Global Mergers & Acquisitions - PowerPoint PPT Presentation

Slide1 l.jpg
Download
1 / 24

  • 740 Views
  • Updated On :
  • Presentation posted in: Shopping

Global Mergers & Acquisitions. 8 th October, 2005. K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\2. Why Global M&A…. What Motivates Companies ?. The need for faster growth which arises out of increasing competition. Access to large capital funds and brand equity.

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.

Download Presentation

Global Mergers & Acquisitions

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Slide1 l.jpg

Global Mergers & Acquisitions

8th October, 2005


Slide2 l.jpg

K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\2

Why Global M&A….

What Motivates Companies ?

  • The need for faster growth which arises out of increasing competition.

  • Access to large capital funds and brand equity.

  • Gaining complementary strengths.

  • Expanding Customer Base.

  • The need to enhance technological skill sets.

  • Expand into new areas to foster growth.

  • Widen the portfolio of addressable markets.

  • Meet end to end solution needs.

  • Opportunity for Growth: Given domestic limitations and challenges companies worldwide have undertaken global M&A activities to grow in size by adding manpower, access resources unavailable in domestic regions and facilitate overall expansion.

1


Slide3 l.jpg

K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\36

Reasons for Increasing Global M&A Activity

Global M&A And World Economy

  • In the past 25 years, there have been two major waves of surging cross-border M&A transactions. The first wave was in the late 1980s, and the second big cross-border buying spree was in the latter half of the 1990s. During both of these periods, the global economy experienced relatively high economic growth and there was widespread industrial restructuring, according to the United Nations Conference on Trade and Development.

  • The reasons for these cross-border takeovers vary, but their increasing numbers suggest that conditions are ripe for a wave of such deals as global competitive pressures intensify.

    • Much of the increased cross-border M&A activity this year has involved companies from the US and Europe who are in a major consolidation process.

    • Such deals are also becoming more common in developing countries, which are beginning to liberalize their trade and investment markets.

    • A pick-up in the global economy is the main reason for this year's rebound in cross-border M&A.

    • One factor that is contributing to increased M&A activity is the increasing importance of private equity deals.

    • The current wave of cross-border M&A deals is not only being driven predominantly by transatlantic activity, as were the two previous periods of frenzied buying in the late 1980s and 1990s. This increase is more geographically distributed and includes China, India and Latin America

    • The growing proportion of M&A deals that are settled in cash makes it easier to buy outside of a region.

    • Companies around the world have fixed their balance sheets and are generating excess cash. Flush with cash, they are more eager to consider acquisitions.

    • As globalization continues, and multinational companies seek to increase market share, eliminate competitors, or gain control of suppliers the stage is set for a third wave of rising cross-border M&A.

21


Slide4 l.jpg

K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\4

Phases of a Global M&A Process

3 Distinct Phases of the M&A Process:

  • Formulation of the Vision

  • Pre-Merger planning

  • Post-Merger Process

    Successful execution of all phases relies upon clearly defined roles and responsibilities and effective channels of communication

  • • Formulation of the Vision

    • GROWTH - The vision for an organization defines its purpose, where it is heading, and what it intends to do once it gets there. The vision includes a well-defined set of core values and beliefs that define a company’s culture and purpose.

    • COMPETITION - The vision should identify the distinct set of competencies that will enable the organization to deliver the unique value required to remain competitive as it moves forward. It should describe clearly the expectations for what the company will look like and how it will operate over time. Targets should be identified and evaluated in a manner consistent with the company’s vision.

  • Pre-Merger planning

    • A coherent pre-merger planning process should target companies with the desired capabilities, get the deal done, and lay the groundwork for a successful integration through rigorous planning and building of trust among the players.

  • Post-Merger Process

    • The post-merger process should be focused on cultural integration, retention of key people, and capturing well defined sources of value as quickly and efficiently as possible.

