Hope for the Best, Plan for the Worst

As an initial matter, many companies may not recognize that integration planning begins during the due diligence phase. Specifically, companies should use their pre-acquisition due diligence to begin shaping their views about how to incorporate the new business ' warts and all ' into the acquirer. Conversely, when integration planning is neglected, even the most promising ventures may fail. For instance, in July 2005, NewsCorp acquired MySpace for $580 million, hoping to capitalize on the social media network's 100 million monthly users. However, NewsCorp apparently failed to ensure MySpace had the resources to retain its competitive position, and eventually sold the company to Specific Media for a mere $35 million. Among cited reasons for MySpace's diminution in value after NewCorp's takeover were poor management, unreasonable pressure to hit revenue targets, lack of resources, and poor public relations ' all problems that could have potentially been avoided with better integration planning. (See Brian Stelter, News Corporation Sells My-
Space for $35 Million, June 29, 2011, N.Y. Times). Similarly, in a deal characterized as “one of the worst technology transactions of the decade,” eBay acquired Skype in 2005 for $3.1 billion, hoping to offer customers the ability to discuss their transactions in real time. When it became clear that Skype lacked synergy with eBay's main e-commerce and online payment businesses, eBay wrote down $900 million of Skype's value and sold the company for $2.75 billion. (See Brad Stone, Ebay is Said to Have Deal to Sell Skype, Sept. 1, 2009, N.Y. Times).