strategic management case study

· Mergers and Acquisitions (M & A)

The combination of two (or more) organisations.

· An acquisition - purchasing a majority of shares in a target company.

‘Friendly’ acquisitions - where the target’s management recommend accepting the acquirer’s deal.

‘Hostile’ acquisitions - where the target’s management refuse the acquirer’s offer.

· A merger – the combination of two previously separate organisations to form a new company.

· Strategic motives for M&A

Strategic motives can be categorised in three ways:

· Extension – of the reach of a firm in terms of geography, products or markets.

· Consolidation – increasing scale, efficiency and market power.

· Capabilities – enhancing technological know-how (or other capabilities).

· Financial gains – increased leverage, access cash

· The acquisition process

· M&A strategy over time

Mergers and acquisitions are rarely one-off events for an organisation:

· Serial acquirers – make multiple acquisitions (often in parallel). This enables them to build up M&A expertise. Examples include Cisco Systems and IBM.

· Divestment (or divesture) – the process of selling a business that no longer fits the corporate strategy. Unless the parent can provide a ‘parenting advantage’ the business should be sold off.

· Strategic alliances

Where two or more organisations share resources and activities to pursue a strategy.

· Collective strategy is about how the whole network of alliances, of which an organisation is a member, competes against rival networks of alliances.

· Collaborative advantage is about managing alliances better than competitors.

· Strategic alliances

Where two or more organisations share resources and activities to pursue a strategy. Types of alliance ownership:

· Equity alliances involve the creation of a new

entity that is owned separately by the partners involved. (Joint ventures, Consortia)

· Non-equity alliances are typically looser alliances, without the commitment implied by ownership. (Franchise, Licensing,

subcontracting)

· Key success factors

Key elements in managing M&A and alliances:

· Strategic fit

· Organisational fit

· Correct valuation

· Integration

· Co-evolution

· Appropriate exit strategies

· Evaluating strategies

· Gap analysis

· The SAFe criteria of evaluation

· Suitability

Suitability is concerned with the overall rationale of the strategy:

· Does it exploit the opportunities in the environment and avoid the threats?

· Does it capitalise on the organisation’s strengths and avoid or remedy the weaknesses?

· Some examples of suitability

· Suitability – screening techniques

There are several useful techniques:

· Ranking

· Screening through scenarios

· Screening for bases of competitive advantage – using the VRIO criteria

· Life-cycle analysis

· Acceptability

Acceptability is concerned with whether the expected performance outcomes of a proposed strategy meet the expectations of stakeholders.

· Risk

· Return

· Stakeholder reactions.

· Reaction of stakeholders

Stakeholder mapping (power/interest matrix) can be used to:

· understand the political context of strategies

· understand the political agenda

· gauge the likely reaction of stakeholders to specific strategies.

If key stakeholders find a strategy to be unacceptable then it is likely to fail.

· Feasibility

Feasibility is concerned with whether a strategy could work in practice, i.e. whether an organisation has the capabilities to deliver a strategy.

Key questions:

· Do the resources and competences currently exist to implement the strategy effectively?

· If not, can they be obtained?

· Feasibility

Need to consider:

· Financial feasibility – funding and cash flow

· People and skills – competences, knowledge and experience

· Integrating resources – obtaining and integrating new resources.