  • 2


    Slide5 l.jpg

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\5

    The Strategic Rationale

    • Given domestic challenges to achieving growth, many companies worldwide will now need to look outside their local boundaries for continued growth opportunities

      • International operations can provide companies with new and diversified revenue sources and opportunities to leverage economies of scale

      • Can also reduce operating costs by tapping into lower cost off-shore manufacturing and service operations in Eastern Europe and Asia

      • Investors are expecting growth in developing economies such as India and China

        Europe is a particularly attractive region:

      • Many industry sectors are more fragmented and less efficient than their U.S. counterparts

        Time may be appropriate for select companies to pursue growth strategies in Europe:

      • Well-positioned U.S. companies enjoy a price to cash-earnings premium relative to their European peers—particularly in the materials, healthcare and industrials industries

        • however, this window of opportunity is closing as U.S. multiples have contracted while European multiple have expanded YTD

      • The U.S. dollar is currently strong relative to the Euro, however it is declining and thus the price of foreign assets will increase.

        Companies should act early as historical evidence suggests that participating later in the M&A cycle, significantly decreases the value created by the merger or acquisitions

    3


    Slide6 l.jpg

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\8

    Global M&A Environment

    Announced Transactions Involving Global Targets

    Dollar Volume Average Transaction Size

    $Bn$MM

    Numbers below the columns represent number of announced deals (aggregate value of over US$100MM) for that year

    Actual

    Annualized

    Avg. Transaction Size

    Notes

    1.Includes announced transactions, each with an aggregate value of $100MM or more. Includes transactions with estimated values Excludes terminated transactions. Future terminations of pending transactions will reduce totals shown

    2.Includes transactions announced as of 30 June 2005. 2005 Annualized

    6


    Slide7 l.jpg

    Number of Global M&A Transactions vs. Global Equities Performance and Economic Growth

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\9

    Global M&A Environment

    Correlation With Broader Economy

    1996

    1997

    1998

    1999

    2000

    2001

    2002

    2003

    2004

    2005

    • Notes

    • Includes announced transactions, each with an aggregate value of $100MM or more. Includes transactions with estimated values. Excludes terminated transactions

    • MSCI World Index indexed to 2.5 on start of period, 1st quarter 1996

    • Percentage change on the same quarter of the previous year based on constant OECD GDP data; 2Q 2005 Illustrative GDP growth based on Morgan Stanley estimates

    7


    Slide8 l.jpg

    Dollar VolumeAverage Transaction Size

    $Bn$MM

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\10

    Global M&A Environment

    Growth in the Worldwide M&A Markets

    U.S. Targets

    Non-U.S. Targets

    Avg. Transaction Size

    • Notes

    • 1.Includes announced transactions, each with an aggregate value of $100MM or more. Includes transactions with estimated values

    • Excludes terminated transactions. Future terminations of pending transactions will reduce totals shown

    • Includes transactions announced as of 30 June 2005. 2005 Annualized

    • Percentage increase/decrease year over year

    8


    Slide9 l.jpg

    Dollar Value

    %

    Number of Deals

    %

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\11

    Global M&A Environment

    Announced Transactions By Value Range

    $100MM–500MM

    $500MM–1Bn

    $1Bn–$5Bn

    $5+Bn

    • Notes

    • Includes announced transactions, each with an aggregate value of $100MM or more. Includes transactions with estimated values. Future terminations of pending transactions will reduce totals

