I see no major acquisitions in Apple's future

Yesterday I attended the first meeting of the Forum for Growth and Innovation. It’s an initiative where practitioners of Clayton’s Christensen’s theory of innovation can review new academic research before it’s published.

The Forum has another goal: to disseminate and propagate key learnings and ideas. As a keen student of the theory and a blogger, I am eager to provide a gateway for you, my audience, to this management theory.

My modus operandi has been to discuss an industry or a set of competitors in great detail while occasionally stepping back and suggesting a cause for the patterns of behavior we are witnessing. More often than not, the causes are described very well by the theories in Christensen’s writings.

There are cases where the theory does not seem to match. That’s actually the most exciting part of this process. Exception (or anomaly) handling is what allows the theory to evolve and improve.

Yesterday’s event focused on M&A. It’s a cliché to say that M&A is a recipe for failure but there are recipes to follow that minimize the chance of failure. The forum debated these recipes and we were treated to the wisdom from those who learned the hard way what works and what doesn’t. (For example, the ex-CEOs of Best Buy, Arrow Electronics and a senior executive who worked under Jack Welch at GE.)

What I came away with was a new respect for the counter-intuitive and contradictory nature of acquisition integration. What often makes sense on paper like synergies or new growth can quickly turn to a loss of the core business. Recipes for deciding what to integrate and what to keep autonomous are an active area of research.

For this and many other reasons, it’s easy to understand why Apple is reluctant to make large acquisitions. The market discounts Apple’s cash because it is expected to evaporate in a mis-guided acquisition (since that’s what management has shown a propensity to do in most other large US companies.)

I’ve written about why I think Apple’s cash is worth more than other companies’ cash (e.g. Microsoft.) Apple’s reluctance to make large acquisitions and no record of such should provide some hope.

However, I don’t think that reluctance is simply a coincidence or a lack of suitable candidates for acquisition. I think it’s more a result of the company’s processes and priorities. As long as the team in charge is focused on the details of execution and integration, and as long as acquisitions are complex and fraught with unknowable risk and lack of control, I see no acquisition in Apple’s future.