and Mui’s avalanche of disastrous failures, avoidable bankruptcies and destruction of shareholder value a depressing—if highly instructive—read.”

My two cents:
I thought the book was excellent. You won’t find a blueprint to avoid business failure, but, you will find, if you learn the lessons in the book, what red flags to look for. Bottom line, most mergers do not work out as well as proposed.

Some main reasons:
1- Consolidations: If two businesses are struggling and merge to make a “stronger company”, most often the results is a larger struggling company.
2- Synergies: Back office synergies rarely develop. The reason? Folks there are smart enough to know if they do, someone is losing a job. It is in their best interest for them NOT to work.
3- Rollups: Buying many smaller businesses in an industry does not result in the market dominance the buyer assume it will.

Now those are the basics. But if we know this, why do these mistakes happen? It comes down to management not playing devils advocate with itself. They begin to only see the information they want to see to affirm the outcome they want, the merger is a good idea. Conflicting information is given less weight or completely ignored as “irrelevant”.

The book is timely given the current environment we are in. Every recession leads to consolidation in industries and there are the inevitable successes and spectacular failures. Reading this book will help you hopefully look at any proposed action by a company you own shares in differently. Now, you will not be able to stop the action, but, if you see the red flags, you can exit your position without suffering what ends up being in some cases, total losses.

For that reason alone, the book is one you should read.

Here is the book:

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