Why JWT shouldn’t have acquired Converge Technologies
In the complex world of mergers and acquisitions, numbers must take a back seat while vision and product promise step into the limelight. At least, this is a lesson JWT Pakistan CEO Mr. Mansoor Karim Shaikh will learn with time, as his team learns truly what comprises of the true capabilities that Converge Technologies boasts as a digital marketing company. While financial data is often the basis for companies acquisition screening, the first should be whether an acquisition fills a strategic gap (product, product outcome or skill).
The next step is developing realistic expectations on the synergies that need to be captured and the timing. Consider that JWT’s two biggest creative clients – Kraft Foods and Nokia – have their social media presence entirely managed by Sociality360 and TNBT respectively. Consider that a majority of Unilever’s brands are currently managed by Symmetry Digital (recently bought by GroupM) and that Nestle is tied with Lowe and Rauf. And finally, consider the low intensity and depth of the supposed ‘digital marketing’ portfolio boasted by Converge Technologies – capabilities and skill sets found in your average software house; as many start-ups reinvest retained earnings towards R&D, notably mobile marketing and augmented reality, Converge prefers to remain in the past and repeat (and repackage) old services.
By failing to identify and quantify the synergy potential (which requires a skillful blending of industry comparable benchmarks) and opportunities specific to the merging companies, JWT has sacrificed its Queen in the interest of appearing forward moving when in fact this acquisition reeks of poor planning or foul play. By not considering these two tried and tested measures for determining the validity of M&A, JWT has failed to determine if the targets specified are aggressive enough and if both the industry benchmarks are realistic.