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SMMCG4[CS-2]LN9&LN12, ［SMMC-ETC ］G4, What John Deere company approach…

- - - - Add the scope of the firm
        
        Merge and acquisition
        
        In an merge, the combination of two firms, which subsequently form a new legal entity under the banner of one corporate name
        
        In an acquisition, one company purchases the other entirely.
      - Decrease the scope of the firm
        
        divestitures through sale car by outsourced spin-outs
      - transactions is that they always by definition involve another firm
    - - BCG M&A
        
        provides analysis and research not only on M&As, but also in divestitures
        
        https://www.bcg.com/capabilities/mergers-acquisitions-transactions-pmi/m-and-a
      - Thompson ONE(SDC)
        
        cited in statistical analyses of M&As divestitures and alliances
      - IMAA(Institute for Mergers Acquisitions and Alliances)
        
        You can learn for example that M&A activity tends to peak right around stock market peaks despite the name the data on IMAA's website only covers merges
        
        https://imaa-institute.org/
- - - - the slowest
        
        only involves the sale of 25 percent of equity
        
        don't result in the parent transferring the entire ownership of the unit
  - - - the fastest and execute
  - - - firms may divest in order to raise cash
      - focus on its core businesses
      - to get rid of low profitability units
      - to free up and redeploy their resources and capabilities
      - free up the entrepreneurial or innovative potential within a unit
        
        might get stymied within a large corporation.
    - - new unit to find its own identity and to define its own culture, to set itself apart from the parent after the divestiture
- - - - Combine two similar companies
        
        Friendly approach
        
        Tax reasons
    - - Purchase or takeover
        
        Friendly or unfriendly
        
        Hostile takeover
  - - - Short-term
        
        On average, neutral
      - Long-term
        
        Loss value (on average)
  - - - Get into new markets
        
        EX. Salesforce x Tablieau
      - Superior acquirsition&integration capability
        
        EX. Cisco
      - Overcome competitive disadvantages
    - - Principal-agent problem
      - Managerial hubris
  - - - the acquirer has to pay more than the fair market value in order to acquire a company, and it's unlikely to create value by simply picking good companies to acquire
  - - - The winner in that bidding war has to pay the highest price on offer among all the bidders.
      - To justify this high bid, the acquirer would need to have more optimistic evaluation of their target relative to all the other bidders.
        
        Many companies tried to reduce the effects of the winner's curse in M&A deals
        
        EX. Amazon insisted on absolute secrecy
      - Winning firms are likely to systematically pay too much.
- - - - used it with clients as we think about next-generation digital offerings
        
        becomes a vocabulary to have a conversation between the customer and the innovator.
  - - - people change and companies are collections of people
        
        if you want to get a company to change, you actually have to one by one get every person that company to want to change
        
        communicating that in a way that's accessible to all types of learners.
  - - - it's an exciting piece of IT
        
        The fundamental thesis is that companies exist to create customer value full stop
        
        it's the lingua Franca of how people think about pop psychology and true psychology, academic psychology.
        
        gives people a sort of a framework to think about it and make it useful
  - - - the integration activities need to follow that values the thesis and become an integration thesis
        
        Putting 80% of the energy on the on that 20%
        
        we find is the difference between winners and losers in M&A.
        
        combine the preparation that you highlighted which is important for the integration.
- - - - Co-owning and also contributing resources
  - - - Reduce each of their asset commitments, and Maintaining some flexibility to invest in other opportunities.
      - Learning from its partner, and thus upgrading its own resources.
        
        Complaint from many companies have with partners in developing countries.
      - Accessing capabilities or markets more quickly, and surely.
      - Do not want to shoulder all the costs and all the risks of new business opportunities.
        
        That means, the rewards would need to be shared.
      - Round building a common technology standard.
        
        For example：Microsoft and AT&T
    - - Giving partners and competitors at the same times
        
        Taking advantage of it's capabilities, technologies, or markets.
        
