trength on strength. In other words, take what's good and what you are good at and build on them. What you do not do well, get rid of. That's what makes the strategic merger not just a merger for merger's sake" (Barmash, 1995, A42).
If the merger is done well and if the partners and products can create synergy, then mergers can provide financial stability and the chance for survival that businesses might not have had. But simply having a synergistic mix is not enough.
Barmash, in the article quoted immediately above points out that "many strategic mergers fail-an estimated 30 percent" (versus 70 percent of conglomerate or intra-industry transactions) (Barmash, 1995, A42). This means that many of the thousands of people unloosed by these deals-12,000 layoffs are planned in the Chase-Chemical merger alone-may have been terminated for no valid reason.
When a merger does not work out, the concept of "de-merging" enters the equation. By the way, just as synergy was represented by the equation 2+ 2 = 5, the equation for the de-merging construct is 4-3 = 2.
The implication of this "de-merging" is that both companies, when separated, will survive. In fact, they might even be healthier, since both companies can now be free to do what they do best.
The Synergistic Power of MCIWorldCom
The company chosen to represent the concept of synergy as a positive financial growth strategy is MCI WorldCom, a synergistic entity that was created by the 1998 merger between MCI Communications, the second-largest long-distance provider in the United States, and WorldCom, the fourth-largest provider of Internet services.
The merger, when it was announced, was stated to be the largest in history, worth $51 billion US in WorldCom stock. The merger announcement met with disbelief in the business and investment press.
For instance, an article in The Economist asked "In launching America's biggest-ever takeover, has WorldCom bitt...