FOLLOWING GLOBAL TRENDS: EXAMINING THE NEED FOR MERGERS & ACQUISITIONS IN THE ENERGY SECTOR IN MALAYSIA Case studies, Conc...
<ul><li>M&A Trends in the Energy Sector </li></ul><ul><li>Rationale for M&As in the Energy Sector </li></ul><ul><li>Strate...
<ul><li>How to fail without trying </li></ul><ul><li>The Roadmap to Failure by Fred Wiersema and Mike Treacy </li></ul>Bef...
The Roadmap to Failure   Fred Wiersema and   Mike Treacy Performance Time www.myCNI.com.my www.OOBEY.com   Clear Sailing T...
Denial and Defense <ul><li>“ It’s not really good value our competitor is offering, because it doesn’t include a lot of ou...
The Roadmap to Failure   Fred Wiersema and   Mike Treacy Performance Time www.myCNI.com.my www.OOBEY.com   Clear Sailing T...
Ad Hoc Tactics <ul><li>Selectively hold discounts to hold business that has started to go elsewhere </li></ul><ul><li>Intr...
The Roadmap to Failure   Fred Wiersema and   Mike Treacy Performance Time www.myCNI.com.my www.OOBEY.com   Clear Sailing T...
<ul><li>“ What is the moral of the story?” </li></ul>www.myCNI.com.my www.OOBEY.com
1. M&A Trends in the Energy Sector www.myCNI.com.my www.OOBEY.com
M&A Trends in the Energy Sector – Malaysia (1/2) <ul><li>MMC purchase of Malakoff, 2007: largest M&A in Malaysia, 2 nd  bi...
M&A Trends in the Energy Sector – Malaysia (2/2) <ul><li>Budget 2008: Stamp Duty exemptions for PLCs and Petronas vendors ...
M&A Trends in the Energy Sector <ul><li>Booming Demand </li></ul><ul><li>Supply shift to remote, unstable locations </li><...
M&A Trends in the Energy Sector <ul><li>Alternative Energy – growth, fragmented* </li></ul><ul><li>Low R&D, demand for new...
Biggest Trend <ul><li>“ Earnings Per Share growth expectations are way above what companies can achieve in most territorie...
2. Rationale for M&As in the Energy Sector www.myCNI.com.my www.OOBEY.com
Rationale for M&As in the Energy Sector <ul><li>“ Energy companies face a demanding future. They must start preparing for ...
Strategies for Growth “ Double-Digit Growth”, Michael Treacy www.myCNI.com.my www.OOBEY.com   <ul><li>Base Retention </li>...
Rationale for M&As: Growth <ul><li>Expansion </li></ul><ul><li>Consolidate </li></ul><ul><li>Geographic </li></ul><ul><li>...
Rationale for M&As: Expansion <ul><li>Expansion </li></ul><ul><li>Consolidate </li></ul><ul><li>Geographic </li></ul><ul><...
Rationale for M&As: Expansion <ul><li>Expansion </li></ul><ul><li>Consolidate </li></ul><ul><li>Geographic </li></ul><ul><...
Rationale for M&As: Transformative <ul><li>Transformative </li></ul><ul><li>Portfolio refocus </li></ul><ul><li>Diversific...
Rationale for M&As: Energy Sectors New Delivery, New Sources, Existing Resources Oil, Gas, Electricity, Coal Biomass, Nucl...
Possible ‘Outside’ Acquirers or Investors <ul><li>Institutional </li></ul>Fund Managers Corporations Sovereign Funds VCs N...
Why do ‘Outsiders’ Acquire or Invest? <ul><li>Return/Profit </li></ul><ul><li>Risk Management/ Hedging </li></ul><ul><li>T...
3. Strategies, Structure, and Optimizing Value in M&As www.myCNI.com.my www.OOBEY.com
Strategies for Growth “ Double-Digit Growth”, Michael Treacy www.myCNI.com.my www.OOBEY.com   <ul><li>Base Retention </li>...
