Professional Documents
Culture Documents
—Helen Keller
Exhibit 1: Course Layout: Mergers,
Acquisitions, and Other
Restructuring Activities
Part I: M&A Part II: M&A Process Part III: M&A Part IV: Deal Part V: Alternative
Environment Valuation and Structuring and Business and
Modeling Financing Restructuring
Strategies
Ch. 1: Motivations for Ch. 4: Business and Ch. 7: Discounted Ch. 11: Payment and Ch. 15: Business
M&A Acquisition Plans Cash Flow Valuation Legal Considerations Alliances
Ch. 2: Regulatory Ch. 5: Search through Ch. 8: Relative Ch. 12: Accounting & Ch. 16: Divestitures,
Considerations Closing Activities Valuation Tax Considerations Spin-Offs, Split-Offs,
Methodologies and Equity Carve-Outs
Ch. 3: Takeover Ch. 6: M&A Ch. 9: Financial Ch. 13: Financing the Ch. 17: Bankruptcy
Tactics, Defenses, and Postclosing Integration Modeling Basics Deal and Liquidation
Corporate Governance
• Integration planning
• Developing communication plans
• Creating a new organization
• Developing staffing plans
• Functional integration
• Integrating corporate cultures
Integration Planning
• Use due diligence to determine post-closing sequencing of events
necessary to realize potential savings
• Resolve contract-related transition issues in purchase agreement
– Employee payroll and benefits claims processing
– Seller reimbursement for products shipped before closing for which
payment not received
– Buyer reimbursement for vendor supplies/services received before
closing for which payment had not yet been made
• Ensure contract closing conditions include those necessary to facilitate
integration (e.g., employee contracts, agreements not to compete)
• Develop post-merger integration organization (management integration
team “MIT”) consisting of both target and acquirer managers to
– Build a master schedule of what should be done, by whom and by
what date
– Establish work teams to determine how each function and business
unit will be combined
– Establish post-closing communication strategy for all stakeholders
Albertson Acquires American Stores:
Underestimating Integration Costs
When Albertson’s acquired American Stores (owners of the Lucky supermarket
stores) for $12.5 billion, making it the nation’s second largest supermarket chain,
with more than 1000 stores, the corporate marriage stumbled almost immediately.
Escalating integration costs caused profits to tumble almost following closing. In the
first quarter of operation, combined operating profits fell 15% to $185 million,
despite an increase in sales of 1.6% to $8.98 billion. Albertson’s proceeded to
update the Lucky supermarket stores that it had acquired in California and to
combine the distribution operations of the two supermarket chains. It appears that
Albertson’s substantially underestimated the complexity of integrating an acquisition
of this magnitude. Albertson’s spent about $90 million before taxes to convert more
than 400 stores to its information and distribution systems as well as to change the
name to Albertson’s. By the end of the year following closing, Albertson’s stock had
lost more than one-half of its value.
Discussion Questions:
1. In your judgment, do you think acquirers’ commonly (albeit not deliberately)
understate integration costs? Why or why not?
2. Cite examples of expenses you believe are commonly incurred in integrating
target companies.
Developing Communication Plans
• Employees:
– Address the “me too” issues immediately
– Communicate frequently and honestly how the merger will
affect employees
• Customers:
– Under-commit and over-deliver
– Acquisition-related customer attrition
– Meet commitments to current customers
• Suppliers: Develop long-term vendor relationships
Discussion Questions:
1. How did Allianz attempt to retain key employees? In the short run? In the long run?
2. How did the potential for culture clash affect the way Alliance acquired Pimco?
3. What else could Allianz have done to minimize the culture clash?
Mechanisms for Integrating
Business Alliances
• Leadership: Establish a shared vision.
• Teamwork and role clarification: Establish teams with clearly
identified roles and responsibilities
• Coordination: Exert control through coordination rather than
mandate.
• Policies and values:
– Ensure employees understand how decisions are made.
– Communicate who will be held accountable and how
rewards are determined.
• Consensus decision making: Give all participants opportunity for
ample input, but make decisions within a reasonable time frame.
• Resource commitments: Partners should live up to commitments
to contribute high quality resources.
Discussion Questions