Unnatural Unions – Adobe And MacroMedia

The acquisition of MacroMedia by Adobe has generated a flood of media and blog commentaries. Most relate to the possible restriction of competition and the possibility of reduced quality and higher prices. Some have discussed the possible difficulties of two companies with different cultures finding an effective way of living together. Some question whether the shareholders of the two companies will really benefit from this merger.

A smaller number of items go into the question of Why should this acquisition occur. Perhaps it will help Adobe better hold its own against any Microsoft competitive actions. Perhaps there is some complementarity in the software packages that the two companies produce, although there seems to be very little obvious overlap. The precise reason why the Adobe management would be going after this acquisition seems to be shrouded in mystery.

Well not really. Perhaps they think that bigger means better. Sometimes the pursuit of growth itself is the only thing driving an acquisition. A successful acquisition should see some synergy so that two plus two will give five. At least some of the stakeholders apart from the management should be seeing clear benefits. However in a ‘marriage of convenience’ the combination may be less than the sum of the parts.

Unfortunately this acquisition may fare no better than two other unlikely combinations. Carly Fiorina decided early in her life at Hewlett Packard that acquiring Compaq would make business sense. Many at the time could not understand the logic and Ms. Fiorina eventually lost her position at HP. Another case was the proposed acquisition of Copernic by Mamma.com. Again there was no obvious synergy. This time the deal fell apart when Federal investigators began an investigation of Mamma.com. So there has been no market test of whether the two would have made a good combination.

So now we have another odd couple with Adobe and Macromedia. Is it driven only by the fascination with size of the Adobe management or is there some real business synergy? 12 or 24 months from now we should be better able to judge whether it was growth for growth’s sake or some more noble reason.

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