SPRINT AND NEXTEL - A RECIPE FOR SUCCESSFULLY LOSING $30 BILLION IN THREE YEARS

You might have thought that Robert and Toby would have run out of M&A disaster stories by now? Oh, Ye of little faith.  THis week we explore Sprint's majority shareholding acquisition of Nextel to try and unpack how a $35 Billion investment in 2005, resulted in a $30 Billion write-off just three years later.

The deal vision made sense and there were significant economies and efficiencies to make the combined business a challenging #3 globally to AT&T and Verizon. Better still, there was significant cross-sell opportunities between Sprint's typical consumer customers and Nextel's B2B customers. Well it made sense on paper BUT:

There's a heck of a lot going on in this particular story and we remain 'Gobsmacked' (that's Rob's descriptive superiority coming through) at how and why this deal should have such a litany of challenges.

To Summarise

1. Significant cultural differences with Sprint being very bureaucratic and Nextel being more entrepreneurial
2. Those cultural differences resulted in very early exits by Nextel's senior leaders and managers leaving a void of experience to manage post deal value creation
3. Absolute opposite reputations for customer service with Nextel demonstrating very strong customer service  and Sprint with a disastrous reputation for poor customer service
4.  An economic downturn that saw customers demanding more value for their dollar and increased pressure from global competitors AT&T and Verizon
5. Similarly, job security fears led to more focus on applying resources to the integration efforts that actually focused on external business growth and customer service / loyalty.
6. AND the obvious factor of external advisors being much too focused on their deal success bonuses and keen to push the deal through regardless. 

So there you have it - yet again, the recipe for how to successfully navigate a $35 Billion investment and turn it into a $30 Billion single write-off in just three years.