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1、DEVELOPING A CORPORATE ACQUISITION STRATEGYCase studies,Concepts,and Debatable IdeasKenny OngCNI Holdings Berhad,www.myCNI.com.my,www.OOBEY.com,M&A Trends Rationale for M&As Strategies,Structure,and Optimizing Value in M&AsConsiderations,Risks and Pitfalls,www.myCNI.com.my,www.OOBEY.com,How to fail
2、without tryingThe Roadmap to Failureby Fred Wiersema and Mike Treacy,Before we start,www.myCNI.com.my,www.OOBEY.com,The Roadmap to Failure Fred Wiersema and Mike Treacy,Performance,Time,www.myCNI.com.my,www.OOBEY.com,Denial and Defense,“Its not really good value our competitor is offering,because it
3、 doesnt include a lot of our features.”-ABC vs Air Asia“Its good value but not in our preferred customer market.”-ABC vs Toyota“Sure theyre hurting us,but with their unfair advantage,what can we do?”ABC vs MILO“The rules we are playing by have always worked before”AMEX vs VISA,www.myCNI.com.my,www.O
4、OBEY.com,The Roadmap to Failure Fred Wiersema and Mike Treacy,Performance,Time,www.myCNI.com.my,www.OOBEY.com,Ad Hoc Tactics,Selectively hold discounts to hold business that has started to go elsewhereIntroduce new promotions,terms,conditions,and offers to confuse and cloud the marketBeef up custome
5、r service by adding people to fix mess-ups and quicken delayed shipmentsDelay capital investments and adjust accounting methods to portray quarterly financial results more favorablyIntroduce“new and improved”products that are new in form,but not in substantive ways that are of consequence to purchas
6、ersMerge,Acquire,Joint Venture and Ally out of desperation or without proper considerations,www.myCNI.com.my,www.OOBEY.com,The Roadmap to Failure Fred Wiersema and Mike Treacy,Performance,Time,www.myCNI.com.my,www.OOBEY.com,“What is the moral of the story?”,www.myCNI.com.my,www.OOBEY.com,What is the
7、 Business Model?,USP,Market Discipline,Profit Model,www.myCNI.com.my,www.OOBEY.com,Intro:Market Discipline,Mamak stall,www.myCNI.com.my,www.OOBEY.com,Intro:Market Discipline,They are the most innovativeConstantly renewing and creativeAlways on the leading edge,A great deal!Excellent/attractive price
8、Minimal acquisition cost and hassleLowest overall cost of ownershipA no-hassles firmConvenience and speedReliable product and service,Exactly what I needCustomized productsPersonalized communicationsTheyre very responsivePreferential service and flexibilityRecommends what I needIm very loyal to them
9、Helps us to be a success,Product Leadership,OperationalExcellence,CustomerIntimacy,www.myCNI.com.my,www.OOBEY.com,Operational Excellence(low cost producer),Ref:The Discipline of Market Leaders,Michael Treacy 1995,Product Leadership(best product),Customer Intimacy(best total solution),Strategy:Discip
10、lines,Priorities,and KPIs,www.myCNI.com.my,www.OOBEY.com,The McPlaybook*,Make it easy to eat50%drive-thruMeals held in one hand,Make it easy to prepareHigh TurnoverTasks simple to learn&repeat,Make it quick“Fast Food”Tests new products for Cooking Times,Make what customers wantProwls market for new
11、productsMonitored field tests,*Adapted from:Businessweek,Februrary 5th 2007,www.myCNI.com.my,www.OOBEY.com,Operational ExcellenceCompetitive priceError free,reliableFast(on demand)SimpleResponsiveConsistent information for allTransactionalOnce and Done,Customer IntimacyManagement by FactEasy to do b
12、usiness withHave it your way(customization)Market segments of oneProactive,flexibleRelationship and consultative sellingCross selling,Product LeadershipNew,state of the art products or servicesRisk takersMeet volatile customer needsFast concept-to-counterNever satisfied-obsolete own and competitors
