Tutorial 7: MA And Strategic Renewal Flashcards
Success Trap
Successful companies become rigid and inert on their thinking
Hybrid vigor
Introduce variety to organisations
How do acquisitions lead to vitality ?
- ST effects: geographic expansion, access to new businesses or technologies
- LT effects: new perspectives and ways of doing things, leaning effects (soft factors)
Principles to help acquirers achieve revitalisation through acquisition
1- select acquisitions you can learn from: compatible/complementary
2- link the size of the acquisition to
Corporate need: when bad big acquisitions very disruptive
3- integrate acquisitions but don’t destroy them: blending: isolation and absorption
4- embrace friction: highlights areas needs fixing
5- balance acquisitions and organic growth: complementary strategies
Activist investor
Individual or group that purchase large numbers of public company’s shares and or tries to obtain a seat on the board with the objective of effecting a major change
Risk of activist investors
- misalignment if goals and interests
- stakeholders vs shareholders
- agent principal theory
Clueless deep- pocketed investors
1- buy their way to the board
2- pretend to be strategists and take decisions on behalf of the company
3- mergers, acquisitions and divestitures
While the pb is the core customer value
Motivations for engaging in technology acquisitions - buyers
- add strategically valuable resources
> rapidly obtain products and technologies
> harness innovative power of smaller young firms
> access tacit socially complex knowledge - enhance market power
> new geographic regions or customer group
> eliminate current and potential rivals - achieve strategic renewal
> provide opportunities for resource reconfiguration and recombination
> unfreeze mental gaps and enable adaptation
Motivations for engaging in acquisitions - sellers
- add strategically valuable resources: obtain necessary resources quickly without risk and uncertainty of IPO or dilution from additional fundraising
- relieve personal pressure: stressful managerial responsibilities and move towards financial liquidity
Strategic renewal definition
Significant and disruptive change in a firm’s approach to achieving superior performance.
Pre acquisition
- unusually powerful sellers
> B: S can reject unattractive Or ill-time offers
> S: Power is reduced after acquisition making négociation key - extreme resource uncertainty
> B: overpay risk
> S: overconfident and overlook offers - mutual information asymmetry
> B: incorrectly assess sellers resources and receptiveness to acquisition
> S: incorrectly assess buyers resources and plans for the future
Post acquisition
- Buyer ans seller momentum
> B: distraction from the core business and damaged internal RnD competence
> S: acquired personnel logistical problems, negative feelings leading to decrease productivity and less innovation - intégration vs autonomy dilemma
> B: integration for transfer knowledge but might disrupt routines trigger turnover and destroy knowledge
> S: subject to ineffective implementation decisions
Performance - Buyer
- picking the right target
> complement/compatible
> relative size of knowledge base - taking the right actions
> date
> delay until IPO
> vigilant négociation - implement effectively
> leave RnD units autonomous while integrating other functions
> base integration decision on targets stage of development
> leaders in influential roles, rich communication - accumulate learning
> gain acquisition experience
> combien with other technology experience
Performance - Seller
- Pay attention to buyers ouvertures
- evaluate fit
- be realistic in negociation
- promote momentum and serendipity
> mobilisé and mitigate actions
