Why Businesses go Bankrupt: Nortel

Telecommunications equipment maker Nortel’s market capitalization reached a peak of $250 billion in 2000, giving it the financial wherewithal to lay out $15 billion for the acquisition of switch makers Bay Networks and Alteon WebSystems.   But the company failed to leverage its acquisitions, and did not keep up with changing technology in its core markets.  An accounting fraud which came to light in 2005 didn’t help matters.  Nortel filed for bankruptcy in January of this year and is being auctioned off in pieces, with bidding interest from Avaya, Cisco and Siemens.

Lesson Learned: Have a solid plan in place to fully integrate acquisitions, and execute it well!