13、productsLearning organization,Strategy:Disciplines,Priorities,and KPIs,www.myCNI.com.my,www.OOBEY.com,Operational Excellence(low cost producer),Ref:The Discipline of Market Leaders,Michael Treacy 1995,Product Leadership(best product),Customer Intimacy(best total solution),Strategy:Value Disciplines,
14、www.myCNI.com.my,www.OOBEY.com,Operational Excellence(low cost producer),Ref:The Discipline of Market Leaders,Michael Treacy 1995,Product Leadership(best product),Customer Intimacy(best total solution),Strategy:Value Disciplines,www.myCNI.com.my,www.OOBEY.com,Sample KPIs for Each Discipline,Operatio
15、nal ExcellencePriceSelectionConvenienceZero DefectsGrowth,Customer IntimacyCustomer KnowledgeSolutions OfferedPenetrationCustomer DataCustomer-success focus,Product LeadershipMarketingFunctionality#of Successes#of FailuresLearn from key usersInterdisciplinary teamsPipeline,www.myCNI.com.my,www.OOBEY
16、.com,1.M&A Trends,www.myCNI.com.my,www.OOBEY.com,M&A Trends,Booming DemandSupply/Demand shift to remote,unstable locationsDemand shift in AsiaMiddle East cheap energy=diversificationNatural resources depleting fastMassive capital required,Supply securityScarcity of TalentGlobal labor marketNew,low c
17、ost playersNiche companies in new technologies*Private EquityRestructuring undervalued Conglomerates,www.myCNI.com.my,www.OOBEY.com,M&A Trends,Alternative Industries growth,fragmented*Low R&D,demand for new technologiesCredit CrunchForeign entitiesPolitical instabilitiesDe-regularization,Unbundling,
18、Record profits,High PricesAntitrust RegulationsCross-border RegulationsTraditional MNC consolidationCompetition for AssetsRise of Sovereign Funds,www.myCNI.com.my,www.OOBEY.com,Biggest Trend,“Earnings Per Share growth expectations are way above what companies can achieve in most territories from org
19、anic growth alone”,John McConomy,US Power and Utilities Transaction Services Leader,PricewaterhouseCoopers,www.myCNI.com.my,www.OOBEY.com,2.Rationale for M&As,www.myCNI.com.my,www.OOBEY.com,Two Major Rationale for M&As:,Cost ReductionGrowth,Strategies for Growth,“Double-Digit Growth”,Michael Treacy,
20、www.myCNI.com.my,www.OOBEY.com,Rationale for M&As:Growth,ExpansionConsolidateGeographicDistributionCompensate,TransformativePortfolio refocusDiversification,Easier,Tougher,www.myCNI.com.my,www.OOBEY.com,Rationale for M&As:Expansion,ExpansionConsolidateGeographicDistributionCompensate,Gain Scale to c
21、ompeteIntegrated SolutionsFinancial GrowthSupply(security,mix)Developing marketsHigh cost of Extra CapacityPrivate EquityExpanding Sovereign Funds,www.myCNI.com.my,www.OOBEY.com,Rationale for M&As:Expansion,ExpansionConsolidateGeographicDistributionCompensate,De-regularizationDemand outstrip supplyR
22、evenue Mix Tax optimizationTalentNew,Low-cost EntrantsUndervalued Big PlayersNewer Assets,www.myCNI.com.my,www.OOBEY.com,Rationale for M&As:Transformative,TransformativePortfolio refocusDiversification,New Business LinesSelling/Spin-off non-coreIncrease product lineNew customersNew technologies*Comp
23、lementary BusinessUp-down Supply ChainPatentConvergence anticipation,www.myCNI.com.my,www.OOBEY.com,Rationale for M&As:Cross Sectors,www.myCNI.com.my,www.OOBEY.com,Rationale for M&As:Cross Sectors,New Delivery,New Sources,Existing Resources,Oil,Gas,Electricity,Coal,Biomass,Nuclear,Ethanol,Wind,Solar
24、,www.myCNI.com.my,www.OOBEY.com,Example:Energy Sector,Possible Outside Acquirers or Investors,Institutional,Fund Managers,Corporations,Sovereign Funds,VCs,NGOs,Non-Profit Org,Financial(Loans),JV Partners,M&A,Social VCs,Holding Co.,Gov.VCs,Supply Chain,Gov.Partnership,Competitors,www.myCNI.com.my,www
25、.OOBEY.com,Why do Outsiders Acquire or Invest?,Return/ProfitRisk Management/HedgingTax-benefitsCSR/ImageDiversify revenueCounter-cyclical balanceSupport MissionExclusive rights,Contractual obligationNational AgendaControl Supply ChainR&D portfolioControl ManagementAlternative Cash FlowM&A,www.myCNI.