    • Includes transactions announced as of 30 June 2005

    9


    Slide10 l.jpg

    Target/Acquiror $Bn

    Target/Acquiror $Bn

    FleetBoston/Bank of America49

    Telecom Italia/Olivetti28

    Resona Bank/Dep. Ins Corp of Japan17

    Sibneft/Yukos17

    Wellpoint Health/Anthem16

    Travelers Ppty Casualty/St. Paul16

    GM Hughes/General Motors15

    Target/Acquiror$Bn

    Shell Transport + Trading/Royal Dutch Shell80

    Aventis/Sanofi-Synthélabo66Bank One/JP Morgan59AT&T Wireless/Cingular47

    Nextel Communications/Sprint47

    TIM SpA/Telecom Italia29

    PSEG/Exelon27

    American (North/South) Target

    European Target

    Rest of World

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\12

    Global M&A Environment

    Worldwide Target Transactions of $10 Billion or More

    Dollar Volume

    $Bn

    Target/Acquiror $Bn

    VodafoneGMBH/Vodafone Group PLC185

    Piezer/Warner Lambert Co110

    Vodafone America Asia/Vodafone Group57

    Mediaone Group/AT&A Corp55

    ELF Aquitaine/Total SA52

    • Target/Acquiror$Bn

    • Gillette/Procter & Gamble57

    • UFJ/Mitsubishi Tokyo Fin. Grp.41

    • MBNA/Bank of America36

    • AT&T/SBC Communications22

    • Unocal/China Nat’l Offshore Oil20

    • Unocal/ChevronTexaco19

    • HVB/Unicredito Italiano18

    Target/Acquiror $Bn

    Historic TW Inc/Time Warner186

    Smithkline Beecham/Glaxosmithkline72

    SeagramCo/Vivendi Universal SA43

    Texaco Inc/Chevron42

    Orange PLC/France Telecom41

    Notes

    1.Includes announced transactions, each with an aggregate value of $10Bn or more. Includes transactions with estimated values. Excludes terminated transactions. Future terminations of pending transactions will reduce totals. Seven largest transactions are detailed for each of 2002, 2003, 2004, and 2005

    2.Includes transactions announced as of 30 June 2005

    10


    Slide11 l.jpg

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\13

    Global M&A Environment

    Announced Transactions by Region of Target

    World Region of Target

    $ Billion

    World Region of Target

    $Bn

    • Notes

    • Includes announced transactions, each with an aggregate value of $100MM or more. Includes transactions with estimated values. Future terminations of pending transactions will reduce totals

    • Includes transactions announced as of 30 June 2005. 2005 Annualized

    11


    Slide12 l.jpg

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\14

    Global M&A Environment

    Announced Transactions by Region of Acquirer

    World Region of Acquiror

    $Billion

    • Notes

    • Includes announced transactions, each with an aggregate value of $100MM or more. Includes transactions with estimated values. Future terminations of pending transactions will reduce totals

    • Includes transactions announced as of 30 June 2005. 2005 Annualized

    12


    Slide13 l.jpg

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\15

    Global M&A Environment

    Announced Transactions by Target Industry

    Key Points Title

    • First key point

      • Sub point

    Worldwide Targets ($Bn)

    %

    Notes

    1.Includes announced transactions, each with an aggregate value of $100MM or more. Includes transactions with estimated values. Excludes terminated transactions. Future terminations of pending transactions will reduce totals shown

    2.Includes transactions announced as of 30 June 2005

    13


    Slide14 l.jpg

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\16

    Americas – M&A

    WORLD REVIEW – M&A

    • The urge to merge remained strong in second quarter. For the first six months of 2005, worldwide merger volume climbed to over US$1.2 trillion, the best showing since the second half 2000 when volume reached US$1.49 trillion.

    • US companies accounted for almost 43% of all M&A targets. Europe comprised 36.3% of target activity while Japan accounted for 6% and ROW accounted for 3%

    • In the first half of 2005, the three most active industries were Energy and Power, Financials, and Media and Entertainment.

    • Several large deals were announced in the second quarter:

    • US$35.8 billion planned acquisition of MBNA by Bank of America,

    • US$18.9 billion and US$20.4 billion competing bids for Unocal Corp by Chevron Corp and China National Offshore Oil, respectively.

    • The planned acquisition of Adelphia Communications Corp for US$17.6 billion by Time Warner Inc and Comcast Corp.

    • The planned acquisition by the Dolan Family of the remaining 77% interest in Cablevision Systems Corp for US$17.2 billion.

