Managing Cross Border M&As

Question 1

What is the pre-acquisition phase?

Answer 1

Phase where the deal is conceived and negotiated, and then legally approved by shareholders and regulators

Question 2

What is the post-acquisition phase?

Answer 2

Transition/combination phase when the integration planning ensues and implementation decisions are made

Question 3

What are the sources of failure in the pre-acquisition phase?

Answer 3

• Lack of clear strategic rationale: management hubris, copycat mergers, over emphasis on financial fit relative to the consideration of synergies
• Lack of due diligence

Question 4

How can thorough due diligence be a success factor is the pre-acquisition phase?

Answer 4

• Broadening of membership of the due diligence team

- Evaluate competencies of target firm’s management

Question 5

What is management hubris?

Answer 5

Unrealistic belief held by managers that they can manage the assets of a target firm more efficiently than the firms current management

Question 6

What is due diligence?

Answer 6

A comprehensive appraisal of a business undertaken by a prospective buyer to establish assets and liabilities and evaluate commercial potential

Question 7

How can clear criteria and rationale for the deal be a success factor in the pre-acquisition phase?

Answer 7

• Consolidation - search and scale economies
• M&As in car industry common sharing of platforms
• Accelerate geographical market access for products of companies
• Competencies’ acquisition or options in related and new technologies

Question 8

How is strategic fit a success factor in the pre-acquisition phase?

Answer 8

• Alignment of acquiring and acquired firm’s strategic objectives and business philosophies
• Focus on core business

Question 9

How is organisational cultural fit between partners a pre-acquisition phase success factor?

Answer 9

• Understand the true motives of the management selling the firm
• Understand the two firms’ management teams and staff
• Undertake deep cultural assessment of both firms
• Undertake a human audit

Question 10

What are the sources of failure in the post-acquisition phase?

Answer 10

• Lack of integration plan
• Cultural mishandling
• Mindset of acquiring firm
• Lack of recognition of stress put on employees
• Ineffective communication
• Loss of management talent

Question 11

What are the post acquisition phase success factors?

Answer 11

• Clear integration plan
• Appropriate level of integration
• Communication management: support, positivity, honesty
• Creation of new culture
• Managing pace of integration
• Appointment of executive team
• Use of integration team

Question 12

How and why do integration teams get used in the post-acquisition phase?

Answer 12

• Operational focus and target oriented integration plan
• Help create mutual understanding and respect integration team from acquiring and acquired firm
• Credibility

Question 13

How can the pace of integration be managed?

Answer 13

• Consider risk of procrastination and indecision
• Consider risk of alienating talent and ignoring each firm’s strengths
• Speed is embedded in different cultural contexts

Question 14

What are the contingent integration modes?

Answer 14

4 different approaches to acquisition integration depending on the need for strategic interdependence and need for organisational autonomy

Question 15

What is preservation as a contingent integration mode?

Answer 15

High autonomy, high low interdependence

• Keep business separate
• Stimulate business development
• Accumulate learning and transfer of competencies

Question 16

What is absorption as a contingent integration model?

Answer 16

Low autonomy, high interdependence

• Consolidate and rationalise quickly
• Adopt best practice
• Instil dominante culture
• Recognise complimentaries

Question 17

What is symbiosis as a contingent integration mode?

Answer 17

High autonomy, high interdependence

• Start with preservation
• Identify joint sources of synergies
• Develop common culture
• Implement progressively needed interdependencies

Question 18

Why is the pre-acquisition phase critical according to Lasserre (2018)?

Answer 18

In order to determine the strategic and financial value of the proposition. Strategic refers to increased global presence/reduced costs/quality improved
Financial refers to forecasting future cash flows

Question 19

What fuelled cross boarder M and As?

Answer 19

• Single European Market - created economic conditions for consolidation
• 1997 Asian financial crisis fuelled purchase of - Western assets
  Shareholder value model - de-diversification

Question 20

What are some examples of CBAs?

Answer 20

2004 Belgian Interbrew merged with Brazilian Ambev to from InBev
2008 InBev merged with US firm Anheuser to form AB InBev

Question 21

What is the success rate of CBAs?

Answer 21

McKinsey estimates a 57% success rate

Question 22

When is symbiosis good?

Answer 22

For horizontal CBAs due to synergy benefits but still need autonomy to address the different cultural context e.g Air France and Dutch KLM have a separate legal and marketing strategy but have joint sourcing of fuel, routes and frequent flyer scheme

Question 23

What are the two components of the post acquisition phase?

Answer 23

Transition management - emotional and organisational context
- establish credibility

Consolidation

• on going relationship between synergies
• autonomy: preservation, absorption and control

Question 24

What is an example of an acquisition that failed?

Answer 24

1994 Quaker Oats acquired Snapple for $1.7 billion –> overpaid as they only sold it for $300 million

Tried to sell it in grocery stores when Snapple’s sales were in petrol stations and convenience stores

Question 25

What is an example of a successful merger?

Answer 25

2008 Anheuser and InBev Ab InBev - biggest brewing company

Successful due to sharing of distribution channels, customer base and information but kept degree of autonomy through the different brand identities