This book highlights larger acquisitions, those that are 15 percent or more of the acquirer's value. Ultimately, you will become the backbone of the emerging company and will be intimately involved in achieving your new company's high levels of performance.
BEYOND
The goal of the value-creating approach is to use an acquisition as a springboard for a quantum leap in your company's performance. Those are sensible reasons, but the question is: “Are they optimal reasons?” Implementing a good acquisition strategy can significantly improve a company's position in the market while providing some protection against competitors' attacks.
Low Readiness
Getting Started
Advanced Organizations
Quantum Leap
Being Unable to Anticipate Problems during the Integration of Two Companies
Some of the strategic risks you may need to anticipate during an acquisition are. It is not just senior management that needs to understand the diversity of potential risks; managers at all other levels of the company must participate. One business segment may be aware of and influence a different configuration of risk factors from another business unit.
Examining alternative case scenarios gives the leaders of the new company an opportunity to find out what the company can do to compensate for any advantages its competition has and any shortcomings it has. Being sensitive to strategic risks enables the new company to manage its risk exposure by adjusting its strategic plan and developing a specific set of countermeasures.
Having a Rigid Mindset and Failing to Be Flexible
The company can see how the capabilities acquired through the acquisition can help it find alternative solutions to this dilemma. Case in point: JC Penney's failed acquisition of Eckerd Drugs When JC Penney bought Eckerd Drugs in 1995, the company quickly and unfortunately realized that there was a strategic mismatch. Penney did not have the capacity to provide good leadership in the drug chain.
The acquirer paid a premium to gain access to these resources, but because of the behavior that arose from his dominant mindset, these resources were driven out of the company. Under the pressure of rapid integration, managers often do not have enough tolerance to understand the true value of what has emerged from another company, but tend to reject it immediately.
Failing to Develop a Partnership between the Two Legacy Companies
A company pursuing significant and continued growth must make it a priority to understand how it appeals to its current and potential customers.䊐 Where do we want to be in the value chain that brings our products and services to customers?䊐 Do we want a close cooperative relationship with our customers, or will we be more of a commodity player and deal with them through intermediaries?
Where your company wants to be in its relationship with your customers determines what you need to buy, in relation to the value chain you will operate in and what particular place you will have in that chain. Thinking about your customers gives you a powerful perspective on the strategic role of the acquisition you are considering.
Acquiring a Company Similar to Your Own
Acquiring a Company with a Different Customer Base
For example, if a mobile phone company in North America with a regional customer base buys a similar company in Asia, the products and services will be very similar, but the customers will be significantly different and will increase the customer base significantly. .
Acquiring a Company with Similar Customers but a Different Way of Doing Business
Acquiring a Company with New Customers and a Different Way of Doing Business
- The “Add-On”
- Dominant Absorption
- Breakthrough
When the new CEO came in, he saw the need to double the company's revenue over a three-year period. Safety issues with one of the company's products have been resolved and Elan has moved on to develop a pipeline of promising upcoming drugs. In each of these cases, you risk losing the thread of your company's strategic logic.
To what extent did the acquisitions of our company fulfill the strategic purpose that guided these acquisitions in the first place. Whether our company's purchases have been driven by the need to create greater value for our customers.
Engaging the Target
Such companies develop a clear acquisition structure, a clear decision-making process, and strong relationships between all parts of the company, so that learning to participate in acquisitions and integrations over time is built into all of the company's business units. Because your company's targeting activity is an extension of the company's strategy and intent, it will need to incorporate and incorporate these values and perspectives. Therefore, it is important for all companies to be wary of senior executives who recommend companies for acquisition simply because they meet that executive's agenda rather than the goals of the company as a whole.
Cisco deliberately developed and systematized the acquisition process so that it became part of the company's regular set of practices. The acquisition should deliver a quick win for Cisco shareholders, preferably within 12 months of the acquisition.
Doing Due Diligence on the Targeted Acquisition
The due diligence teams your company assembles should reflect your company and its acquisition strategy. The strength of the business plan is largely determined by the quality of the due diligence efforts. The knowledge resulting from due diligence is used to lay the foundation for the integration plan.
