Developing a Corporate Acquisition Strategy

Loading...

Flash Player 9 (or above) is needed to view presentations.
We have detected that you do not have it on your computer. To install it, go here.

0 comments

Post a comment

    Post a comment
    Embed Video
    Edit your comment Cancel

    2 Favorites

    Developing a Corporate Acquisition Strategy - Presentation Transcript

    1. DEVELOPING A CORPORATE ACQUISITION STRATEGY Case studies, Concepts, and Debatable Ideas Kenny Ong CNI Holdings Berhad www.myCNI.com.my www.OOBEY.com
      • M&A Trends
      • Rationale for M&As
      • Strategies, Structure, and Optimizing Value in M&As
      • Considerations, Risks and Pitfalls
      www.myCNI.com.my www.OOBEY.com
      • How to fail without trying
      • The Roadmap to Failure by Fred Wiersema and Mike Treacy
      Before we start… www.myCNI.com.my www.OOBEY.com
    2. The Roadmap to Failure Fred Wiersema and Mike Treacy Performance Time www.myCNI.com.my www.OOBEY.com Clear Sailing Today’s performance Ad-hoc Tactics Denial & Defense Doom Projections Overdue Failure The Moment of Truth X Performance Freefall Tomorrow’s actual performance Downpresure of Unclear Strategy
    3. Denial and Defense
      • “ It’s not really good value our competitor is offering, because it doesn’t include a lot of our features.” - ABC vs Air Asia
      • “ It’s good value but not in our preferred customer market.” - ABC vs Toyota
      • “ Sure they’re hurting us, but with their unfair advantage, what can we do?” – ABC vs MILO
      • “ The rules we are playing by have always worked before” – AMEX vs VISA
      www.myCNI.com.my www.OOBEY.com
    4. The Roadmap to Failure Fred Wiersema and Mike Treacy Performance Time www.myCNI.com.my www.OOBEY.com Clear Sailing Today’s performance Ad-hoc Tactics Denial & Defense Doom Projections Overdue Failure The Moment of Truth X Performance Freefall Tomorrow’s actual performance Downpresure of Unclear Strategy
    5. Ad Hoc Tactics
      • Selectively hold discounts to hold business that has started to go elsewhere
      • Introduce new promotions, terms, conditions, and offers to confuse and cloud the market
      • Beef up customer service by adding people to fix mess-ups and quicken delayed shipments
      • Delay capital investments and adjust accounting methods to portray quarterly financial results more favorably
      • Introduce “new and improved” products that are new in form, but not in substantive ways that are of consequence to purchasers
      • Merge, Acquire, Joint Venture and Ally out of desperation or without proper considerations
      www.myCNI.com.my www.OOBEY.com
    6. The Roadmap to Failure Fred Wiersema and Mike Treacy Performance Time www.myCNI.com.my www.OOBEY.com Clear Sailing Today’s performance Ad-hoc Tactics Denial & Defense Doom Projections Overdue Failure The Moment of Truth X Performance Freefall Tomorrow’s actual performance Downpresure of Unclear Strategy
      • “ What is the moral of the story?”
      www.myCNI.com.my www.OOBEY.com
    7. What is the Business Model? USP Market Discipline Profit Model www.myCNI.com.my www.OOBEY.com
    8. Intro: Market Discipline
      • Mamak stall
      www.myCNI.com.my www.OOBEY.com
    9. Intro: Market Discipline
      • "Exactly what I need"
      • Customized products
      • Personalized communications
      • "They're very responsive"
      • Preferential service and flexibility
      • Recommends what I need
      • "I'm very loyal to them"
      • Helps us to be a success
      "They are the most innovative" "Constantly renewing and creative" "Always on the leading edge" "A great deal!" Excellent/attractive price Minimal acquisition cost and hassle Lowest overall cost of ownership "A no-hassles firm" Convenience and speed Reliable product and service Product Leadership Operational Excellence Customer Intimacy www.myCNI.com.my www.OOBEY.com
    10. Strategy: Disciplines, Priorities, and KPIs Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) www.myCNI.com.my www.OOBEY.com
    11. The McPlaybook*
      • Make it easy to eat
      • 50% drive-thru
      • Meals held in one hand
      • Make it easy to prepare
      • High Turnover
      • Tasks simple to learn & repeat
