Developing a Corporate Acquisition Strategy

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*Key elements involved in developing an acquisition initiative that will meet corporate growth objectives
*Fine-turning an acquisition strategy that will increase the probability of creating shareholder value
*Effective ways of conducting a search campaign that will result in finding attractive opportunities

Published in: Business, Education

Developing a Corporate Acquisition Strategy

  1. 1. DEVELOPING A CORPORATE ACQUISITION STRATEGY Case studies, Concepts, and Debatable Ideas Kenny Ong CNI Holdings Berhad www.myCNI.com.my www.OOBEY.com
  2. 2. <ul><li>M&A Trends </li></ul><ul><li>Rationale for M&As </li></ul><ul><li>Strategies, Structure, and Optimizing Value in M&As </li></ul><ul><li>Considerations, Risks and Pitfalls </li></ul>www.myCNI.com.my www.OOBEY.com
  3. 3. <ul><li>How to fail without trying </li></ul><ul><li>The Roadmap to Failure by Fred Wiersema and Mike Treacy </li></ul>Before we start… www.myCNI.com.my www.OOBEY.com
  4. 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. 5. Denial and Defense <ul><li>“ It’s not really good value our competitor is offering, because it doesn’t include a lot of our features.” - ABC vs Air Asia </li></ul><ul><li>“ It’s good value but not in our preferred customer market.” - ABC vs Toyota </li></ul><ul><li>“ Sure they’re hurting us, but with their unfair advantage, what can we do?” – ABC vs MILO </li></ul><ul><li>“ The rules we are playing by have always worked before” – AMEX vs VISA </li></ul>www.myCNI.com.my www.OOBEY.com
  6. 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
  7. 7. Ad Hoc Tactics <ul><li>Selectively hold discounts to hold business that has started to go elsewhere </li></ul><ul><li>Introduce new promotions, terms, conditions, and offers to confuse and cloud the market </li></ul><ul><li>Beef up customer service by adding people to fix mess-ups and quicken delayed shipments </li></ul><ul><li>Delay capital investments and adjust accounting methods to portray quarterly financial results more favorably </li></ul><ul><li>Introduce “new and improved” products that are new in form, but not in substantive ways that are of consequence to purchasers </li></ul><ul><li>Merge, Acquire, Joint Venture and Ally out of desperation or without proper considerations </li></ul>www.myCNI.com.my www.OOBEY.com
  8. 8. 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
  9. 9. <ul><li>“ What is the moral of the story?” </li></ul>www.myCNI.com.my www.OOBEY.com
  10. 10. What is the Business Model? USP Market Discipline Profit Model www.myCNI.com.my www.OOBEY.com
  11. 11. Intro: Market Discipline <ul><li>Mamak stall </li></ul>www.myCNI.com.my www.OOBEY.com
  12. 12. Intro: Market Discipline <ul><li>&quot;Exactly what I need&quot; </li></ul><ul><li>Customized products </li></ul><ul><li>Personalized communications </li></ul><ul><li>&quot;They're very responsive&quot; </li></ul><ul><li>Preferential service and flexibility </li></ul><ul><li>Recommends what I need </li></ul><ul><li>&quot;I'm very loyal to them&quot; </li></ul><ul><li>Helps us to be a success </li></ul>&quot;They are the most innovative&quot; &quot;Constantly renewing and creative&quot; &quot;Always on the leading edge&quot; &quot;A great deal!&quot; Excellent/attractive price Minimal acquisition cost and hassle Lowest overall cost of ownership &quot;A no-hassles firm&quot; Convenience and speed Reliable product and service Product Leadership Operational Excellence Customer Intimacy www.myCNI.com.my www.OOBEY.com
  13. 13. 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
  14. 14. The McPlaybook* <ul><li>Make it easy to eat </li></ul><ul><li>50% drive-thru </li></ul><ul><li>Meals held in one hand </li></ul><ul><li>Make it easy to prepare </li></ul><ul><li>High Turnover </li></ul><ul><li>Tasks simple to learn & repeat </li></ul><ul><li>Make it quick </li></ul><ul><li>“ Fast Food” </li></ul><ul><li>Tests new products for Cooking Times </li></ul><ul><li>Make what customers want </li></ul><ul><li>Prowls market for new products </li></ul><ul><li>Monitored field tests </li></ul>*Adapted from: Businessweek , Februrary 5 th 2007 www.myCNI.com.my www.OOBEY.com
