Failure Is Ok

By Tom Taulli

No doubt, M&A has seen many disasters. In some cases, it could mean the end of a company.

This week, security software developer, VeriSign, admitted a big failure: its acquisition of Network Solutions. Several years ago, the transaction was valued at a stunning $532 per share or $21 billion. But this week, VeriSign unloaded the company for approximately $100 million (VeriSign will maintain a 15% stake, though).

Interestingly enough, even during the heyday when the deal was transacted, there were many skeptics ñ as investors slammed the stock of VeriSign.

The obvious question was: Why does it make sense for both companies to combine?

What is the value proposition? There was no clear answer from VeriSign -- perhaps because they did not know either.

The Problem

Mistakes are a natural part of business. If your company is not making mistakes, it is probably not growing. And for M&A purposes, even the best companies blunder.

However, in the case of VeriSign, the mistake was more fundamental. Basically, the company did not set forth a vision or defensible plan for the acquisition. It was as if VeriSign wanted to find a way to bulk-up its operations at any cost. After all, the companyís stock was a great currency to buy companies.

Conclusion

Itís not a total loss for VeriSign. In fact, the company will keep Network Solutionís top-level domain business. This makes a lot of sense because this is part of the infrastructure of the Web. And, for the most part, VeriSign is a leader in Web infrastructure.

And itís also good that VeriSign recognized its mistake and unloaded the rest of Network Solutions. From here, VeriSign can chalk this one up to experience and hopefully not make the same mistake again.

MergerPlace is pleased to have the esteemed Mr. Tom Taulli as the managing editor of our MergerPlace M & A Advisor™ E-zine.

Tom Taulli is an expert in the M&A process. He is the author of the critically acclaimed The Complete M&A Handbook (Random House) as well as six other books written for publishers such as Bloomberg and McGraw-Hill. Tom also teaches M&A at the USC School of Business.

Tom has been quoted extensively in the press, including the Wall Street Journal, USA Today, Barron's, and The Los Angeles Times, and has provided commentary on CNBC, CNN, and Bloomberg TV, as well as appeared on a variety of top radio stations across the country.

Tom's books are available for purchase in our bookstore.

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