      • Make it quick
      • “ Fast Food”
      • Tests new products for Cooking Times
      • Make what customers want
      • Prowls market for new products
      • Monitored field tests
      *Adapted from: Businessweek , Februrary 5 th 2007 www.myCNI.com.my www.OOBEY.com
      • Product Leadership
      • New, state of the art products or services
      • Risk takers
      • Meet volatile customer needs
      • Fast concept-to- counter
      • Never satisfied - obsolete own and competitors' products
      • Learning organization
      Strategy: Disciplines, Priorities, and KPIs
      • Operational Excellence
      • Competitive price
      • Error free, reliable
      • Fast (on demand)
      • Simple
      • Responsive
      • Consistent information for all
      • Transactional
      • 'Once and Done'
      • Customer Intimacy
      • Management by Fact
      • Easy to do business with
      • Have it your way (customization)
      • Market segments of one
      • Proactive, flexible
      • Relationship and consultative selling
      • Cross selling
      www.myCNI.com.my www.OOBEY.com
    12. Strategy: Value Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) www.myCNI.com.my www.OOBEY.com
    13. Strategy: Value Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) www.myCNI.com.my www.OOBEY.com
    14. Sample KPIs for Each Discipline
      • Operational Excellence
      • Price
      • Selection
      • Convenience
      • Zero Defects
      • Growth
      • Customer Intimacy
      • Customer Knowledge
      • Solutions Offered
      • Penetration
      • Customer Data
      • Customer-success focus
      • Product Leadership
      • Marketing
      • Functionality
      • # of Successes
      • # of Failures
      • Learn from key users
      • Interdisciplinary teams
      • Pipeline
      www.myCNI.com.my www.OOBEY.com
    15. 1. M&A Trends www.myCNI.com.my www.OOBEY.com
    16. M&A Trends
      • Booming Demand
      • Supply/Demand shift to remote, unstable locations
      • Demand shift in Asia
      • Middle East ‘cheap’ energy = diversification
      • Natural resources depleting fast
      • Massive capital required
      • Supply security
      • Scarcity of Talent
      • Global labor market
      • New, low cost players
      • Niche companies in new technologies*
      • Private Equity
      • Restructuring undervalued Conglomerates
      www.myCNI.com.my www.OOBEY.com
    17. M&A Trends
      • Alternative Industries – growth, fragmented*
      • Low R&D, demand for new technologies
      • Credit Crunch
      • Foreign entities
      • Political instabilities
      • De-regularization, Unbundling
      • Record profits, High Prices
      • Antitrust Regulations
      • Cross-border Regulations
      • Traditional MNC consolidation
      • Competition for Assets
      • Rise of Sovereign Funds
      www.myCNI.com.my www.OOBEY.com
    18. Biggest Trend
      • “ Earnings Per Share growth expectations are way above what companies can achieve in most territories from organic growth alone”
      John McConomy, US Power and Utilities Transaction Services Leader, PricewaterhouseCoopers www.myCNI.com.my www.OOBEY.com
    19. 2. Rationale for M&As www.myCNI.com.my www.OOBEY.com
    20. Two Major Rationale for M&As:
      • Cost Reduction
      • Growth
    21. Strategies for Growth “ Double-Digit Growth”, Michael Treacy www.myCNI.com.my www.OOBEY.com
      • Base Retention
      • Share Gain
      • Positioning
      • Adjacent Market
      • New Business
      GROWTH
    22. Rationale for M&As: Growth
      • Expansion
      • Consolidate
      • Geographic
      • Distribution
      • Compensate
      • Transformative
      • Portfolio refocus
      • Diversification
      Easier Tougher www.myCNI.com.my www.OOBEY.com
    23. Rationale for M&As: Expansion
      • Expansion
      • Consolidate
      • Geographic
      • Distribution
      • Compensate
      • Gain Scale to compete
      • Integrated Solutions
      • Financial Growth
      • Supply (security, mix)
      • Developing markets
      • High cost of Extra Capacity
      • Private Equity
      • Expanding Sovereign Funds
      www.myCNI.com.my www.OOBEY.com
    24. Rationale for M&As: Expansion