26、com.my,www.OOBEY.com,3.Strategies,Structure,and Optimizing Value in M&As,www.myCNI.com.my,www.OOBEY.com,Strategies for Growth,“Double-Digit Growth”,Michael Treacy,www.myCNI.com.my,www.OOBEY.com,How Markets determine Growth Strategies(1),Growth Rate,www.myCNI.com.my,www.OOBEY.com,Churn Rate,How Marke
27、ts determine Growth Strategies(2),www.myCNI.com.my,www.OOBEY.com,How Markets determine Growth Strategies(3),Example:Energy Sector,www.myCNI.com.my,www.OOBEY.com,Create better Value propositionNeutralize competitor advantagesBuy Market Share outrightPrice PremiumOperating ModelIntegration,Strategy 2:
28、Share Gain,www.myCNI.com.my,www.OOBEY.com,Buying Market Share:Acquisition strategy,No evidence of previous company,One KingdomPre-integration BlueprintSlow Trigger,Fast Bullet,www.myCNI.com.my,www.OOBEY.com,Buying Market Share:Side notes on Funding,www.myCNI.com.my,www.OOBEY.com,*Adapted from Warren
29、 Buffets acquisition strategies,Strategy 4:Invade Adjacent Markets,Adjacent Market=Important Similarities and Large Differences in:Cost StructureCompetitorsCustomersCritical Capabilities,www.myCNI.com.my,www.OOBEY.com,Strategy 4:Invade Adjacent Markets,www.myCNI.com.my,www.OOBEY.com,Strategy 4:Invad
30、e Adjacent Markets,www.myCNI.com.my,www.OOBEY.com,Example:Energy Sector,Strategy 4:Invade Adjacent Markets,Upstream,Midstream,Downstream,Distribution,Conversion,Raw Mat,Vendors/Services,www.myCNI.com.my,www.OOBEY.com,Is it a promising market?Best when market is new and not stableYou must time your e
31、ntry carefullyEntrenched companies usually delay embracing new technology or processCan you win in this market?Must be built on advantages that are tangible,practical and easily implemented,Strategy 4:Invade Adjacent Markets,www.myCNI.com.my,www.OOBEY.com,Can you match the Standards of Competition i
32、n this Market?You do have to meet the quality level that is common in the marketThree Standards:-Technology,Relationships,Business-modelYou must have 80 percent of the capabilities you need to match competitors Standards,Strategy 4:Invade Adjacent Markets,www.myCNI.com.my,www.OOBEY.com,Make or Buy?I
33、t is easier to meet the standards of competition if you buy an existing playerAdjacent acquisitions must remain as a separate enterpriseIntegrate Management Control(systems,technology)Inter-transfer of management talent,knowledge and capability are important,Strategy 4:Invade Adjacent Markets,www.my
34、CNI.com.my,www.OOBEY.com,Strategy 5:Acquire new Business,No core advantage to bring inInvestors mind-set vs.Managers mind-setValue unlocking via operational improvementsInvest in Management/LeadershipPremium=Combined value stand alone,www.myCNI.com.my,www.OOBEY.com,Revenue Growth,Base Retention,Shar
35、e Gain,Positioning,Adjacent Market,New Business,Operational Excellence,Product Leadership,Customer Intimacy,Competencies,Information Systems,Motivation,empowerment,alignment,Financial,Learning&Growth,Internal Process,Customers,Investment Strategy,Productivity,Market Value,Linking BSC to M&A Strategy
36、,www.myCNI.com.my,www.OOBEY.com,4.Considerations,Risks and Pitfalls,www.myCNI.com.my,www.OOBEY.com,Types of M&A Deals vs.Considerations,Overcapacity,Product/Market Consolidation,Transformation/Convergence,Roll-up,Acquire products/market,Strategic Growth Bet,Size(Relative),Share Gain(Expansion),Adjac
37、ent(Transformative),New Business(Transformative),Small,Large,“Running a winning M&A shop”,McKinsey,Types of M&A Deals vs.Considerations,Overcapacity,Size(Relative),Share Gain(Expansion),Adjacent(Transformative),New Business(Transformative),Small,Large,“Running a winning M&A shop”,McKinsey,Reduce ind
