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How do different types of mergers and acquisitions facilitate strategic…
How do different types of mergers and acquisitions facilitate strategic agility?
Strategic agility
capability to notice opportunity rapid yet precise move with extraordinary accelerating power
Manufacturing: ability to turn on a dime, right product at right price, place by leveraging value-chain-wide resources for economies of knowledge
Strategic management: nimble and flexible, open to new evidence, always ready to reassess past choices and change direction in light of new developments, willing and able to turn on a dime
Having agility without strategy is no better than having strategy without agility
operational is strategic (planning and implementation as iterative)
readily implemented business initiatives
change course of action without significant momentum loss, adaptable under unexpected difficulties that might weaken or eliminate less-agile peers
capacity of making knowledgeable, nimble, rapid strategic moves with high level of precision
Nimble decision making (deal making)
quick movement or action
solid grasp of position, capabilities from accumulated experience
tested decision heuristics, minimize decision making organisation resistance
Rapid resource deployment (post-merger integration (PMI))
fast implementation to capitalise on opportunities
seize acquisition value
Knowledgeable sensemaking (screening phase)
first to notice, address emergent trends or needs
superior sensing, processing relevant information
deep ecosystem involvement
preferential relationships with information providers
Main stages of acquisition: screening, deal making, post-merger integration (PMI)
what worked, did not work
done differently
generative process for strategic agility
learning into decision rules (simplicity from extensive experience, subsequent abstraction applying to clearly delineated circumstances)
Classes of acquisitions
Bolt-on (product) (technology-grafting acquisitions)
Level: Business unit (new product)
product or market extension that fits neatly in existing business or market
Required change: incremental
lower risk, reward than platform
easier than platform, more frequent
Target size, age: Medium
tradeoff between R&D, flexibility for downstream capabilities integration
Time horizon: short, long
narrow time window (after product development completion but preferably before significant commitment in go-to-market strategy
significant growth in short-time period
PMI approach
fill gaps in early stage of value chain (mostly product-related with additional product or techology)
rely on later stages of value chain (existing access to customers for synergies) - manufacturing, sales
preservation is necessary but insufficient for speed, ability to scale up sales
Potential synergies: Medium to high (target choice, appropriate integration)
need to integrate acquired technology
long time to market
Bolt-on (technology and talent)
Level: Business unit (new component)
Target size, age: young, small
target fully absorbed
acquirer responsible for remaining product development with heavy dependence on acquirer's staff
Potential synergies: Low to medium (product not readily available, requires joint development
cost reduction, cross selling, complementary products, technologies, markets
Required change: radical (technology)
PMI approach: absorption
preservation is insufficient (new acquired technologies, talents as new domain or product / market requirement subsets
Platform
Target size, age: Large, established, needs to provide center of gravity for new domain activity
Required change: Radical (eg. new product domain, customers)
more difficult, less frequent
higher risk, reward
Synergy creation (low to medium)
practical support for vision implementation
learn about target's industry, operations, process to better manage future platform acquisitions
nurture target with ambitious vision induction
General management skills, support eg. finance, human resources
Low to medium (shallow integration), significant synergy only later on
PMI approach: preservation
protect boundary of acquired company, champion acquisition internally for legitimacy, future development commitment
enable target to manage operations independently, at least for a certain time period (lack of marketplace understanding)
Level: corporate (new line of business)
new markets, products (related to target's fully developed value chains (upstream products, downstream sales and marketing)
new business space or activity
Entire value chain: new activities (R&D, product design), capabilities (manufacturing, sales, support) with little or no overlap
Long time horizon
Cornerstones of strategic agility
From sensemaking to making decisions
foresight
search rules, practices
thorough grasp of acquirer's capabilities, repeated applications
Bolt-on acquisition criteria
Strategic fit, organisational ability, financial considerations
business units enhance deal-making capability, offers centralized corporate M&A, business development functions opportunities for process learning
emerge naturally in firm econsystem eg. employees, customers, business partners
Platform acquisition criteria
Market before company (market size, growth rate, fragmentation, competition, relevance to core competencies (desired synergies))
Business attractiveness, growth rate, distance between new, existing businesses, cultural compatibility, potential brand dilution
From decision making to resource redeployment
Key integration approaches (autonomy need, strategic interdependence)
Absorption
Symbosis
Preservation
learning from bolit-on acquisitions
systematise capability to manage acquisitions as organic growth strategy ("grafting")
complement internal R&D
quick response to briefer product life cycles primarily in growing markets, paramount time-to-market importance
narrow scope, limited to set of closely related product domains served by acquirers' downstream resources
Right chemistry
same vision about industry future
company role in industry
technology visions
company visions
long-term wins (shareholders, employees, customers, business partners
shareholders' quick wins (1 year)
adjacent product extensions can enable incumbent takeover emerging product catergories from early innovators with strategic agility
Reflecting, codifying, articulating limitations of strategic agility
reflection process
crystalize rules, scenarios in which acquisitions are appropriate to be delineated
more attentive to work processes
codification process: knowledge combination or integration capabilities
due diligence checklists
integration manuals
acquisition criteria might change for entering new market (implications on implementation speed, failure risk)
augment capacities underpinning strategic agility in generative, reinforcing manner
Other corporate development tools that foster agility
minority stakes for one target
business process differentiation according to time horizons
target settings
review processes
knowledge combination capabilities, ability to absorb, integrate exchanged information
Real benefits: transform own organisation capabilities, competitive strategy
openness to acquired capabilities
ability to leverage in own organisations through useful information flow within, across different organisation entities
agile system for rapid product / service introduction
capacity to combine exchanged, transferred knowledge
less complicated to integrate bolt-on, technology-and-talent than platform acquisitions
breadth, depth of derived knowledge
reponse to PMI demands
improvise, better utilise resources
different mechanisms to promote strategic agility for different M&A
Task force for technology-and-talent acquisitions (more intimate connection)
more systematic design for platform acquisitions (more complex)
experience is not automatic determinant of success or agility