CAN THE LESSONS BE LEARNED FROM ORGANIZATIONAL MARRIAGES? THE CASE OF MADGE & LANNET MERGER

On October 1998, Lannet Data Communication Ltd. (Hereinafter: "Lannet") was sold to Lucent technologies Inc. (Hereafter "Lucent") for a total price of US$117M. This sale marked the end of a merger destined to provide Lannet with the much-needed strategic breakthrough. The said merger started in 1995. In July 1995, the multinational manufacturer of data communication and networking products, Madge Networks N.V. (Hereinafter: "Madge"), purchased the share capital of the Israeli company, Lannet, at US$27.5 per share, even though its then current market price was only US$19. The total value of the acquisition was US$330. However, this friendly and promising merger between two similar enterprises turned out, upon its implementation, to be problematic. A large number of problems were encountered during the process of attempting to integrate the respective operations, with the result that the value of the Madge stock declined by more than 90% over the course of less than three years. The case describes two high technology, international companies, prior to the merger, the negotiation process, the manner in which the merger was implemented and the events leading to the sale of Lannet to Lucent.