February 2005   

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AcquisitionWorks Newsletter

February 2005   

Mergerstat reported a 15% increase in the number of US deals (to 10,286) and a 56% increase in deal value from 2003 to 2004. The number of European deals increased only 8% (to 11,273) and 32% in value. 2005 is expected to see a further increase in the growth rate both in number of transactions and in value.


in this issue
  • AMP Marketing Merges Leadership Teams

  • When is an Acquisition Done?

  • the Good

  • the Bad

  • the Ugly

  • AcquisitionWorks News


    When is an Acquisition Done?

    Of course it depends! On size, geography, cultural disparity, similarities of strategies, etc. A recent survey by Accenture showed the following responses when asked the question,

    "How long did the integration process take from the closure of the deal until the end of the major integration activities?" Response Percent

    • 1 year 29.9%
    • 2 years 22.4%
    • 3 years 5.6%
    • >3 yrs 11.2%
    • no acquisition 4.7%

    Almost 40% said it took 2 or more years to complete. Too often companies underestimate the time that it takes to accomplish full integration. And in some cases, such as HP-Compaq declaring an early victory to the press may hinder the actual time and effort to complete the integration.


    the Good

    EMC has deliberately moved slowly in integrating its significant acquisitions on the software side of storage. Each acquired group has been allowed to continue its operations with little integration to date and during this time EMC has increased it's market share within the storage area and recently announced a 4th quarter revenue increase of 27% to $2.63 billion. Looking into the detail, software sales rose 43% and hardware systems sales were up 15%. Over the past 6 months EMC has clearly established its role as market leader in storage beating out rivals HP and IBM in market share.


    the Bad

    Fortune magazine, which in 1988 made Carly Fiorina an executive star with a feature article, reversed its opinion in the January 25th, 2005 issue ("Why Carly's Big Bet is Failing"). Commenting on the profit shortfall in Q3, Fortune blames acquisition related troubles, saying: "Three problems, all in the enterprise business, underlay this profit jolt. First, European results suffered because HP mismanaged some of its dealings with the resellers and distributors that the company works with. Second, in the U.S., project managers failed to get a new order-processing system online as scheduled, which reduced shipments of enterprise computers. Third, HP's storage business didn't meet its profit goals. Storage, intrinsically a business of lovable margins, has in fact given HP major headaches for some time."

    With any mega acquisition, there are likely to be areas that don't go according to plan. One has to wonder, however, if in declaring victory after the significant cost savings were achieved, whether, Carly's team lost sight of the growth synergies that may have been possible. Perhaps there is still time to turn this around. Good luck Carly!


    the Ugly

    Despite the movie image of Gordon Gekko in Wall Street, most individuals involved in M&A have to feel saddened by the destruction of PeopleSoft by Oracle. This past month, Oracle announced that it would jettison 5,000 jobs primarily from the ranks of PeopleSoft, who went into the merger with 11,225 employees. Undoubtedly, Oracle is expecting additional voluntary reductions from the company that they seized in a hostile takeover. In the past month more than 3,700 PeopleSoft employees have joined and online business networking service LinkedIn used frequently by job hunters. Retaining PeopleSoft's 12,750 customers seems to be Oracle's only goal and I think it is naive to think that PeopleSoft's competitors won't take advantage of the low morale and its effect on customer relations.


    AcquisitionWorks News
    Professor Anthony Buono, an Affiliate Partner, recently published a chapter on "Consulting to Integrate Mergers and Acquisitions" in The Contemporary Consultant: Insights from World Experts (Thompson/South-Western, 2005)

    AcquisitionWorks and Cambio International have entered into an agreement to provide cross border cultural due diligence. Cambio's Cynthia Livingston has has authored a number of articles on The Transcultural Organization.

    AMP Marketing Merges Leadership Teams
    AMP, an Alloy marketing and promotions Company has grown from 6 employees to 150 in 6 years, through acquisition as well as internal growth. Their specific focus is on providing lifestyle marketing events for generation Y. Recently, Bryan Cadogan, COO and Sarah Mann, VP, Operations, for AMP recognized the need to integrate a diverse leadership team that had combined people from multiple organizations. To accomplish this they turned to Jon Lane of AcquisitionWorks.

    "Acquisition Works was integral in helping us pull diverse areas of the company together and form a more cohesive management group. Through the design and delivery of customized leadership behaviors and company-wide management training, we are better positioned to meet our business objectives in the coming year." Sarah Mann, Vice President, Operations

    With a clear focus on a specific market niche, Alloy and its subsidiaries is one of the fastest growing marketing firms in the country. Taking the time to create a shared mind set within its geographically disperse leadership team reflects their emphasis on focused execution of their strategy. We see more growth and good business in their future.


    Quick Links...


    EMC Year End Results

    Fortune "Why Carly's Big Bet is Failing

    Marketwatch "Oracle is firing 5,000..."




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