  15. 15. <ul><li>Product Leadership </li></ul><ul><li>New, state of the art products or services </li></ul><ul><li>Risk takers </li></ul><ul><li>Meet volatile customer needs </li></ul><ul><li>Fast concept-to- counter </li></ul><ul><li>Never satisfied - obsolete own and competitors' products </li></ul><ul><li>Learning organization </li></ul>Strategy: Disciplines, Priorities, and KPIs <ul><li>Operational Excellence </li></ul><ul><li>Competitive price </li></ul><ul><li>Error free, reliable </li></ul><ul><li>Fast (on demand) </li></ul><ul><li>Simple </li></ul><ul><li>Responsive </li></ul><ul><li>Consistent information for all </li></ul><ul><li>Transactional </li></ul><ul><li>'Once and Done' </li></ul><ul><li>Customer Intimacy </li></ul><ul><li>Management by Fact </li></ul><ul><li>Easy to do business with </li></ul><ul><li>Have it your way (customization) </li></ul><ul><li>Market segments of one </li></ul><ul><li>Proactive, flexible </li></ul><ul><li>Relationship and consultative selling </li></ul><ul><li>Cross selling </li></ul>www.myCNI.com.my www.OOBEY.com
  16. 16. 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
  17. 17. 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
  18. 18. Sample KPIs for Each Discipline <ul><li>Operational Excellence </li></ul><ul><li>Price </li></ul><ul><li>Selection </li></ul><ul><li>Convenience </li></ul><ul><li>Zero Defects </li></ul><ul><li>Growth </li></ul><ul><li>Customer Intimacy </li></ul><ul><li>Customer Knowledge </li></ul><ul><li>Solutions Offered </li></ul><ul><li>Penetration </li></ul><ul><li>Customer Data </li></ul><ul><li>Customer-success focus </li></ul><ul><li>Product Leadership </li></ul><ul><li>Marketing </li></ul><ul><li>Functionality </li></ul><ul><li># of Successes </li></ul><ul><li># of Failures </li></ul><ul><li>Learn from key users </li></ul><ul><li>Interdisciplinary teams </li></ul><ul><li>Pipeline </li></ul>www.myCNI.com.my www.OOBEY.com
  19. 19. 1. M&A Trends www.myCNI.com.my www.OOBEY.com
  20. 20. M&A Trends <ul><li>Booming Demand </li></ul><ul><li>Supply/Demand shift to remote, unstable locations </li></ul><ul><li>Demand shift in Asia </li></ul><ul><li>Middle East ‘cheap’ energy = diversification </li></ul><ul><li>Natural resources depleting fast </li></ul><ul><li>Massive capital required </li></ul><ul><li>Supply security </li></ul><ul><li>Scarcity of Talent </li></ul><ul><li>Global labor market </li></ul><ul><li>New, low cost players </li></ul><ul><li>Niche companies in new technologies* </li></ul><ul><li>Private Equity </li></ul><ul><li>Restructuring undervalued Conglomerates </li></ul>www.myCNI.com.my www.OOBEY.com
  21. 21. M&A Trends <ul><li>Alternative Industries – growth, fragmented* </li></ul><ul><li>Low R&D, demand for new technologies </li></ul><ul><li>Credit Crunch </li></ul><ul><li>Foreign entities </li></ul><ul><li>Political instabilities </li></ul><ul><li>De-regularization, Unbundling </li></ul><ul><li>Record profits, High Prices </li></ul><ul><li>Antitrust Regulations </li></ul><ul><li>Cross-border Regulations </li></ul><ul><li>Traditional MNC consolidation </li></ul><ul><li>Competition for Assets </li></ul><ul><li>Rise of Sovereign Funds </li></ul>www.myCNI.com.my www.OOBEY.com
  22. 22. Biggest Trend <ul><li>“ Earnings Per Share growth expectations are way above what companies can achieve in most territories from organic growth alone” </li></ul>John McConomy, US Power and Utilities Transaction Services Leader, PricewaterhouseCoopers www.myCNI.com.my www.OOBEY.com
  23. 23. 2. Rationale for M&As www.myCNI.com.my www.OOBEY.com
  24. 24. Two Major Rationale for M&As: <ul><li>Cost Reduction </li></ul><ul><li>Growth </li></ul>
  25. 25. Strategies for Growth “ Double-Digit Growth”, Michael Treacy www.myCNI.com.my www.OOBEY.com <ul><li>Base Retention </li></ul><ul><li>Share Gain </li></ul><ul><li>Positioning </li></ul><ul><li>Adjacent Market </li></ul><ul><li>New Business </li></ul>GROWTH