38、ustry capacityControl PricingSimilar Product OfferingsPay for Cost synergies,Types of M&A Deals vs.Considerations,Roll-up,Size(Relative),Share Gain(Expansion),Adjacent(Transformative),New Business(Transformative),Small,Large,“Running a winning M&A shop”,McKinsey,Transfer Core Strength to targetPay f
39、or lower operating cost of targetIncrease revenue thru broad strength,Types of M&A Deals vs.Considerations,Product/Market Consolidation,Size(Relative),Share Gain(Expansion),Adjacent(Transformative),New Business(Transformative),Small,Large,“Running a winning M&A shop”,McKinsey,Economies of ScaleConso
40、lidate back officeExpand Market presencePay for Growth,Channels,Types of M&A Deals vs.Considerations,Acquire products/market,Size(Relative),Share Gain(Expansion),Adjacent(Transformative),New Business(Transformative),Small,Large,“Running a winning M&A shop”,McKinsey,Expand market offeringExpand Geogr
41、aphic reachPay for Growth,ChannelsRevenue synergies,Types of M&A Deals vs.Considerations,Transformation/Convergence,Size(Relative),Share Gain(Expansion),Adjacent(Transformative),New Business(Transformative),Small,Large,“Running a winning M&A shop”,McKinsey,Transform IndustryCreate new Value Proposit
42、ionPay for New Markets,New Capabilities,Types of M&A Deals vs.Considerations,Strategic Growth Bet,Size(Relative),Share Gain(Expansion),Adjacent(Transformative),New Business(Transformative),Small,Large,Adapted:“Running a winning M&A shop”,McKinsey,Skill transfer into new businessPay for High Risk opt
43、ions,ability to act in new market space,Three-Stage Process for Evaluating M&A deals,1.Strategy Approval,2.Approval-to-Negotiate,3.Deal Approval,Business Dev+Business UnitWorth of Target?Attractiveness of Target vs.OthersTarget compatible with Strategy?Support from Acquirer?Integration possibilities
44、?,“Running a winning M&A shop”,McKinsey,Three-Stage Process for Evaluating M&A deals,1.Strategy Approval,2.Approval-to-Negotiate,3.Deal Approval,Price rangeInitial Due DiligenceVision for incorporationKey SynergiesNonbinding Term Sheet/LOINegotiation RoadmapProcess to Close,“Running a winning M&A sh
45、op”,McKinsey,Three-Stage Process for Evaluating M&A deals,1.Strategy Approval,2.Approval-to-Negotiate,3.Deal Approval,Answering Key QuestionsDebating ValuationsAiming for IntegrationDealing with Execution Risks,“Running a winning M&A shop”,McKinsey,Considerations,Risks and Pitfalls,Global footprint
46、vs.Local PresenceAnti-trust and Regulatory permissionsM&A Accounting StandardsFair Value definition in financial reporting=Exit priceAcquirer and Target having different Risk TolerancesPublic(or Public-hopeful)companies need to consider EPS after acquisition,www.myCNI.com.my,www.OOBEY.com,Considerat
47、ions,Risks and Pitfalls,Synergies and Improvements need to realized as quickly and efficiently as possibleCombined Management capability to deliver improved performanceFirst 100 days post-acquisition blueprintCulture managementStaff Poaching from Competitors(and non-competitors)Customer Poaching fro
48、m Competitors,www.myCNI.com.my,www.OOBEY.com,Consideration:Alternative Deals to M&A,“When companies are unwilling to sell or acquisition premiums are too high,alliances are the next best thing to a merger.In other cases,they are actually preferable to M&A”,David Hernst,Principal,McKinseys Washington
49、,DC,www.myCNI.com.my,www.OOBEY.com,Consideration:Alternative Deals to M&A,Joint Venture,Unite business unitsProblem with shared ownershipNew Product LinesCost ReductionsShare risk,Share Cost in new markets,R&DBuy-out clause,Alliances,Reduce non-core or commoditizing partsOutsourcing,OffshoringHelp supplier gain ScaleEnter Complementary business,www.myCNI.com.my,www.OOBEY.com,End Note for M&A,“Go where the money is.then marry for love”,F.Scott Fitzgerald,Author,www.myCNI.com.my,www.OOBEY.com,Thank You.,soft copy of slides:,
