rob|ems |n

Ach|ev|ng Success
rob|ems |n
Ach|ev|ng Success
lnLegraLlon
ulfflculLles/CulLures
lnadequaLe
evaluaLlon of LargeL
1oo much
dlverslflcaLlon
Large or
exLraordlnary debL
lnablllLy Lo
achleve synergy
Managers overly
focused on acqulslLlons
1oo large
lncreased
markeL power
Cvercome
enLry barrlers
Lower rlsk
compared Lo developlng
new producLs
CosL of new
producL developmenL
lncreased speed
Lo markeL
lncreased
dlverslflcaLlon
Avold excesslve
compeLlLlon
Acqu|s|t|ons
keasons for
Acqu|s|t|ons
keasons for Acqu|s|t|ons
Increased Market ower
AcqulslLlon lnLended Lo reduce Lhe compeLlLlve balance of Lhe lndusLry
Cvercome 8arr|ers to Lntry
AcqulslLlons overcome cosLly barrlers Lo enLry whlch may make sLarLups"
economlcally unaLLracLlve
8uylng esLabllshed buslnesses reduces rlsk of sLarLup venLures
Lower Cost and k|sk of New roduct Deve|opment
keasons for Acqu|s|t|ons keasons for Acqu|s|t|ons
Increased Speed to Market
Closely relaLed Lo 8arrlers Lo LnLry allows markeL enLry ln a more Llmely
fashlon
D|vers|f|cat|on
Culck way Lo move lnLo buslnesses when flrm currenLly lacks experlence and depLh
ln lndusLry
keshap|ng Compet|t|ve Scope keshap|ng Compet|t|ve Scope
llrms may use acqulslLlons Lo resLrlcL lLs dependence on a slngle or a few producLs
or markeLs
rob|ems w|th Acqu|s|t|ons
Cn|y a "f|nanc|a| team" assemb|ed and they make
"the dec|s|on" (shou|d have two teams one f|nanc|a|
And one organ|zat|ona| where the organ|zat|ona|
1eam says "es" or "No"
Integrat|on D|ff|cu|t|es
ulfferlng flnanclal and conLrol sysLems can make lnLegraLlon of flrms dlfflculL
rob|ems w|th Acqu|s|t|ons
Inadequate Lva|uat|on of 1arget
Wlnners Curse" bld causes acqulrer Lo overpay for flrm
Large or Lxtraord|nary Debt
CosLly debL can creaLe onerous burden on cash ouLflows
Inab|||ty to Ach|eve Synergy
usLlfylng acqulslLlons can lncrease esLlmaLe of expecLed beneflLs
rob|ems w|th Acqu|s|t|ons
Cver|y D|vers|f|ed
Acqulrer doesn'L have experLlse requlred Lo manage unrelaLed
buslnesses
Managers Cver|y Iocused on Acqu|s|t|ons
Managers may fall Lo ob[ecLlvely assess Lhe value of ouLcomes achleved
Lhrough Lhe flrm's acqulslLlon sLraLegy
1oo Large
Large bureaucracy reduces lnnovaLlon and flexlblllLy
Attr|butes of Lffect|ve Acqu|s|t|ons
Comp|ementary Assets or kesources
8uylng flrms wlLh asseLs LhaL meeL currenL needs Lo bulld
compeLlLlveness

Ir|end|y Acqu|s|t|ons
lrlendly deals make lnLegraLlon go more smooLhly

Carefu| Se|ect|on rocess

uellberaLe evaluaLlon and negoLlaLlons ls more llkely Lo lead Lo easy
lnLegraLlon and bulldlng synergles

Ma|nta|n I|nanc|a| S|ack

9rovlde enough addlLlonal flnanclal resources so LhaL proflLable
pro[ecLs would noL be foregone

Attr|butes of Lffect|ve Acqu|s|t|ons

LowtoModerate Debt
Merged flrm malnLalns flnanclal flexlblllLy

I|ex|b|||ty
as experlence aL managlng change and ls flexlble and
adapLable

Lmphas|ze Innovat|on
ConLlnue Lo lnvesL ln 8u as parL of Lhe flrm's overall sLraLegy

ow to make acqu|s|t|on successfu|

1C1AL Vs 2u|f| Case
reAcqu|s|t|on Steps
9roacLlve vs 8eacLlve

(1) Screen|ng
llnanclal sLaLus
9roducL markeL poslLlon
9hyslcal condlLlon of producLlon faclllLles
uman 8esources
9revalllng corporaLe culLure
Managerlal compaLlblllLy
llnd ouL S18LnC1WLAknLSS8lSk lAC1C8S

ow to make acqu|s|t|on successfu|

(2) Negoat|at|on
Arrlve aL usL 9rlce"
1lmlng of acqulslLlon
Acqulred company face shorL Lerm problem
lace down Lurn ln Lhe buslness

ow to make acqu|s|t|on successfu|

ostAcqu|s|t|on Steps
9roper lnLegraLlon

(1) C|ean|ng Iound|ng

8emove exlsLlng Lop managemenL lnsLallaLlon of new and
sLrong Leam
lnsLallaLlon of effecLlve flnanclal reporLlng sysLem
uLlllse Lhe ldle capaclLy Lo earn revenues LhaL guaranLee
sufflclenL cashflows

ow to make acqu|s|t|on successfu|

ostAcqu|s|t|on Steps
9roper lnLegraLlon

(2) Strateg|c and Crgan|zat|ona| kev|va|

8edeflne vlslon values and vlLal prlnclples
uevelop managemenL ln llghL of vlslon values
8aLlonallze Lhe work force and negoLlaLe Lhe Lrade unlon for
muLual beneflLs
lnvesL ln core Lechnology quallLy and dlsLrlbuLlon neLwork
upgrade Lhe organlzaLlonal skllls

ow to make acqu|s|t|on successfu|

ostAcqu|s|t|on Steps
9roper lnLegraLlon

(3) Integrat|on of peop|e and operat|ons

lnLegraLe funcLlonal areas llke
producLlonmarkeLlngpurchaslngflnance
lmplemenL lnLegraLed l1 S?S1LM or L89
SLreamllne Lwo ways flow of people aL dlfferenL levels
lnvesL ln core Lechnology quallLy and dlsLrlbuLlon neLwork
upgrade Lhe organlzaLlonal skllls
LCLL CUL1UkL UNIIICA1ICN IS kL 1C SUCCLLSIUL
ACUISI1ICN