I remember working on the Bay Networks deal in 1998. I had to be top secret about it (probably the hardest thing I had ever done in my career – be quiet about the project I was working on ) too.

Over several months, we achieved some milestone – prepared this analysis, or wrote that PowerPoint or briefed this executive or that one – and then things got quiet again. I took the matter into my own hands and thought that it'd be best to do some research on 'Why M&A fail' in order to avoid those pitfalls and maximize the shareholder return.

So I went to Amazon.com and found several lovely tomes on the topic. 

Some of these were casestudies of failures, others were 'how to' books.

As I scoured through them a big insight came to the top:

the #1 reason why M&As fail is because the buyer paid too much.

So, I thought, how would my employer be sure they didn't pay too much?

We needed to know our 'walk-away' price. This is the price at which the justification is not plausible. But how much was that?

Here's where my experience in justifying engineering projects, and business cases for new products and the development of business plans really came in handy. I simply estimated, product by product, what incremental sales could be achieved if only product X from them, was sold through our channels to our customers Y? Similarly, how would product Z from us be sold through their channels to their customer A?

I built a matrix from all of their and our products, and all of their and our customers (segments).

This synergy spreadsheet became the basis for justifying the deal to the Board and to the shareholders. Although it was probably a disappointment in reality since Y2K totally consumed the enterprise sales and product units for the first 18 months after the deal closed.

Clearly, the business plan for Enterprise Data showed that switching and routing technologies were headed right into the heart of the Central Office, and we needed to help the technology get there sooner than later, but only if we owned a player addressing the enterprise segment – where the growth at that time was.

What's your Walk Away Price? 

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