GE’s Failed Play For Honeywell (2001)

Tony Velocci was Aviation Week & Space Technology’s editor-in-chief from 2004-12 and senior business editor from 1989-2003.

There seems to be a growing consensus among astute aerospace observers that the industry is on the cusp of another major round of consolidation. That may well be, given the market forces affecting virtually all companies, but it remains to be seen whether there will be a repeat of the Darwinian spectacle that occurred between the mid-1990s and the early 2000s. Probably not, if for no other reason than because it is unlikely to involve any of the largest systems integrators who survived the last near-unbridled round.

Whatever the scale of merger-and-acquisition activity—with the possibility of maybe one more “elephant deal”—one of the more interesting dimensions to follow will be the extent, if any, to which participants heed any of the lessons to be gleaned from the last Great Consolidation.

At the very top of the list has got to be the need to manage stakeholder expectations. Announcements of proposed acquisitions almost always are accompanied by predictions of synergies, more efficient asset utilization, greater market clout and enhanced revenue and profit opportunities. But achieving such goals depends largely on how well the corporate cultures and management styles of the merged businesses are meshed after the deals are consummated. Many of the surviving companies that emerged from the 1994-2004 consolidation fray were still slogging through these extremely difficult process years after the fact, with projected efficiency gains proving maddeningly elusive.

Of the companies who had unsuccessful integrations—those who realized less than 25% of their anticipated savings—75% thought they would fully complete the integration within 2-3 years.

Difficult as it may be to comprehend, as many as a third of the acquisitive companies who succeeded in capturing their quarry neglected to have an effective human resources plan for managing talent retention. It is the kind of oversight that aerospace companies can ill-afford, given the difficulty that some of them continue to have in attracting and retaining the most sought-after talent—software and systems engineers, for example.

Of course, not all of the mergers and acquisitions that were proposed actually happened. Some failed to get past regulators, either in the U.S. or Europe. Perhaps the most poignant was General Electric Co.’s successful counterbid to United Technologies Corp.’s play for Honeywell International Inc. (now simply Honeywell). The European Commission shot it down. And therein lies yet another lesson to be gleaned from the last great round of consolidation: a little humility goes a long way.

► Read the articles and commentary from Aviation Week & Space Technology:

GE's Own Arrogance Thwarted Bid To Acquire Honeywell (July 9, 2001)

GE, Honeywell Chart Post-Merger Courses (June 25, 2001)

GE Outmaneuvers UTC And Snares Honeywell (October 30, 2000)

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