The Merger Mystery

Why companies cannot buy their way to greatness

In the early 1980S, Burroughs Corp. was desperately seeking a way to get back in the game against IBM. Burroughs had fallen so far behind that it found itself utterly dwarfed by its larger rival. Burroughs' solution? Undertake the then largest merger in computer history: buy Sperry Corp. and create a new company--dubbed Unisys--as a single-step leap to greatness.

Despite achieving encouraging results in the first few quarters post merger--results easy to attain with one-time cost cutting but hard to sustain--Unisys' cumulative net income in the decade after the merger failed to break even. If you had invested $1 in Burroughs...

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