      • Expansion
      • Consolidate
      • Geographic
      • Distribution
      • Compensate
      • De-regularization
      • Demand outstrip supply
      • Revenue Mix – Tax optimization
      • Talent
      • New, Low-cost Entrants
      • Undervalued Big Players
      • Newer Assets
      www.myCNI.com.my www.OOBEY.com
    25. Rationale for M&As: Transformative
      • Transformative
      • Portfolio refocus
      • Diversification
      • New Business Lines
      • Selling/Spin-off non-core
      • Increase product line
      • New customers
      • New technologies*
      • Complementary Business
      • Up-down Supply Chain
      • Patent
      • Convergence anticipation
      www.myCNI.com.my www.OOBEY.com
    26. Rationale for M&As: Cross Sectors www.myCNI.com.my www.OOBEY.com Traditional Alternative Incremental
    27. Rationale for M&As: Cross Sectors New Delivery, New Sources, Existing Resources Oil, Gas, Electricity, Coal Biomass, Nuclear, Ethanol, Wind, Solar www.myCNI.com.my www.OOBEY.com Example: Energy Sector Traditional Utility Alternative Energy Incremental Technology
    28. Possible ‘Outside’ Acquirers or Investors
      • Institutional
      Fund Managers Corporations Sovereign Funds VCs NGOs Non-Profit Org Financial (Loans) JV Partners M&A Social VCs Holding Co. Gov. VCs Supply Chain Gov. Partnership Competitors www.myCNI.com.my www.OOBEY.com
    29. Why do ‘Outsiders’ Acquire or Invest?
      • Return/Profit
      • Risk Management/ Hedging
      • Tax-benefits
      • CSR/Image
      • Diversify revenue
      • Counter-cyclical balance
      • Support ‘Mission’
      • Exclusive rights
      • Contractual obligation
      • National Agenda
      • Control Supply Chain
      • R&D portfolio
      • Control Management
      • Alternative Cash Flow
      • M&A
      www.myCNI.com.my www.OOBEY.com
    30. 3. Strategies, Structure, and Optimizing Value in M&As www.myCNI.com.my www.OOBEY.com
    31. Strategies for Growth “ Double-Digit Growth”, Michael Treacy www.myCNI.com.my www.OOBEY.com
      • Base Retention
      • Share Gain
      • Positioning
      • Adjacent Market
      • New Business
      GROWTH
    32. How Markets determine Growth Strategies (1)
      • Growth Rate
      www.myCNI.com.my www.OOBEY.com
      • Base Retention
      • Share Gain (Acquisitions)
      • Market Positioning
      • Share Gain
      • Base Retention
      Strategy
      • Lose customers slower than competitors
      • Create scale economics, squeeze costs
      • Maintain market share in strategic segments
      • Prepare for market decline
      • Competitors focus too much on getting new customers
      Why? Flat Fast Growth Rate
      • Churn Rate
      How Markets determine Growth Strategies (2) www.myCNI.com.my www.OOBEY.com
      • Base Retention
      • Share Gain
      • Adjacent Market
      • Share Gain (Acquisitions)
      • Adjacent Markets
      Strategy
      • Lose customers slower than competitors
      • Customers are always open to the best value and offer
      • Desperate to gain revenue
      • Buying customer base is cheaper than own efforts
      • New products, old customers strategy
      Why? High Low Churn Rate
    33. How Markets determine Growth Strategies (3)
      • Example: Energy Sector
      www.myCNI.com.my www.OOBEY.com
      • Market Positioning
      • Share Gain (M&A)
      • Base Retention
      • Adjacent Markets (M&A)
      Fast Growth, Low Churn
      • Create better ‘Value’ proposition
      • Neutralize competitor advantages
      • Buy Market Share outright
        • Price Premium
        • Operating Model
        • Integration
      Strategy 2: Share Gain www.myCNI.com.my www.OOBEY.com
    34. Buying Market Share: Acquisition strategy No evidence of previous company One Kingdom Pre-integration Blueprint Slow Trigger, Fast Bullet www.myCNI.com.my www.OOBEY.com Integration Operating Model Price Premium Buying Market Share Net Cost per Customer < Direct Acquire
    35. Buying Market Share: Side notes on Funding www.myCNI.com.my www.OOBEY.com *Adapted from Warren Buffet’s acquisition strategies
      • Cash from Stock sale
      • Issue more stock
      • Cash from Earnings
      • Cash from Borrowings
