Documenti di Didattica
Documenti di Professioni
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Acquisitions, and
Business Alliances
What could be worse than being
without sight? Being born with sight
and no vision.
Helen Keller
Course Layout: M&A & Other
Restructuring Activities
Part I: M&A Part II: M&A Part III: M&A Part IV: Deal Part V:
Environment Process Valuation & Structuring & Alternative
Modeling Financing Strategies
Cross-Border
Transactions
Current Learning Objectives
Primary learning objectives: To provide students with
knowledge of
Factors critical to successfully integrating businesses,
Post-merger integration planning, and
Key activities that make-up the integration process
Secondary learning objectives: To provide students with
knowledge of
Post-merger integration organizations
How to develop communication plans
How to create a new organization
How to develop staffing plans, and
Integrating corporate cultures
Factors Affecting Successful Integration
Integration planning
Developing communication plans
Creating a new organization
Developing staffing plans
Functional integration
Integrating corporate cultures
Integration Planning
Use due diligence to determine post-closing sequencing of events
necessary to realize potential savings
Resolve contract-related transition issues in purchase agreement
Employee payroll and benefits claims processing
Seller reimbursement for products shipped before closing for which
payment not received
Buyer reimbursement for vendor supplies/services received before
closing for which payment had not yet been made
Ensure contract closing conditions include those necessary to facilitate
integration (e.g., employee contracts, agreements not to compete)
Develop post-merger integration organization (management integration
team MIT) consisting of both target and acquirer managers to
Build a master schedule of what should be done, by whom and by
what date
Establish work teams to determine how each function and business
unit will be combined
Establish post-closing communication strategy for all stakeholders
Albertson Acquires American Stores:
Underestimating Integration Costs
When Albertsons acquired American Stores (owners of the Lucky supermarket
stores) for $12.5 billion, making it the nations second largest supermarket chain,
with more than 1000 stores, the corporate marriage stumbled almost immediately.
Escalating integration costs caused profits to tumble almost following closing. In the
first quarter of operation, combined operating profits fell 15% to $185 million,
despite an increase in sales of 1.6% to $8.98 billion. Albertsons proceeded to
update the Lucky supermarket stores that it had acquired in California and to
combine the distribution operations of the two supermarket chains. It appears that
Albertsons substantially underestimated the complexity of integrating an acquisition
of this magnitude. Albertsons spent about $90 million before taxes to convert more
than 400 stores to its information and distribution systems as well as to change the
name to Albertsons. By the end of the year following closing, Albertsons stock had
lost more than one-half of its value.
Discussion Questions:
1. In your judgment, do you think acquirers commonly (albeit not deliberately)
understate integration costs? Why or why not?
2. Cite examples of expenses you believe are commonly incurred in integrating
target companies.
Developing Communication Plans
Employees:
Address the me too issues immediately
Communicate frequently and honestly how the merger will
affect employees
Customers:
Under-commit and over-deliver
Acquisition-related customer attrition
Meet commitments to current customers
Suppliers: Develop long-term vendor relationships
Discussion Questions:
1. How did Allianz attempt to retain key employees? In the short run? In the long run?
2. How did the potential for culture clash affect the way Alliance acquired Pimco?
3. What else could Allianz have done to minimize the culture clash?
Mechanisms for Integrating
Business Alliances
Leadership: Establish a shared vision.
Teamwork and role clarification: Establish teams with clearly
identified roles and responsibilities
Coordination: Exert control through coordination rather than
mandate.
Policies and values:
Ensure employees understand how decisions are made.
Communicate who will be held accountable and how
rewards are determined.
Consensus decision making: Give all participants opportunity for
ample input, but make decisions within a reasonable time frame.
Resource commitments: Partners should live up to
commitments to contribute high quality resources.
Discussion Questions
Identify the main challenges of developing
a new organization for the combined
businesses. How would you attempt to
resolve these challenges? Be specific.
What are the common methods for
integrating corporate cultures? Of these,
which do you believe would be the most
important? Explain your answer.
Things to remember...
Post-closing integration is a critical phase of the M&A process
Integration can be viewed as a process consisting of six
activities
Except in highly complex situations, combining companies
should be done quickly to
Minimize key employee, customer, and supplier turnover
Eliminate redundant assets, and
Achieve returns expected by shareholders
Successfully integrated M&As are those whose management
candidly and continuously communicate a clear vision, set of
values, and unambiguous priorities to all stakeholders
Unlike M&As, integrating business alliances is usually a lengthy
process because of shared control and the overarching need to
gain consensus on key decisions