Managing Cross Border M&As Flashcards
What is the pre-acquisition phase?
Phase where the deal is conceived and negotiated, and then legally approved by shareholders and regulators
What is the post-acquisition phase?
Transition/combination phase when the integration planning ensues and implementation decisions are made
What are the sources of failure in the pre-acquisition phase?
- Lack of clear strategic rationale: management hubris, copycat mergers, over emphasis on financial fit relative to the consideration of synergies
- Lack of due diligence
How can thorough due diligence be a success factor is the pre-acquisition phase?
- Broadening of membership of the due diligence team
- Evaluate competencies of target firm’s management
What is management hubris?
Unrealistic belief held by managers that they can manage the assets of a target firm more efficiently than the firms current management
What is due diligence?
A comprehensive appraisal of a business undertaken by a prospective buyer to establish assets and liabilities and evaluate commercial potential
How can clear criteria and rationale for the deal be a success factor in the pre-acquisition phase?
- 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
How is strategic fit a success factor in the pre-acquisition phase?
- Alignment of acquiring and acquired firm’s strategic objectives and business philosophies
- Focus on core business
How is organisational cultural fit between partners a pre-acquisition phase success factor?
- 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
What are the sources of failure in the post-acquisition phase?
- Lack of integration plan
- Cultural mishandling
- Mindset of acquiring firm
- Lack of recognition of stress put on employees
- Ineffective communication
- Loss of management talent
What are the post acquisition phase success factors?
- 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
How and why do integration teams get used in the post-acquisition phase?
- Operational focus and target oriented integration plan
- Help create mutual understanding and respect integration team from acquiring and acquired firm
- Credibility
How can the pace of integration be managed?
- Consider risk of procrastination and indecision
- Consider risk of alienating talent and ignoring each firm’s strengths
- Speed is embedded in different cultural contexts
What are the contingent integration modes?
4 different approaches to acquisition integration depending on the need for strategic interdependence and need for organisational autonomy
What is preservation as a contingent integration mode?
High autonomy, high low interdependence
- Keep business separate
- Stimulate business development
- Accumulate learning and transfer of competencies
What is absorption as a contingent integration model?
Low autonomy, high interdependence
- Consolidate and rationalise quickly
- Adopt best practice
- Instil dominante culture
- Recognise complimentaries
What is symbiosis as a contingent integration mode?
High autonomy, high interdependence
- Start with preservation
- Identify joint sources of synergies
- Develop common culture
- Implement progressively needed interdependencies
Why is the pre-acquisition phase critical according to Lasserre (2018)?
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
What fuelled cross boarder M and As?
- Single European Market - created economic conditions for consolidation
- 1997 Asian financial crisis fuelled purchase of - Western assets
Shareholder value model - de-diversification
What are some examples of CBAs?
2004 Belgian Interbrew merged with Brazilian Ambev to from InBev
2008 InBev merged with US firm Anheuser to form AB InBev
What is the success rate of CBAs?
McKinsey estimates a 57% success rate
When is symbiosis good?
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
What are the two components of the post acquisition phase?
Transition management - emotional and organisational context
- establish credibility
Consolidation
- on going relationship between synergies
- autonomy: preservation, absorption and control
What is an example of an acquisition that failed?
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
What is an example of a successful merger?
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