    • The US$57.2 billion Procter & Gamble mega-merger continued to drive the Consumer Products and Services industry volume and remains the highest value deal announced in 2005.

    • US M&A Totals more than $550 billion for First Half 2005

    • The record-setting pace of 2005 continued through the second quarter. Since 2001, the first half of 2005 was the most active 6-month period for announced US target transactions of more than $550 billion in volume. The number of deals announced decreased from last year as the trend towards mega deal structures continues.

    14


    Slide15 l.jpg

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\17

    European - M&A

    NOTEABLE DEALS

    • Gas Naturals $51.7 billion unsolicited bid for rival Endesa in Spain.

    • Italian Bank UniCredito’s $18.6 billion acquisition of German rival HVB

    • Pernod’s $17.7 billion deal to buy Britain’s Allied Domecq

    • OAO Rosneft’s US$7.1 billion acquisition of OAO Gazprom

    • Russia witnessed the US$7.12 Billion Gaprom/Rozneft transaction

  • These and other similar deals have led the way in Europe and have started to create a knock-on effect as deals that have been bubbling under the surface finally find their way onto the table

    • Increasing Appetite for European Targets

    • In the first six months of 2005, the number of announced deals with a European target decreased from 5,266 to 4,951transactions, while the overall volume level in the first half increased by 35% from $301.6 billion to $406.1billion.

    • Sector Wise Break Up

      • Financials, accounting for 19.2% of the market, was the most active sector in Europe.

      • Transactions in the Energy and Power sector accounted for 9.6% which was the second most active sector of the market.

  • UK Companies Account for 24% of European Targets and Italy ranks second with 17% of the market share

  • The most active country at the half year stage was the UK. Compared to this time last year, the value of UK targets rose from US$75.5 billion to US$99.5 billion.

  • Italy was the second most active country accounting for 17.1% of the market. The total rank value increase was largely due to Weather’s US$15.2 billion two-step acquisition of Wind and Electricite de France’s US$9.8 billion takeover offer for Edison.

  • Russia & Czech Republic Rise to the Occasion

  • Russian target announced M&A transactions rose from US$2.7 billion to US$11.2 billion. Also of note was the volume of announced M&A transactions involving Czech Republic targets which was fueld by Telefonica’s US$6.4 billion two-step acquisition of Cesky Telecom and Vodafone’s US$4.4 billion acquisition of Oskar Mobil.

  • 15


    Slide16 l.jpg

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\18

    Asia Pacific – M&A

    TOP DEALS

    • China National Offshore Oil Corp's recently announced unsolicited challenging offer to acquire Unocal Corp, for US$20.4 billion, topped all Asian ex-Japan transactions for this quarter

    • Hite Brewery Co Ltd’s announced acquisition of Jinro Ltd for US$3.4 billion, was the second largest transaction

    • Asia – Pacific climbs more than 82%

    • Overall announced Asian (excluding Japan) M&A Involvement activity surged 82.9%, amounting to US$98.2 billion in the first half of 2005 compared to US$53.7 billion during the same period last year.

    • South Korea Region's Top Haven for Investors (by dollar value)

    • South Korea continued to dominate the M&A target nation list for this quarter, garnering a total of US$12.6 billion worth of transactions, with 84 deals.

    • China moved up one place to become the second busiest nation, with a total of 804 transactions amounting to US$11.8 billion.

    • Hong Kong has overtaken Indonesia as the third busiest nation with 386 transactions totaling US$8.1 billion.

    • Energy and Power as the most Active Sector

    • The most sought after industry for dealmakers in Asia ex. Japan was the Energy & Power sector, with a market share of 32.3% for the second quarter, representing a 125.9% increase, compared to 14.3%, same period last year. The top industry had 192 transactions worth US$31.7 billion.

    • The Financials sector was the second most active sector, accounting for 19.9% of the market, valued at US$19.6 billion with 597 deals.

    • .