  26. 26. Rationale for M&As: Growth <ul><li>Expansion </li></ul><ul><li>Consolidate </li></ul><ul><li>Geographic </li></ul><ul><li>Distribution </li></ul><ul><li>Compensate </li></ul><ul><li>Transformative </li></ul><ul><li>Portfolio refocus </li></ul><ul><li>Diversification </li></ul>Easier Tougher www.myCNI.com.my www.OOBEY.com
  27. 27. Rationale for M&As: Expansion <ul><li>Expansion </li></ul><ul><li>Consolidate </li></ul><ul><li>Geographic </li></ul><ul><li>Distribution </li></ul><ul><li>Compensate </li></ul><ul><li>Gain Scale to compete </li></ul><ul><li>Integrated Solutions </li></ul><ul><li>Financial Growth </li></ul><ul><li>Supply (security, mix) </li></ul><ul><li>Developing markets </li></ul><ul><li>High cost of Extra Capacity </li></ul><ul><li>Private Equity </li></ul><ul><li>Expanding Sovereign Funds </li></ul>www.myCNI.com.my www.OOBEY.com
  28. 28. Rationale for M&As: Expansion <ul><li>Expansion </li></ul><ul><li>Consolidate </li></ul><ul><li>Geographic </li></ul><ul><li>Distribution </li></ul><ul><li>Compensate </li></ul><ul><li>De-regularization </li></ul><ul><li>Demand outstrip supply </li></ul><ul><li>Revenue Mix – Tax optimization </li></ul><ul><li>Talent </li></ul><ul><li>New, Low-cost Entrants </li></ul><ul><li>Undervalued Big Players </li></ul><ul><li>Newer Assets </li></ul>www.myCNI.com.my www.OOBEY.com
  29. 29. Rationale for M&As: Transformative <ul><li>Transformative </li></ul><ul><li>Portfolio refocus </li></ul><ul><li>Diversification </li></ul><ul><li>New Business Lines </li></ul><ul><li>Selling/Spin-off non-core </li></ul><ul><li>Increase product line </li></ul><ul><li>New customers </li></ul><ul><li>New technologies* </li></ul><ul><li>Complementary Business </li></ul><ul><li>Up-down Supply Chain </li></ul><ul><li>Patent </li></ul><ul><li>Convergence anticipation </li></ul>www.myCNI.com.my www.OOBEY.com
  30. 30. Rationale for M&As: Cross Sectors www.myCNI.com.my www.OOBEY.com Traditional Alternative Incremental
  31. 31. 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
  32. 32. Possible ‘Outside’ Acquirers or Investors <ul><li>Institutional </li></ul>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
  33. 33. Why do ‘Outsiders’ Acquire or Invest? <ul><li>Return/Profit </li></ul><ul><li>Risk Management/ Hedging </li></ul><ul><li>Tax-benefits </li></ul><ul><li>CSR/Image </li></ul><ul><li>Diversify revenue </li></ul><ul><li>Counter-cyclical balance </li></ul><ul><li>Support ‘Mission’ </li></ul><ul><li>Exclusive rights </li></ul><ul><li>Contractual obligation </li></ul><ul><li>National Agenda </li></ul><ul><li>Control Supply Chain </li></ul><ul><li>R&D portfolio </li></ul><ul><li>Control Management </li></ul><ul><li>Alternative Cash Flow </li></ul><ul><li>M&A </li></ul>www.myCNI.com.my www.OOBEY.com
  34. 34. 3. Strategies, Structure, and Optimizing Value in M&As www.myCNI.com.my www.OOBEY.com
  35. 35. Strategies for Growth “ Double-Digit Growth”, Michael Treacy www.myCNI.com.my www.OOBEY.com <ul><li>Base Retention </li></ul><ul><li>Share Gain </li></ul><ul><li>Positioning </li></ul><ul><li>Adjacent Market </li></ul><ul><li>New Business </li></ul>GROWTH
  36. 36. How Markets determine Growth Strategies (1) <ul><li>Growth Rate </li></ul>www.myCNI.com.my www.OOBEY.com <ul><li>Base Retention </li></ul><ul><li>Share Gain (Acquisitions) </li></ul><ul><li>Market Positioning </li></ul><ul><li>Share Gain </li></ul><ul><li>Base Retention </li></ul>Strategy <ul><li>Lose customers slower than competitors </li></ul><ul><li>Create scale economics, squeeze costs </li></ul><ul><li>Maintain market share in strategic segments </li></ul><ul><li>Prepare for market decline </li></ul><ul><li>Competitors focus too much on getting new customers </li></ul>Why? Flat Fast Growth Rate
