Apple-Mc: Apple, McLaren and the trouble with hybrid deals

A long history tells us that crossing businesses is a tricky proposition

McLaren, maker of ‘supercars’ for the overly rich who have been stricken by midlife crises, is reportedly “in talks” with Apple. The UK company denies a sale is imminent but the combination is hardly surprising given the computers-to-digital entertainment megacorp’s current fascination with building an automotive business.  Indeed, just as McLaren spinners were dismissing the notion of a combination, Apple was also busy also talking to the maker of a “self-balancing motorcycle”, according to the New York Times.

Cross-industry mergers and acquisitions are likely to be a feature of the coming years, despite a sickly history of deal-making to create hybrid organisations. This is in part because, like Tamburlaine or Alexander the Great, some companies are beginning to exhaust the empires they first won, have expanded further, and then wish to conquer the rest of the world that remains. Apple could sell more computers perhaps but how much more fun, and potentially lucrative, to create new markets, having already gate-crashed and thence transformed phones, digital music, movies, wristwatches and retail sectors.

It’s also because there are what students of this game call “synergies” between sectors. Apple was able to take over music sales because popular music had become a digital consumption medium so there was little to no need for physical media, distribution and stores. CEOs see synergies everywhere in their pursuit of growth to satisfy their boards, shareholders and stock market analysts.

And of course Apple is far from being the first company with its roots in tech to spy opportunities away from home turf. But as remarked already, attempts to diversify have a rather bloody history, even when the markets seem closely aligned. IBM tried to break into telecoms over 30 years ago by buying Rolm but could never make a proper fist of the business despite having a collier’s grip on the nascent business computing sector. In the early 1990s AT&T tried things the other way around by buying a veteran computer company in NCR… and the results were similar.

Others tried wide swings away from their core business. When ‘convergence’ was a buzzword at the turn of the century AOL acquired Time Warner and thereby created a case study in disastrous business cocktails. Other improbable and unsuccessful deals included the UK TV broadcaster ITV buying the one-time high-flying social network Friends Reunited. British Sky Broadcasting bought the managed service provider Easynet but didn’t hang onto it for long.

These warning tales bespeak an eternal truth: most successful companies can do one thing well but struggle when it comes to seeking a second act. They are one-trick ponies that can’t pull off the cultural and process changes it takes to succeed in another market, no matter how seemingly analogous.

Apple, or Steve Jobs’ Apple at least, showed a remarkable ability to extend into adjacent markets but Jobs had a Midas touch and acquisitions add another layer of risk and doubt. The company has many a circuit to go before it can claim to have successfully parked its brand in the automotive sector and taken the victor’s laurels.