How Markets determine Growth Strategies (1) <ul><li>Growth Rate </li></ul>www.myCNI.com.my www.OOBEY.com   <ul><li>Base Re...
<ul><li>Churn Rate </li></ul>How Markets determine Growth Strategies (2) www.myCNI.com.my www.OOBEY.com   <ul><li>Base Ret...
How Markets determine Growth Strategies (3) <ul><li>Energy Sector </li></ul>www.myCNI.com.my www.OOBEY.com   <ul><li>Marke...
<ul><li>Neutralize Competitor Advantages </li></ul><ul><li>Deliver far better value </li></ul><ul><li>Buy Market Share out...
Buying Market Share: Acquisition strategy No evidence of previous company One Kingdom Pre-integration Blueprint Slow Trigg...
Buying Market Share: Side notes on Funding www.myCNI.com.my www.OOBEY.com   *Adapted from Warren Buffet’s acquisition stra...
Strategy 4: Invade Adjacent Markets <ul><li>Adjacent Market = Important Similarities and Large Differences in: </li></ul><...
Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com   Traditional Utility Alternative Energy Incremental Te...
Strategy 4: Invade Adjacent Markets Upstream Midstream Downstream Distribution Generation Extraction Vendors/Services www....
<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>...
<ul><li>Can you match the Standards of Competition in this Market? </li></ul><ul><ul><li>You do have to meet the quality l...
<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...
Strategy 5: Acquire new Business <ul><li>No core advantage to bring in </li></ul><ul><li>Investors mind-set vs. Managers m...
Linking BSC to M&A Strategy Revenue Growth Base Retention Share Gain Positioning Adjacent Market New Business Operational ...
Optimizing M&A: 4-Wheels Model Culture Business  Objective M&A Strategy www.myCNI.com.my www.OOBEY.com   Structure Resourc...
Optimizing M&A : Framework <ul><li>Org Structure </li></ul><ul><li>Job Design </li></ul><ul><li>C&B </li></ul><ul><li>Poli...
Optimizing M&A : Framework <ul><li>Role modeling </li></ul><ul><li>Vision/Mission/Philosophy </li></ul><ul><li>Leadership ...
Optimizing M&A : Framework <ul><li>Identification and Recruitment </li></ul><ul><li>Incentives </li></ul><ul><li>Training ...
Optimizing M&A : Framework <ul><li>Enablers </li></ul><ul><li>Projects </li></ul><ul><li>Technology </li></ul><ul><li>Equi...
4. Considerations, Risks and Pitfalls www.myCNI.com.my www.OOBEY.com
Considerations, Risks and Pitfalls <ul><li>Global footprint vs. Local Presence </li></ul><ul><li>Anti-trust and Regulatory...
Considerations, Risks and Pitfalls <ul><li>Synergies and Improvements need to realized as quickly and efficiently as possi...
Consideration: Alternative Deals to M&A <ul><li>“ When companies are unwilling to sell or acquisition premiums are too hig...
Consideration: Alternative Deals to M&A Joint Venture Unite business units Problem with shared ownership New Product Lines...
5. Investment Opportunities www.myCNI.com.my www.OOBEY.com
Examples <ul><li>Renewable Energy: Wind, Solar, Biomass, Hydro </li></ul><ul><li>New generation Power Fuel Cells: silicon ...
End Note for Energy Sector <ul><li>“ Globalization, Scale, Profitability” </li></ul>Michael Hurley, UK Oil and gas advisor...
Thank You. soft copy of slides:  www.totallyunrelatedrandomanddebatable.blogspot.com
Upcoming SlideShare
Loading in …5
×