  37. 37. <ul><li>Churn Rate </li></ul>How Markets determine Growth Strategies (2) www.myCNI.com.my www.OOBEY.com <ul><li>Base Retention </li></ul><ul><li>Share Gain </li></ul><ul><li>Adjacent Market </li></ul><ul><li>Share Gain (Acquisitions) </li></ul><ul><li>Adjacent Markets </li></ul>Strategy <ul><li>Lose customers slower than competitors </li></ul><ul><li>Customers are always open to the best value and offer </li></ul><ul><li>Desperate to gain revenue </li></ul><ul><li>Buying customer base is cheaper than own efforts </li></ul><ul><li>New products, old customers strategy </li></ul>Why? High Low Churn Rate
  38. 38. How Markets determine Growth Strategies (3) <ul><li>Example: Energy Sector </li></ul>www.myCNI.com.my www.OOBEY.com <ul><li>Market Positioning </li></ul><ul><li>Share Gain (M&A) </li></ul><ul><li>Base Retention </li></ul><ul><li>Adjacent Markets (M&A) </li></ul>Fast Growth, Low Churn
  39. 39. <ul><li>Create better ‘Value’ proposition </li></ul><ul><li>Neutralize competitor advantages </li></ul><ul><li>Buy Market Share outright </li></ul><ul><ul><li>Price Premium </li></ul></ul><ul><ul><li>Operating Model </li></ul></ul><ul><ul><li>Integration </li></ul></ul>Strategy 2: Share Gain www.myCNI.com.my www.OOBEY.com
  40. 40. 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
  41. 41. Buying Market Share: Side notes on Funding www.myCNI.com.my www.OOBEY.com *Adapted from Warren Buffet’s acquisition strategies <ul><li>Cash from Stock sale </li></ul><ul><li>Issue more stock </li></ul><ul><li>Cash from Earnings </li></ul><ul><li>Cash from Borrowings </li></ul>OK, but not preferred Preferable
  42. 42. Strategy 4: Invade Adjacent Markets <ul><li>Adjacent Market = Important Similarities and Large Differences in: </li></ul><ul><li>Cost Structure </li></ul><ul><li>Competitors </li></ul><ul><li>Customers </li></ul><ul><li>Critical Capabilities </li></ul>www.myCNI.com.my www.OOBEY.com
  43. 43. Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com Traditional Alternative Incremental
  44. 44. Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com Example: Energy Sector Traditional Utility Alternative Energy Incremental Technology
  45. 45. Strategy 4: Invade Adjacent Markets Upstream Midstream Downstream Distribution Conversion Raw Mat Vendors/Services www.myCNI.com.my www.OOBEY.com
  46. 46. <ul><li>Is it a promising market? </li></ul><ul><ul><li>Best when market is new and not stable </li></ul></ul><ul><ul><li>You must time your entry carefully </li></ul></ul><ul><ul><li>Entrenched companies usually delay embracing new technology or process </li></ul></ul><ul><li>Can you win in this market? </li></ul><ul><ul><li>Must be built on advantages that are tangible, practical and easily implemented </li></ul></ul>Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com
  47. 47. <ul><li>Can you match the Standards of Competition in this Market? </li></ul><ul><ul><li>You do have to meet the quality level that is common in the market </li></ul></ul><ul><ul><li>Three Standards:- Technology , Relationships , Business-model </li></ul></ul><ul><ul><li>You must have 80 percent of the capabilities you need to match competitor’s Standards </li></ul></ul>Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com
  48. 48. <ul><li>Make or Buy? </li></ul><ul><ul><li>It is easier to meet the standards of competition if you buy an existing player </li></ul></ul><ul><ul><li>Adjacent acquisitions must remain as a separate enterprise </li></ul></ul><ul><ul><li>Integrate Management Control (systems, technology) </li></ul></ul><ul><ul><li>Inter-transfer of management talent, knowledge and capability are important </li></ul></ul>Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com
  49. 49. Strategy 5: Acquire new Business <ul><li>No core advantage to bring in </li></ul><ul><li>Investors mind-set vs. Managers mind-set </li></ul><ul><li>Value unlocking via operational improvements </li></ul><ul><li>Invest in Management/Leadership </li></ul><ul><li>Premium = Combined value > stand alone </li></ul>www.myCNI.com.my www.OOBEY.com
  50. 50. 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
  51. 51. 4. Considerations, Risks and Pitfalls www.myCNI.com.my www.OOBEY.com
