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Can colo mergers learn from the past?

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I’ve been intrigued by mergers for many years and the last few weeks have provided some interesting information about how recent mergers are being executed. The idea that every merger will work just because it is based on good commercial interests is a staple theory which takes a knock.  

I have been an employee at a number of companies which have bought a rival or have been acquired to increase market share. In most cases the reasons for the mergers was simple – buying revenue or market share quickly. This has led to some nasty scenes as some staff race toward the exits early with the human resources (HR) department trying to rugby-tackle the ones it wanted to keep at the elevators while back in the offices line-managers defenestrated the unwanted.

Fish acquisition Equinix Telecity Interxtion

Source: Thinkstock / KaeArt

Welcoming the new overlords?

As the new mergerees were welcomed there were, in my experience, two distinct types: those who were going to seize the opportunity to use the merger as a career enhancer, and those who were still in a fog of bewilderment about what was happening to them. Under these circumstances the HR departments’ reputations were tarnished because they were, wrongly, seen as the frontline troops as excess staff were let go and were too tied up in this task to properly help those exiting or the newbies coming in the door.

The resultant merged entities were then not led properly. They were certainly managed but not led. In fact the CEOs or MDs often fled the country to the quieter outposts of the corporation to escape the problems. There was no real effort to forge a new corporate culture because, frankly, these organizations were led by mere managers – there was not a leader amongst them.

The leader-board of failed mergers is led, in my opinion, by AOL and Time Warner. The two giants were merged in an attempt to fuse old media and new media. The merger cost $111bn. However the untimely dot-com bust, and the inevitable degeneration of dial-up internet access which AOL stubbornly clung to spelled disaster for the new company.

The merger was a disaster. I was therefore intrigued by an excellent article on LinkedIn called Marketing lessons from one of the major M&As in the energy and technology sectors by Giuseppe Caltabiano, Vice President Marketing Integration - Social Media, PR, Content Process & Tools at Schneider Electric. 

Caltabiano has a far more positive message – he details the case of Schneider Electric’s 2013 acquisition of Invensys. As he says: “Right immediately after the acquisition, Schneider Electric focused heavily on internal and external communications and branding. The communication plan supporting the acquisition was tailored to the identified audience and was segmented by customers and partners types. After several stages of validation with the business units, specific contents and communication assets were released to address all segments: customers, partners, system integrators, OEMs, distributors, JVs, supply chain partners. The plan included external and internal communication contents.” The ‘big picture’ plan was to quickly integrate the Invensys brands into the one Schneider Electric brand.

Caltabiano details how Schneider included an integrated marketing campaign (“Better Together”) that was launched in September 2014 and which used social media channels to ramp up and reach the right audience. As he says: “The campaign was triggered by two major situations, taking place in mid-2014:

  1. Existing customers started to be concerned about our future investment in products and solutions they used and thus were holding back on new projects
  2. New customers did not recognise the value of the combined Schneider Electric and Invensys portfolio and showed higher resistance to move to Schneider Electric/Invensys solutions.

Now the difference here is that Schneider Electric had carefully planned their acquisition. It’s sad but true that most don’t. So why is that relevant?

Across the globe the colocation market is undergoing huge consolidation. This is important because most enterprises are moving from their own on-premise or purpose built data centers to the bigger colocation experts while also moving into the cloud. This puts a lot more of their critical infrastructure into the hands of third parties.

Equinix - moving the cloud

Source: Equinix

Mergers in the colocation market

That has made the retail colocation market the fastest-growing colocation sector with North America as the most prominent region valued at $11,780m in 2014 with large growth potential in a market with global potential to top $51.8bn by 2020 according to Research in Markets registering compound aggregate return (CAGR) of 12.4 percent during 2015 - 2020.

However the fast pace of industrialization in China, India and Japan is seeing the Asia-Pacific region in very close second place. And there are mergers aplenty taking place across both regions and Europe, which is seeing fierce battles for market share.

The market leader, Equinix, has bought TelecityGroup and this week announced its intention of buying Bit-isle in Japan. Digital Realty has acquired Telx and Japan’s NTT recently purchased e-shelter to boost its European market-share. Now these mergers don’t involve too many staff – data centers aren’t exactly labor intensive – but I’d like to know how all of these these mergers are being managed. Do they have a plan, like Schneider Electric, or will we only find out when it’s too late that a lack of leadership has scuppered some of these mergers from day one? We will be watching carefully. 

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