    16


    Slide17 l.jpg

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\19

    Client Name or Project Name

    Japanese – M&A

    TOP DEALS

    • Nomura topped the announcement-based tables with US$72.21 billion in deals.

    • Mitsubishi Tokyo Financial Group ranked second at US$ 51.2 billion in deals.

    • With Record Deal Volume, Japan Outpaces UK

    • A record 1,196 Japanese target deals were announced in the first half, reaching an aggregate value of $US108.85 billion, despite a typically slower second quarter. The Japanese M&A market, which falls roughly between Australasia and the UK in terms of dollar volume and deal count, surpassed the UK for the first time on both counts in the first half.

    • Defensive Maneuvers

    • A MITI study group (Ministry of International Trade & Industry) released official guidelines for corporate defense measures coinciding with a rush of company announcements proposing the adoption of poison pills, board reorganizations, and M&A transactions aimed at consolidating control over listed subsidiaries. In May and June alone, nearly 100 companies announced intentions to introduce some manner of defense against hostile takeovers.

    • Cross Border: Lost in Transactions

    • Cross-border M&A investment into Japan dropped nearly 90% in the first half to US$958.2 million from/to 47 deals. 87 deals, totaling $8.19 billion were announced in the comparable 2004 period.

    17


    Slide18 l.jpg

    M&A Activity in India

    M&A activity is rapidly picking up in India in terms of both number of transactions and value of deals

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\20

    M&A Trends in India

    A predominant theme in today’s M&A market is the emergence of large volume transactions.

    And the growing capital markets will further help in increasing M&A activities in India

    NOTEABLE DEALS IN 2005 (YTD)

    • Hutchison Communication acquired BPL Communications forUS$ 1152.52 million

    • Ambuja Cement India Ltd acquired Associated Cement Company for US$ 840.66 million

      The lowest deal in the current year was Beethoven Ltd acquiring Simplex Concrete Pile India for US$ 21.43

    DATA IN COLUMS REPRESENT NUMBER OF DEALS

    18


    Slide19 l.jpg

    1990

    1991

    1992

    1993

    1994

    1995

    1996

    1997

    1998

    1999

    2000

    2001

    2002

    2003

    2004

    2005

    YTD

    No. ofHostile Bids

    43

    47

    46

    25

    29

    13

    21

    22

    14

    13

    31

    47

    19

    53

    18

    26

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\21

    Global Hostile Activity - Overview

    • A predominant theme in today’s market is the emergence of the opportunistic/hostile suitor

      • Comcast’s $67Bn offer for Disney

      • Sanofi-Synthelabo’s $66Bn offer for Aventis

      • Gas Natural’s $29Bn offer for Iberdrola

      • Oracle’s $9Bn offer for PeopleSoft

      • Harmony’s $8Bn offer for Gold Fields

      • Alcan’s $7Bn offer for Pechiney SA

      • ArvinMeritor’s $5Bn offer for Dana Corp.

      • Zimmer’s $4Bn offer for Centerpulse AG

    Aggregate Hostile Activity (1)

    $Bn

    European Targets

    ROW

    American (North/South) Targets

    19


    Slide20 l.jpg

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\22

    Hostile Activity Has Been Widespread Across Industries

    20


    Slide21 l.jpg

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\24

    Indian M&A Regulatory Environment

    Summary Comments

    • The Indian M&A environment is a highly regulated one with several pieces of legislation as well as institutions exerting control over the process

    • The Indian M&A environment is a strongly regulated by the following major pieces of legislation/bodies:

      • The Companies Act, 1956

      • The Takeovers Code, 1997

      • The Monopolies and Restrictive Trade Practices Act, 1969

      • The Foreign Exchange Management Act, 1999

      • The Foreign Investment Promotion Board (FIPB)

      • The Reserve Bank of India

      • The Income Tax Act, 1961

    • Mergers, amalgamations, de-mergers, acquisitions of business units or divisions, are all governed by The Companies Act for all registered companies

    • Acquisition of shares in listed Indian companies is governed by The Takeover Code, 1997.