  52. 52. 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
  53. 53. 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 <ul><li>Reduce industry capacity </li></ul><ul><li>Control Pricing </li></ul><ul><li>Similar Product Offerings </li></ul><ul><li>Pay for Cost synergies </li></ul>
  54. 54. 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 <ul><li>Transfer Core Strength to target </li></ul><ul><li>Pay for lower operating cost of target </li></ul><ul><li>Increase revenue thru broad strength </li></ul>
  55. 55. 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 <ul><li>Economies of Scale </li></ul><ul><li>Consolidate back office </li></ul><ul><li>Expand Market presence </li></ul><ul><li>Pay for Growth, Channels </li></ul>
  56. 56. 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 <ul><li>Expand market offering </li></ul><ul><li>Expand Geographic reach </li></ul><ul><li>Pay for Growth, Channels </li></ul><ul><li>Revenue synergies </li></ul>
  57. 57. 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 <ul><li>Transform Industry </li></ul><ul><li>Create new Value Proposition </li></ul><ul><li>Pay for New Markets, New Capabilities </li></ul>
  58. 58. 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 <ul><li>Skill transfer into new business </li></ul><ul><li>Pay for High Risk options, ability to act in new market space </li></ul>
  59. 59. Three-Stage Process for Evaluating M&A deals 1. Strategy Approval 2. Approval-to- Negotiate 3. Deal Approval <ul><li>Business Dev + Business Unit </li></ul><ul><li>Worth of Target? </li></ul><ul><li>Attractiveness of Target vs. Others </li></ul><ul><li>Target compatible with Strategy? </li></ul><ul><li>Support from Acquirer? </li></ul><ul><li>Integration possibilities? </li></ul>“ Running a winning M&A shop”, McKinsey
  60. 60. Three-Stage Process for Evaluating M&A deals 1. Strategy Approval 2. Approval-to- Negotiate 3. Deal Approval <ul><li>Price range </li></ul><ul><li>Initial Due Diligence </li></ul><ul><li>Vision for incorporation </li></ul><ul><li>Key Synergies </li></ul><ul><li>Nonbinding Term Sheet/LOI </li></ul><ul><li>Negotiation Roadmap </li></ul><ul><li>Process to Close </li></ul>“ Running a winning M&A shop”, McKinsey
  61. 61. Three-Stage Process for Evaluating M&A deals 1. Strategy Approval 2. Approval-to- Negotiate 3. Deal Approval <ul><li>Answering Key Questions </li></ul><ul><li>Debating Valuations </li></ul><ul><li>Aiming for Integration </li></ul><ul><li>Dealing with Execution Risks </li></ul>“ Running a winning M&A shop”, McKinsey
  62. 62. Considerations, Risks and Pitfalls <ul><li>Global footprint vs. Local Presence </li></ul><ul><li>Anti-trust and Regulatory permissions </li></ul><ul><li>M&A Accounting Standards </li></ul><ul><li>‘Fair Value’ definition in financial reporting = ‘Exit’ price </li></ul><ul><li>Acquirer and Target having different Risk Tolerances </li></ul><ul><li>Public (or Public-hopeful) companies need to consider EPS after acquisition </li></ul>www.myCNI.com.my www.OOBEY.com
  63. 63. Considerations, Risks and Pitfalls <ul><li>Synergies and Improvements need to realized as quickly and efficiently as possible </li></ul><ul><li>Combined Management capability to deliver improved performance </li></ul><ul><li>First 100 days post-acquisition blueprint </li></ul><ul><li>Culture management </li></ul><ul><li>Staff Poaching from Competitors (and non-competitors) </li></ul><ul><li>Customer Poaching from Competitors </li></ul>www.myCNI.com.my www.OOBEY.com
  64. 64. Consideration: Alternative Deals to M&A <ul><li>“ 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” </li></ul>David Hernst, Principal, McKinsey’s Washington, DC www.myCNI.com.my www.OOBEY.com
  65. 65. 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
  66. 66. End Note for M&A <ul><li>“ Go where the money is... then marry for love” </li></ul>F. Scott Fitzgerald, Author www.myCNI.com.my www.OOBEY.com
  67. 67. Thank You. soft copy of slides: www.totallyunrelatedrandomanddebatable.blogspot.com

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