Examining The Need For Mergers And Acquisitions In The Energy Sector In Malaysia

4,870 views

Published on

The last decade has witnessed an unprecedented number of mergers and acquisitions (M&A) in the global energy sector. According to the United Nations Conference on Trade and Development (UNCTAD), of the 1,035 regulatory changes made globally between 1991 and 1999, 974 were specifically aimed at increasing foreign direct investment and M&A.
*Examining the upward trend of M&A in the global energy industry and assessing the rationale and benefits of M&A in the energy sector in Malaysia
*Critical success factors and considerations
*Identifying the risks and avoiding pitfalls
*Strategies to structure and negotiate effectively for optimal value and partnership for your investment
*Capitalizing on the opportunity for investments in what were once state-owned monopolies

Published in: Economy & Finance, Technology
0 Comments
4 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
4,870
On SlideShare
0
From Embeds
0
Number of Embeds
41
Actions
Shares
0
Downloads
327
Comments
0
Likes
4
Embeds 0
No embeds

No notes for slide
  • Examining The Need For Mergers And Acquisitions In The Energy Sector In Malaysia

    1. 1. FOLLOWING GLOBAL TRENDS: EXAMINING THE NEED FOR MERGERS & ACQUISITIONS IN THE ENERGY SECTOR IN MALAYSIA 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 in the Energy Sector </li></ul><ul><li>Rationale for M&As in the Energy Sector </li></ul><ul><li>Strategies, Structure, and Optimizing Value in M&As </li></ul><ul><li>Considerations, Risks and Pitfalls </li></ul><ul><li>Investment Opportunities </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. 1. M&A Trends in the Energy Sector www.myCNI.com.my www.OOBEY.com
    11. 11. M&A Trends in the Energy Sector – Malaysia (1/2) <ul><li>MMC purchase of Malakoff, 2007: largest M&A in Malaysia, 2 nd biggest in Region </li></ul><ul><li>Seadrill Ltd (Oslo Stock Exchange, offshore drilling operations) SapuraCrest Petroleum Bhd, raising shareholding from 10% to 18.51% </li></ul><ul><li>Sarawak Corridor of Renewable Energy (Score) – hydroelectricity, aluminum, steel, oil and gas, glass and agriculture </li></ul><ul><li>Perisai Petroleum Teknologi Bhd - acquire SJR Marine (L) Ltd for US$42mil, an anchor handling tug (AHT) for US$11.5mil, a portable saturation diving system (SAT system) for US$4.25mil and the disposal of two subsidiaries Corro-Shield (M) Sdn Bhd and Orinippon Trading Sdn Bhd for RM40mil. </li></ul>www.myCNI.com.my www.OOBEY.com
    12. 12. M&A Trends in the Energy Sector – Malaysia (2/2) <ul><li>Budget 2008: Stamp Duty exemptions for PLCs and Petronas vendors </li></ul><ul><li>Budget 2008: Investment Tax Allowance for energy conservation, energy savings </li></ul><ul><li>Budget 2008: Tax Exemption of income from Certified Emission Reduction (CER) </li></ul><ul><li>Europe’s ban on Biofuel i.e. Palm Oil </li></ul><ul><li>Excess capacity </li></ul><ul><li>“ Energy Blueprint” - IPPs to supply at competitive prices to an Energy Exchange </li></ul>www.myCNI.com.my www.OOBEY.com
    13. 13. M&A Trends in the Energy Sector <ul><li>Booming Demand </li></ul><ul><li>Supply shift to remote, unstable locations </li></ul><ul><li>Environmental impact, Fuel Mix </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>Interest in ‘Renewable’ energy </li></ul><ul><li>Demand reduction and Demand Management </li></ul><ul><li>Scarcity of Talent: Technical, Projects </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>www.myCNI.com.my www.OOBEY.com
    14. 14. M&A Trends in the Energy Sector <ul><li>Alternative Energy – growth, fragmented* </li></ul><ul><li>Low R&D, demand for new technologies </li></ul><ul><li>Anti-Pollution Solutions** </li></ul><ul><li>Credit Crunch </li></ul><ul><li>Foreign entities </li></ul><ul><li>Reliability standards </li></ul><ul><li>Political instabilities </li></ul><ul><li>De-regularization, Unbundling </li></ul><ul><li>Global Warming, less Water, less Hydro power </li></ul><ul><li>Private Equity </li></ul><ul><li>Restructuring undervalued Conglomerates </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 utilities consolidation </li></ul><ul><li>Competition for Assets </li></ul><ul><li>Rise of NOCs </li></ul>www.myCNI.com.my www.OOBEY.com
    15. 15. 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
    16. 16. 2. Rationale for M&As in the Energy Sector www.myCNI.com.my www.OOBEY.com
    17. 17. Rationale for M&As in the Energy Sector <ul><li>“ Energy companies face a demanding future. They must start preparing for it now” </li></ul>Ivo Bozon, Director, McKinsey’s Amsterdam Office www.myCNI.com.my www.OOBEY.com
    18. 18. 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
    19. 19. 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
    20. 20. 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 NOCs </li></ul>www.myCNI.com.my www.OOBEY.com
    21. 21. 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>Remote, unstable locations </li></ul><ul><li>De-regularization </li></ul><ul><li>Demand outstrip supply </li></ul><ul><li>Fuel Mix – Carbon Tax </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
