M&A WAR STORIES - The Good, The Bad and The Ugly
SPRINT AND NEXTEL - A RECIPE FOR SUCCESSFULLY LOSING $30 BILLION IN THREE YEARS
July 27, 2021
Robert Heaton & Toby Tester
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.
- Significant cultural differences with Sprint being very bureaucratic and Nextel being more entrepreneurial
- 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
- Absolute opposite reputations for customer service with Nextel demonstrating very strong customer service and Sprint with a disastrous reputation for poor customer service
- An economic downturn that saw customers demanding more value for their dollar and increased pressure from global competitors AT&T and Verizon
- 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.
- 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.