One of the brightest entrepreneurs I know runs Dragonfly, a boutique consulting firm that specializes in risk management. He once recounted to me the story of one of his clients, a mid-sized engineering firm based in a small country in Asia.
This company had approached him for help on their expansion strategy – they had superb operational capabilities and had always depended on organic growth, but this had slowed as they became increasingly dominant in their home market. They had been mulling an acquisition in another country, but having never done one before were understandably wary.
After carefully analyzing the situation with a strategic lens and a sharp pencil, my friend concurred with his client that making a foreign acquisition was indeed highly risky. However, he also found that it was even more risky to do nothing. Sitting cooped up as a big fish in a small pond while competitors consolidated and gained regional/global scale would pose a serious threat to the company’s long term survival.
Over the past few days, the masses have waxed lyrical about Microsoft’s bid to acquire Yahoo. Much of the chatter has been negative. The Price. Unnecessary Distractions. Talent Leakage. Clash of Cultures. And so on.
Yes, I agree that this is a bold and highly risky endeavor for Microsoft to pursue. But then, would it be even more risky if Microsoft didn’t?