    22. 22. 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
    23. 23. Rationale for M&As: Energy Sectors New Delivery, New Sources, Existing Resources Oil, Gas, Electricity, Coal Biomass, Nuclear, Ethanol, Wind, Solar www.myCNI.com.my www.OOBEY.com Traditional Utility Alternative Energy Incremental Technology
    24. 24. 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
    25. 25. 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
    26. 26. 3. Strategies, Structure, and Optimizing Value in M&As www.myCNI.com.my www.OOBEY.com
    27. 27. 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
    28. 28. 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
    29. 29. <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
    30. 30. How Markets determine Growth Strategies (3) <ul><li>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
    31. 31. <ul><li>Neutralize Competitor Advantages </li></ul><ul><li>Deliver far better value </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
    32. 32. 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
    33. 33. 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
    34. 34. 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
    35. 35. Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com Traditional Utility Alternative Energy Incremental Technology
    36. 36. Strategy 4: Invade Adjacent Markets Upstream Midstream Downstream Distribution Generation Extraction Vendors/Services www.myCNI.com.my www.OOBEY.com
    37. 37. <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
    38. 38. <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
    39. 39. <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
    40. 40. 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
    41. 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. 42. Optimizing M&A: 4-Wheels Model Culture Business Objective M&A Strategy www.myCNI.com.my www.OOBEY.com Structure Resources Leadership Person
    43. 43. Optimizing M&A : Framework <ul><li>Org Structure </li></ul><ul><li>Job Design </li></ul><ul><li>C&B </li></ul><ul><li>Policies & procedures </li></ul><ul><li>Decision making </li></ul><ul><li>Job fit </li></ul><ul><li>Management Systems </li></ul><ul><li>BSC and KPIs </li></ul><ul><li>Decentralized & Empower </li></ul>www.myCNI.com.my www.OOBEY.com Structure
    44. 44. Optimizing M&A : Framework <ul><li>Role modeling </li></ul><ul><li>Vision/Mission/Philosophy </li></ul><ul><li>Leadership Style </li></ul><ul><li>Delegation & Empowerment </li></ul><ul><li>C&B, Promotions </li></ul><ul><li>Sense of Urgency </li></ul><ul><li>Customer focused </li></ul><ul><li>Best practices </li></ul><ul><li>Bottom line management </li></ul><ul><li>Tradeoff between Cost vs. Value </li></ul>www.myCNI.com.my www.OOBEY.com Leadership
    45. 45. Optimizing M&A : Framework <ul><li>Identification and Recruitment </li></ul><ul><li>Incentives </li></ul><ul><li>Training </li></ul><ul><li>Values </li></ul><ul><li>Motivation </li></ul><ul><li>Competency Analysis </li></ul><ul><li>Education/Curriculum </li></ul>www.myCNI.com.my www.OOBEY.com Person
    46. 46. Optimizing M&A : Framework <ul><li>Enablers </li></ul><ul><li>Projects </li></ul><ul><li>Technology </li></ul><ul><li>Equipment </li></ul><ul><li>Materials </li></ul><ul><li>Intellectual Property </li></ul><ul><li>Partners </li></ul><ul><li>Property </li></ul><ul><li>Funding (Capital Access) </li></ul><ul><li>Public </li></ul><ul><li>Private </li></ul>www.myCNI.com.my www.OOBEY.com Resources
    47. 47. 4. Considerations, Risks and Pitfalls www.myCNI.com.my www.OOBEY.com
    48. 48. Considerations, Risks and Pitfalls <ul><li>Global footprint vs. Local Presence </li></ul><ul><li>Anti-trust and Regulatory permissions </li></ul><ul><li>Environmental (e.g. Europe’s ban on Biofuels) </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
    49. 49. 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>www.myCNI.com.my www.OOBEY.com
    50. 50. 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
    51. 51. 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
    52. 52. 5. Investment Opportunities www.myCNI.com.my www.OOBEY.com
    53. 53. Examples <ul><li>Renewable Energy: Wind, Solar, Biomass, Hydro </li></ul><ul><li>New generation Power Fuel Cells: silicon impregnated with hydrogen, easy to transport wind/solar energy to cities </li></ul><ul><li>Sun-Wind Generator (Solar Thermal): solar at ground to produce hot air to power turbines </li></ul><ul><li>Fuel from Carbon Dioxide via Osmosis </li></ul><ul><li>Heating from Datacenters (Server, Network) </li></ul><ul><li>‘ Smart’ Electric Grid: capacity optimization without adding coal/gas </li></ul><ul><li>Energy Storage technology </li></ul>www.myCNI.com.my www.OOBEY.com
    54. 54. End Note for Energy Sector <ul><li>“ Globalization, Scale, Profitability” </li></ul>Michael Hurley, UK Oil and gas advisory leader, PricewaterhouseCoopers www.myCNI.com.my www.OOBEY.com
    55. 55. Thank You. soft copy of slides: www.totallyunrelatedrandomanddebatable.blogspot.com

    ×