      OK, but not preferred Preferable
    36. Strategy 4: Invade Adjacent Markets
      • Adjacent Market = Important Similarities and Large Differences in:
      • Cost Structure
      • Competitors
      • Customers
      • Critical Capabilities
      www.myCNI.com.my www.OOBEY.com
    37. Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com Traditional Alternative Incremental
    38. Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com Example: Energy Sector Traditional Utility Alternative Energy Incremental Technology
    39. Strategy 4: Invade Adjacent Markets Upstream Midstream Downstream Distribution Conversion Raw Mat Vendors/Services www.myCNI.com.my www.OOBEY.com
      • Is it a promising market?
        • Best when market is new and not stable
        • You must time your entry carefully
        • Entrenched companies usually delay embracing new technology or process
      • Can you win in this market?
        • Must be built on advantages that are tangible, practical and easily implemented
      Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com
      • Can you match the Standards of Competition in this Market?
        • You do have to meet the quality level that is common in the market
        • Three Standards:- Technology , Relationships , Business-model
        • You must have 80 percent of the capabilities you need to match competitor’s Standards
      Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com
      • Make or Buy?
        • It is easier to meet the standards of competition if you buy an existing player
        • Adjacent acquisitions must remain as a separate enterprise
        • Integrate Management Control (systems, technology)
        • Inter-transfer of management talent, knowledge and capability are important
      Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com
    40. Strategy 5: Acquire new Business
      • No core advantage to bring in
      • Investors mind-set vs. Managers mind-set
      • Value unlocking via operational improvements
      • Invest in Management/Leadership
      • Premium = Combined value > stand alone
      www.myCNI.com.my www.OOBEY.com
    41. Linking BSC to M&A Strategy Revenue Growth Base Retention Share Gain Positioning Adjacent Market New Business Operational Excellence Product Leadership Customer Intimacy Competencies Information Systems Motivation, empowerment, alignment Financial Learning & Growth Internal Process Customers Investment Strategy Productivity Market Value www.myCNI.com.my www.OOBEY.com
    42. 4. Considerations, Risks and Pitfalls www.myCNI.com.my www.OOBEY.com
    43. Types of M&A Deals vs. Considerations Overcapacity Product/ Market Consolidation Transformation/ Convergence Roll-up Acquire products/ market Strategic Growth Bet Size (Relative) Share Gain (Expansion) Adjacent (Transformative) New Business (Transformative) Small Large “ Running a winning M&A shop”, McKinsey
    44. Types of M&A Deals vs. Considerations Overcapacity Size (Relative) Share Gain (Expansion) Adjacent (Transformative) New Business (Transformative) Small Large “ Running a winning M&A shop”, McKinsey
      • Reduce industry capacity
      • Control Pricing
      • Similar Product Offerings
      • Pay for Cost synergies
    45. Types of M&A Deals vs. Considerations Roll-up Size (Relative) Share Gain (Expansion) Adjacent (Transformative) New Business (Transformative) Small Large “ Running a winning M&A shop”, McKinsey
      • Transfer Core Strength to target
      • Pay for lower operating cost of target
      • Increase revenue thru broad strength
    46. Types of M&A Deals vs. Considerations Product/ Market Consolidation Size (Relative) Share Gain (Expansion) Adjacent (Transformative) New Business (Transformative) Small Large “ Running a winning M&A shop”, McKinsey
      • Economies of Scale
      • Consolidate back office
      • Expand Market presence
      • Pay for Growth, Channels
    47. Types of M&A Deals vs. Considerations Acquire products/ market Size (Relative) Share Gain (Expansion) Adjacent (Transformative) New Business (Transformative) Small Large “ Running a winning M&A shop”, McKinsey
      • Expand market offering
      • Expand Geographic reach
