Dare Obasanjo does a great job of explaining why software company acquisitions tend to fail:

The stories are the same except that some of the names are different. A startup gets bought and immediately stops innovating because all their development time is being spent porting the code to a new platform. During that time newer, more agile competitors show up and eat their lunch.

I wrote about this recently here; there's a reason I tend to notice this topic, too: The ParcPlace/Digitalk merger from the mid 90's. Management saw two Smalltalk platforms, one Windows specific, one cross platform. In their eyes, that spelled "synergy". Down at the developer level, it spelled "trench warfare", as the attempt to merge the two products failed ugly over an 18 month timespan fillied with pointless arguments (many of which I was involved in), and sales fights over what could or should be sold. This overlapped with the introduction of Java and - as Dare notes above - it expanded to fill the space Smalltalk vacated as ParcPlace/Digitalk failed.

Our merger was small in industry terms, but the experience happens over and over. That's why I think any MS acquisition of Yahoo would be a disaster of epic proportions: months (maybe years) would be filled with two activities:

• Deciding which overlapping product to kill
• Rewriting any Yahoo survivors to fit the MS platform

At the end of all that, I think MS would not only be smaller than the two entities combined, but smaller than MS is now.

Which leads me to what I puzzle over: none of this stuff is secret; the history of tech acquisitions is pretty well known. So why do executive teams continue to pursue them? Are most executives victims of the "peter principle"?

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