Comment

China M&AAccording to figures compiled by consulting firm DC Advisory, China has now overtaken the UK, Canada and Germany to rival Japan and the US as the nation with the world’s most acquisitive companies. Significantly, the report suggests that alongside the well-known tale of breakneck growth and increasing consumerism, “China is attempting a huge shift from an order-taker to an innovator, producing leading technology and infrastructure for both domestic and global markets.”1 What does this mean for ‘Western’ entities intending to join forces with a new Chinese parent company?

[caption id="attachment_198" align="alignleft" width="150"]Integration and Leadership United Leadership - vital to successful integration[/caption] M&A only works if management get behind the heavy lifting of integration, change and performance improvement post-close. Dig beneath any ‘failed’ integration and you will almost invariably find a leadership team that is confused, disillusioned, distracted, or simply unaware of what they are expected to deliver, and why.

[caption id="attachment_177" align="alignleft" width="150"]Logic and Emotion in M&A You need them both![/caption] Last week I heard Tony Blair talking to a packed gathering at Chatham House put on by the organisation Business for New Europe. Their aim is stop politics getting in the way of exploiting UK trade with the rest of Europe – vital, given its value of £600 billion per year.

[caption id="attachment_115" align="alignleft" width="150"]HP Autonomy comment Why didn't they understand each other?[/caption] What a glittering array of advisers were on hand to take HP and Autonomy to completion in August 2011. Barclays Capital and Perella Weinberg advised HP and for Autonomy it was Goldman Sachs, Citigroup, Merrill Lynch, UBS and JPMorgan Chase. Did any of them see any signs that the relationship would crumble in the way that it has?

United Continental merger IT systems commentA few weeks ago United Airlines’ CEO Jeff Smisek announced that after a challenging 2012, “the road is repaired” and the majority of integration headaches are now behind them. Alongside labour issues and a challenging economic environment, one of the largest of these headaches had to do with the implementation of a common technology platform for their passenger booking and service system, SHARES. The cut-over to the new system last March caused serious disruptions to passenger operations followed by some of the worst flight disruption and customer complaint figures amongst US carriers this year (visit this link for more detail). With the technological issues largely resolved, United now faces an uphill struggle to regain customer confidence and reputation.

HP Autonomy commentYet again we see a story about a merger that has foundered post-close when all the advisers have banked their fees and left the scene. It’s a depressing story about due diligence that we see again and again.

Recently I read an interesting article from Merrill Datasite about Executing Effective M&A. The article was a good reminder about the importance of the M&A process and how preparation in delivering successful M&A is vital. Good tools including an active target selection process, virtual data room, right timing; they are all important ingredients of a palatable and easily digestible acquisition. However, no matter how good the tools are, they won’t work effectively if there is no framework for using them – in short, a strategy.

An interesting article here relates to the current appetite for M&A. This one chimes with several we’ve seen over the past months. It suggests that most businesses have completed their cost-cutting programmes and reduced stock-piles in response to the financial crisis and now, being flush with cash, are under pressure to grow quickly. Investing in one’s current business is generally a sound strategic move but investing in organic growth will rarely bring the immediate and spectacular rewards brought about by focussed acquisition, as an adjacency play or by taking out one of your competitors.

Here's an interesting article  that discusses integration speed and provides pause for thought in any pre-deal thinking. It describes how there is a need for the whole M&A cycle to be a competitive business advantage which is absolutely right – the days of the ‘casual and easy growth through acquisition’ approach have long gone. Markets will not look kindly upon any acquisition that under-delivers or, worse still, never realises promised benefits. The authors make the excellent point that ‘the need for speed’ is critical, and never more so than in the digital sector. Again this is right; understanding the need for pace (however this is defined) is indeed critical as loss of momentum, particularly in the early stages of integration, will have a disproportionate effect downstream.

Here’s another piece we saw. This time it’s an article from Gizmodo about Yahoo – it discusses the threat integration can pose to innovation. It’s called ‘How Yahoo Killed Flickr and Lost the Internet’ and can be found here: http://gizmodo.com/5910223/how-yahoo-killed-flickr-and-lost-the-internet While agreeing with this premise in this specific case, I’d extend the point: Integration, if not managed in a way that is informed by, and complements, the strengths and culture of the acquired business, can dilute or destroy whatever capabilities this business brings to the party.