        One be exposed, the other too.
      - Problems of coordination.
        
        Why?
        
        Need to make joint decision.
      - Common problems of any market-based governance.
        
        Adverse selection
        
        Moral hazard
        
        Partners performance can not be monitored.
        
        Hold up
    - - Good partner may have good marketing capabilities. Good partners are also able and willing to contribute valuable resources to the alliance, and to see that everyone gets a fair share of the value that's being created.
  - - - Legal contractual terms.
        
        Expect both sides to meet the specific terms
      - Self-enforcing contract
        
        Ensuring that the other side will behave in the expected way.
        
        Example
        
        As I am sale manager.
        
        Taking a significant deposit from each dealer for the privilege of working with us.
        
        Big deposit on the line, the dealer would do well by us.
        
        1 more item...
        
        The dealer was also holding stock of our products
        
        1 more item...
    - - Walling off key technology.
      - Contractual safeguards or credible commitments.
      - System of mutual agreements and governance in place, to navigate these waters.
    - - Building and reinforce trust
      - Learning from your partner
      - Alliance should be flexible and adaptable
      - You have to exit if alliance can not adapt to your need.
- - - - M&A
      - alliance
    - - example
        
        Google
        
        the acquisition of Android
        
        Staff reorganization
        
        Andy Rubin, the founder of Android, went on to head Google's robotics business.
        
        alliances
        
        commercialize Android
        
        manufacture its own version of an Android phone
        
        1 more item...
    - - forming an alliance
      - making say a small equity investment
        
        a company may obtain for itself the option, but not necessarily the commitment
      - example
        
        pharma companies
        
        a small investment
        
        getting a peek into new technologies
        
        M&A or buying up of biotech companies
  - - - divestitures
        
        the opposite phenomena of M&As
      - strategic alliances
        
        a hybrid middle option
      - mergers and acquisitions
        
        destroy value
        
        value-creating
- - - - For example, one company have cost of new product development, so that if the acquisition is cheaper, then doing it yourself, that lowers your cost.
      - Increase speed to market, that can bring in revenue sooner, that increases revenues
      - Lower risk, straightforward, lower risk compared to developing the new products yourself
  - - - The other thing that often happens and empirically, is a lot of the people from the acquired company leave the organization
    - - For example, once you acquire the company, it may put the acquiring firm in a higher debt ratio, which then makes the firm unable to do strategies that they would like to do
    - - So the cost may actually go in the other direction and go up
    - - Too much attention on M&As cause to neglect daily operation and routine, eventually decreasing management efficiency
  - - - Whether this potential synergy can be at least partly captured ?
      - it's really important to have a strong, credible post-merger plan for realizing the synergies.
      - Is does the M&A have the potential for creating synergies ?
    - - whether the companies have really thought carefully about it and put the managers who will be in charge of delivering the synergies on the front lines of evaluating the M&A
- - - - help the acquirer develop new capabilities,
        
        the acquirer have to carefully evaluate the target.
    - - apply the acquirer's capabilities to the target's business and create more value
    - - shareholders lost 9.1% of value after two years of M&A
        
        the challenges of post-merger integration
        
        to find where the value is going to come from.
        
        have to put 80% of the energy on that things
        
        80% of the value is going to come from a handful of things.
    - - how to make money
        
        2.increase their value by improving it
        
        have a thesis about how the target firm's value can be improved
        
        have a vision of where there's value creation and where it's possible.
        
        sell it
        
        through an IPO or by sale to another company.
        
        1.buy target companies
        
        identify targets that might be undervalued by the market
      - key point
        
        evaluating the target
        
        ensuring the synergies are there
        
        planning for post-merger integration
        
        faithfully executing the integration plans.
- - - - management team
        
        We're focused is on things like market size, market growth, competitive positioning, and different growth opportunities.
      - private equity fund
      - investment bank
    - - where the capital is coming from
        
        insurance companies
        
        pension funds