Obtaining a 360 degree view by conducting a thorough due diligence to ensure a successful acquisition
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Marcus Evans Structuring and Financing M&A Conference Singapore,12-13 July 2010 Obtaining a 360 degree view by conducting a thorough due diligence to ensure a successful acquisition • Analysing the pre-offer preparation • Amplifying internal fitment • Focusing on areas for due diligence • Balancing valuation with fitment • Examining the key facets of negotiation
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Obtaining a 360 degree view by conducting a thorough due diligence to ensure a successful acquisition
- 1. OBTAINING A 360 DEGREE VIEW BY CONDUCTING A THOROUGH DUE DILIGENCE TO ENSURE A SUCCESSFUL ACQUISITION Case studies, Concepts, and Debatable Ideas Kenny Ong CNI Holdings Berhad www.myCNI.com.my www.OOBEY.com
- 3. 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. 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. 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
- 11. 1. Business Model www.myCNI.com.my www.OOBEY.com
- 13. What is the Business Model? USP Market Discipline Profit Model
- 14. Business Model: Profit Model Revenue Cost Margin Cash Flow Assets
- 15. What is the Business Model? USP Market Discipline Profit Model
- 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. 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
- 19. 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
- 22. Strategy: 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)
- 23. Strategy: 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) HP well-balanced portfolio, mass customization Acer super lean cost structure, aggressive pricing Apple powerful products, premium pricing, limited range Still Doing well in 2009-2010
- 24. What is the Business Model? USP Market Discipline Profit Model
- 25. 2. Strategic Rationales for M&As 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
- 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
- 44. 3. Working Backwards: Post-Integration Checklist www.myCNI.com.my www.OOBEY.com
- 46. The First 100 Days 25 50 75 100 Save Star Performers Revise Strategy/Value Maps Staffing Plans Assess HR Value Re-align Strategy Coaching/Team Dev Restructure Capabilities Audit Culture Integration www.myCNI.com.my www.OOBEY.com
- 50. Post M&A: 4-Wheels Model Culture Business Objective M&A Strategy www.myCNI.com.my www.OOBEY.com Structure Resources Leadership Person
- 54. Activity Grid to optimize resources www.myCNI.com.my www.OOBEY.com Increase ( ↑) What are features/ activities/services to increase? Create (+) What are features/ activities/services to introduce? Reduce (↓) What are features/ activities/services to reduce? Eliminate (-) What are features/ activities/services to eliminate?
- 58. MBO Standards www.myCNI.com.my www.OOBEY.com A Excellent B Good C Average D Poor E Useless
- 59. MBO Standards www.myCNI.com.my www.OOBEY.com A Excellent B Good C Average Good D Poor E Useless
- 60. MBO Standards www.myCNI.com.my www.OOBEY.com A Excellent Excellent B Good Very Good C Average Good D Poor Not Good E Useless Commit Suicide
- 61. MBO Standards www.myCNI.com.my www.OOBEY.com A Excellent Consistently achieved 4 for 3 quarters B Very Good Higher than planned results C Good Achieved Planned Results D Not Good Did not fully meet planned results E Commit Suicide Unacceptable performance
- 66. Post M&A: 4-Wheels Model Culture Business Objective M&A Strategy www.myCNI.com.my www.OOBEY.com Structure Resources Leadership Person
- 68. 4. Considerations, Risks and Pitfalls www.myCNI.com.my www.OOBEY.com
- 69. 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
- 82. 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
- 84. Thank You. soft copy of slides: www.totallyunrelatedrandomanddebatable.blogspot.com
Editor's Notes
- Intro: “How to fail without trying” Why this intro? -
- Moral 1: The Right Business Strategy comes first, not M&As to boost the busines. If the Business Model is wrong, the M&A will be wrong no matter how. Good M&As cannot correct a Bad business model!
- Example: Google USP – Search, Free! Profit Model – Ad revenue MKt Discipline – Operational Excellence Example: Air Asia USP – Budget Profit Model – Lowest Cost, Maximum Seats Mkt Discipline – Operational Excellence
- Example: Google USP – Search, Free! Profit Model – Ad revenue MKt Discipline – Operational Excellence Example: Air Asia USP – Budget Profit Model – Lowest Cost, Maximum Seats Mkt Discipline – Operational Excellence
- Example: Google USP – Search, Free! Profit Model – Ad revenue MKt Discipline – Operational Excellence Example: Air Asia USP – Budget Profit Model – Lowest Cost, Maximum Seats Mkt Discipline – Operational Excellence
- How does the Customer define “Great Experience”? - It depends on their own perceptions. Problem is…this differs depending on the Customer! If you are very good in something that the Customer does not value, it will not improve the Experience.
- To Excel – Must be a Leader in ONE of the disciplines but the other two must be at least at industry standard
- OPTION 1
- Exercise: Customer Analysis and Market Discipline Determining your Market Discipline
- Example of successful customer loyalty strategy focusing on Operational Excellence and Product Leadership while maintaining market standard on Customer Service without indulging in it
- To Excel – Must be a Leader in ONE of the disciplines but the other two must be at least at industry standard
- To Excel – Must be a Leader in ONE of the disciplines but the other two must be at least at industry standard
- Example: Google USP – Search, Free! Profit Model – Ad revenue MKt Discipline – Operational Excellence Example: Air Asia USP – Budget Profit Model – Lowest Cost, Maximum Seats Mkt Discipline – Operational Excellence
- 2 and 3 are ‘Expansion’ 4 and 5 are ‘Transformative’
- This grid and discipline will also help in: managing conflicts on where limited resources should go Solve the problem of ever compounding activities and resources
- Example: What do you mean by Good? A, B, or C? Achieve 5 tasks, what is your rating? You mean if I achieve all, I only get AVERAGE? You must be crazy
- This looks better for the ‘achieved all’ category But… the ratings still look ambiguous, right?
- This looks better for the ‘achieved all’ category But… the ratings still look ambiguous, right?
- This looks better right? But… also still not good enough, right? Refer to Handout 4: 1. Priority, Targets and Standards
- Group 1: High Potential, High Performance (Talent) Staff this category will automatically be placed in the company’s Succession Plans. Be the first priority to be considered for any promotions or upgrading exercises. Career Acceleration + Specialist Career Paths. Group 2: Average Potential, High Performance (Leadership Issues) Leadership, motivational and cultural development would be given to these staff while they perform in their current positions. Group 3: High Potential, Average Performance (Potential) Should not be given career advancement unless performance improves. Good targets for transfers or job rotations to departments that require urgent manpower. Group 4: Average Potential, Low Performance (Issues) Staff in this group should be monitored closely by HR. They should be eventually moved out of their current work function, department or even the company entirely.