      • Pay for Growth, Channels
      • Revenue synergies
    48. Types of M&A Deals vs. Considerations Transformation/ Convergence Size (Relative) Share Gain (Expansion) Adjacent (Transformative) New Business (Transformative) Small Large “ Running a winning M&A shop”, McKinsey
      • Transform Industry
      • Create new Value Proposition
      • Pay for New Markets, New Capabilities
    49. Types of M&A Deals vs. Considerations Strategic Growth Bet Size (Relative) Share Gain (Expansion) Adjacent (Transformative) New Business (Transformative) Small Large Adapted: “Running a winning M&A shop”, McKinsey
      • Skill transfer into new business
      • Pay for High Risk options, ability to act in new market space
    50. Three-Stage Process for Evaluating M&A deals 1. Strategy Approval 2. Approval-to- Negotiate 3. Deal Approval
      • Business Dev + Business Unit
      • Worth of Target?
      • Attractiveness of Target vs. Others
      • Target compatible with Strategy?
      • Support from Acquirer?
      • Integration possibilities?
      “ Running a winning M&A shop”, McKinsey
    51. Three-Stage Process for Evaluating M&A deals 1. Strategy Approval 2. Approval-to- Negotiate 3. Deal Approval
      • Price range
      • Initial Due Diligence
      • Vision for incorporation
      • Key Synergies
      • Nonbinding Term Sheet/LOI
      • Negotiation Roadmap
      • Process to Close
      “ Running a winning M&A shop”, McKinsey
    52. Three-Stage Process for Evaluating M&A deals 1. Strategy Approval 2. Approval-to- Negotiate 3. Deal Approval
      • Answering Key Questions
      • Debating Valuations
      • Aiming for Integration
      • Dealing with Execution Risks
      “ Running a winning M&A shop”, McKinsey
    53. Considerations, Risks and Pitfalls
      • Global footprint vs. Local Presence
      • Anti-trust and Regulatory permissions
      • M&A Accounting Standards
      • ‘Fair Value’ definition in financial reporting = ‘Exit’ price
      • Acquirer and Target having different Risk Tolerances
      • Public (or Public-hopeful) companies need to consider EPS after acquisition
      www.myCNI.com.my www.OOBEY.com
    54. Considerations, Risks and Pitfalls
      • Synergies and Improvements need to realized as quickly and efficiently as possible
      • Combined Management capability to deliver improved performance
      • First 100 days post-acquisition blueprint
      • Culture management
      • Staff Poaching from Competitors (and non-competitors)
      • Customer Poaching from Competitors
      www.myCNI.com.my www.OOBEY.com
    55. Consideration: Alternative Deals to M&A
      • “ When companies are unwilling to sell or acquisition premiums are too high, alliances are the next best thing to a merger. In other cases, they are actually preferable to M&A”
      David Hernst, Principal, McKinsey’s Washington, DC www.myCNI.com.my www.OOBEY.com
    56. Consideration: Alternative Deals to M&A Joint Venture Unite business units Problem with shared ownership New Product Lines Cost Reductions Share risk, Share Cost in new markets, R&D Buy-out clause Alliances Reduce non-core or commoditizing parts Outsourcing, Offshoring Help supplier gain Scale Enter Complementary business www.myCNI.com.my www.OOBEY.com
    57. End Note for M&A
      • “ Go where the money is... then marry for love”
      F. Scott Fitzgerald, Author www.myCNI.com.my www.OOBEY.com
    58. Thank You. soft copy of slides: www.totallyunrelatedrandomanddebatable.blogspot.com

    + Kenny OngKenny Ong, 2 years ago

    custom

    5378 views, 2 favs, 0 embeds more stats

    *Key elements involved in developing an acquisition more

    More info about this document

    © All Rights Reserved

    Go to text version

    • Total Views 5378
      • 5378 on SlideShare
      • 0 from embeds
    • Comments 0
    • Favorites 2
    • Downloads 576
    Most viewed embeds

    more

    All embeds

    less

    Flagged as inappropriate Flag as inappropriate
    Flag as inappropriate

    Select your reason for flagging this presentation as inappropriate. If needed, use the feedback form to let us know more details.

    Cancel
    File a copyright complaint
    Having problems? Go to our helpdesk?

    Categories