    23


    Slide22 l.jpg

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\33

    Why Global M&A’s Fail !!!

    • Research has conclusively shown that most of the mergers fail to achieve their stated goals.

    • Some of the reasons identified are:

      • Corporate Culture Clash

      • Lack of Communication

      • Loss of Key people and talent

      • HR issues

      • Lack of proper training

      • Clashes between management

      • Loss of customers due to apprehensions

      • Failure to adhere to plans

    32


    Slide23 l.jpg

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\34

    Why Global M&A’s Fail !!! (cont’d)

    Unsuccessful Deals due to lack of Effective Communication Strategy.

    • Hewlett-Packard Co.'s acquisition of Compaq Corp.

    • Conseco Inc.'s acquisition of Green Tree Financial Corp.

    • Newell Co.'s takeover of Rubbermaid Inc. In contrast

      Successful Deals

    • PepsiCo Inc.'s acquisition of The Quaker Oats Co.

    • Reed Elsevier Plc's acquisition of Harcourt General Inc.

    • These deals succeeded largely because, in each case, the acquirer explained to investors the rationale behind its respective deal - carefully, honestly and succinctly.

    • Communications strategy can make the difference between success and failure of a Global M&A transaction.

      • Slick press releases and conference calls can't save a bad deal, but a poorly conceived communications strategy can - and usually will - kill one that may make good strategic sense.

      • Over the last several years, many of the biggest unsuccessful deals, as measured by post-announcement return to shareholders, have performed poorly in large part because the acquirers didn't tell their story adequately

      • If the deal is dilutive in the short term, but makes "strategic" sense long-term, there should be a compelling economics for profitable growth.

      • For the transaction to be successful, Constituencies - particularly investors and employees - must be convinced that the company is capable of delivering on its promises and that they will be better off if the deal is completed.

      • In short, “An Effective Communication Strategy” helps in securing everything from shareholder approval to meshing two organizational cultures.

        Lack of IT Integration Seen As One of the Key Reasons to M&A Failure

      • The lack of focus on IT integration during the "lifecycle" of a merger or acquisition inevitably can lead to a host of problems. For example, while many companies look to IT to help bring about a successful merger, many do not involve IT in the decision process before the deal is done. Frequently, the result is that companies are less able to recognize potential difficulties in uniting IT operations before the actual integration has taken place

    33


    Slide24 l.jpg

    K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\35

    Why M&A’s Fail !!! (cont’d)

    What is Cultural Integration ?

    • It is well known that many M&A efforts lack a critical success ingredient: sustained attention to the Cultural Integration of the two sets of employees and their daily work processes.

    • Research indicates that senior executives who have personal experience with a merger or acquisition rate underestimating the importance and difficulty of integrating the two cultures as a major cause of M&A failures.

    • Research indicates that senior executives who have personal experience with a merger or acquisition rate underestimating the importance and difficulty of integrating the two cultures as a major cause of M&A failures.

    • Organizational Culture & Cultural Integration

    • "How we get things done around here" is a short yet evocative definition of Organizational culture. It includes the emotional, cognitive and behavioral patterns among employees and how they interact with colleagues, customers, suppliers, and other stakeholders in their original firms.

    • Organizational culture includes the informal practices and the implicit norms and values that, as much as the codified rules, silently guide the how of employees' daily work.

    • Cultural Integration is the meshing of the two different Organizational Cultures. And when two firms combine, deal-makers and process managers always should be careful to integrate the formal rules and policies which previously governed each separate firm. 

    • Failure of Cultural Integration can have adverse impacts on the M&A transaction:

      • Clash between the two Managements and clash between Management & Employees.

      • Creates differences among employees which can result in operational inefficiencies.

      • Negatively affects the value creation process after the transaction is complete

      • Loss of Key employees

      • Negatively affects the strategic communication process.

    34


  • Login