Where Have All The Flowers Gone?

“Is Sprint Nextel making an unwitting bid for business school case-study status? Investors could hardly be blamed for thinking so after reading the Sprint SEC filing Thursday that the cellphone company may write off $30.7 billion of goodwill related to the 2005 deal that combined Sprint with Nextel.

“That wouldn't sap Sprint Nextel of more cash, but it is a reminder of just how much value has been lost since the deal was struck.

“At the time of the deal -- billed as a merger of equals -- Nextel's market capitalization was roughly $33 billion, as was Sprint's. Today, the combined company's market cap is $29.69 billion. Operationally, it isn't much better. Last year, Sprint Nextel lost 1.2 million postpaid subscribers, and it has one of the highest churn rates in the industry. The solo Nextel had one of the lowest customer-defection rates...

“Sprint spokesman James Fisher wouldn't comment on speculation about the company's business plans. ‘We are sound financially, we have strong cash flows from operations and we have good liquidity on the balance sheet’."

(“Deal Journal / Breaking Insight From WSJ.com - Is Sprint Nextel Worth Saving?” The Wall Street Journal. February 4, 2008. pg C3)

"EVERYONE KNOWS" that the clear majority (67 - 75%) of mergers and acquisitions destroy shareholder value. Operational and cultural dyssynergies plague even the best of intentions, the best executives, and the best firms.

Even in mergers of peers, even in mergers of equals, costs and frictions and disincentives frustrate the accomplishment of strategic imperatives. Things as fundamental as customer relations and credit policy get lost in the shuffle of M&A.