Knowing the relationship between the due diligence process and shaping your business plan. If you follow this process, at the end of the due diligence period, your business plan will be in its development phase.
Negotiating the Deal
This may mean looking for opportunities for things like cross-selling the acquired company's services to the acquiring company's customer list or turning the acquired company's research into marketable goods and services, all of which have an impact . Your goal during negotiations is to achieve a value proposition where your company achieves the desired return on your investment in the target company. You need repayment at a specific rate and over a specific period of time to meet the threshold and threshold requirements of your business and to ensure that you realize a return on your equity.
Negotiations are also an opportunity to gain close-up experience of the negotiation skills of the target company's senior managers. Plan the benefits created by these synergies (cost and growth synergies) and how the added value created by these synergies will be distributed between your company and the acquired company.
Approving the Deal
The plan recognizes that integration work begins at the pre-deal stage.䊐 What will be the scope of integration between our company and the acquired company. Establish a clearly defined roadmap and timeline for all major integration phases.
Avoid the trap of developing the integration plan in isolation from the rest of the acquisition process. At the time of the transition to integration, much of the accountability structure for the integration had already been designed. Clarica defined the two parts of the acquisition as the transition process and the integration process.
We started it [taking care of the KIDs] because of the Union Carbide merger.
Communication and Change Management
One of Dow's abilities is to know and be very explicit about all these important elements. How Dow Handles Communication and Change Management Like other companies that are successful in acquisitions, Dow has a well-defined communication plan that reaches out to all major stakeholders—. The title of Dow's communications program was "Communicate the New Dow." That title was so strong that during the integration, people asked if the new company would be called "The New Dow." Using that title was Dow's way of indicating that the entire company, inside and out, would undergo change—not just the people from the acquired company.
An open communication process sets the conditions for all those involved to be open to a positive perspective on the integration and to work together on the implementation of the changes that form the core of the integration initiative. Change management should be an important consideration when going through these transitions.
Synergies
When done in accordance with our quantum leap approach, an acquisition is not just a static addition to an existing company, but an opportunity to rethink and reframe a large part of your company or even your entire company. This means that almost every dimension of your company is eligible for reform in light of new conditions and new sets of options. This is a time for re-evaluating strategic business goals, major markets, customer targets, core processes, and how your company is structured to enable the new emerging company to succeed.
Work Process Integration
Create a set of integration metrics that allow you to understand how effectively the integration process is working. Dictating the terms of integration without including members of the acquired company as partners. What are the key factors involved in how you design your integration framework?
Which set of statistics will provide you with the information you need to evaluate the success of the integration. This is when your integration team should take over your integration plan to implement the integration of the two companies.
Identifying the Customer Strategy for Your Newly Combined Company
You and other managers in your newly merged company are faced with the challenge of determining how to best utilize the brands of the two old companies that have now become one. Similarly, when Norwest acquired Wells Fargo and Co., the new company chose to retain the Wells Fargo name to capitalize on the long history of the nationally recognized Wells Fargo name and its trademark stagecoach slogan. An integration that does not aim for a quantum leap will simply erase the brand(s) of the acquired company(s) without sufficient strategic review, in which case your company will simply continue on the course you had set out prior to the acquisition new company.
A poor choice does not take advantage of the opportunity and strength of the brands of the company you are acquiring. A quantum leap integration company asks, "How do we leverage the brands based on our customer strategy?" The new company must decide which brands it wants to continue to support.
Setting the Company Strategy for Your Newly Combined Company
The middle domain is where your company develops and manages solutions based on the information you receive from the core domain and directly from customers. The middle court is then able to send the necessary information to the back court, where your company's products and/or services are manufactured. Your company needs to determine which "buckets" the various components of your company's strategy fall into and what those components are.
These definitions will help shape the structure of your company, its processes, and the products and/or services that will shape the architecture of your newly combined company. Exhibit 7-2 shows how you might categorize your company's core functions for review and planning, and Exhibit 7-3 gives a general overview of what's going on in the different arenas.
