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AcquisitionWorks, Inc. Newsletter Post Merger Integration
June 2004

For the year to date, the number of US acquisitions is up 11% in the first 6 months to a total of 3,793 transactions. But transaction value is up almost 160%!! The average price of a deal is $103M this year versus $44 million in 2003. Some of this number is influenced by the mega deals this year but even when eliminating the mega deals, the average price is still a significant increase from last year. Valuations are up and competition is back. (See Quick Link: AP OnLine article, Oracle Weighed 9 Bids)

Cross border mergers have not seen the same rise in valuations as of yet, with the average transaction value rising from $60M to only $74M (4,115 transactions). For more detail on statistics visit Mergerstat's web site (See Quick Link)

in this issue
  • Notes from the Post Merger Integration Conference
  • The Merger Endgame
  • ThirdWave Integration
  • Best Practices: Sun Microsystems

    The Merger Endgame

    An interesting read in spite of the zealous attitude of the authors is Winning The Merger Endgame (See Quick Link), in which the authors argue convincingly that consolidation is inevitable as an industry matures. Given this premise they argue that acquisition skills need to be a part of every company's competency. Yet they believe, most companies lack these critical success skills.


    ThirdWave Integration
    When an acquisition is first announced the acquired employees are in a state of Shock - the first wave. They live in a world of fear and insecurity until the close. In this stage the objective is value preservation....

    To the degree that integration is required between the major business processes the second stage is the integration of infrastructure, systems, processes, and policies. This is the stage when redundancies are reduced and cost reductions are ensured. This stage is about value capture....

    ThirdWave Integration is about value creation. It's it about aligning people to the strategic intent. To focus their energies. And to capture their hearts and minds in the process. ....

    Best Practices: Sun Microsystems
    Sun Microsystems integrates an acquired sales force slowly over time. Since most of its acquisitions are focused on technology and the companies are quite small with little or no revenues, they maintain an individual sales force reporting in to one executive for the products of the acquired company. The positive results they have seen from this practice include better early sales for the acquired product through the focused sales force, a time period for the Sun sales force to get familiar with the new products, and a higher retention rate of the acquired sales personnel.

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    Dennis Fitzgerald Steve Abbey Jonathan Lane Steve Mamarchev Dave Remillard  

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    Notes from the Post Merger Integration Conference


    The Conference Board recently sponsored a 2 day seminar on Post Merger Integration. Best practices were shared from HP, IBM, Sun Microsystems, John Deere, J&J, JP Morgan, McKinsey and many others. While most presenters acknowledged that the failure rate of acquisitions is still high, Diane Sias of McKinsey, suggested that the larger companies who are serial acquirers have a higher success rate because they are able to develop specialized internal skills and standard processes for integration. Further, Pat Caveney of HP, emphasized the advantage of having full time personnel dedicated to the integration process and separated from the day-to-day operational personnel. David Johnson from IBM says that they have placed a strong emphasis on involving the integration team early in the due diligence process.

    Another interesting approach to acquisitions was taken by John Deere, who has established an acquisition capability within their Dealer Development Services Group.  They have concluded that stronger dealers lead to better sales and stronger dealers are characterized by size and financial strength.  So they have offered their skills to help facilitate the consolidation of their dealers (a consolidation that was inevitable) in an effective way.

    Stephanie Snyder of Pritchett spoke eloquently about the effects of culture on integration.  She encouraged the audience to work toward understanding and respecting the differences and to limit the desire to change cultures unless absolutely necessary to support the strategic objectives of the business.

    JP Morgan and Sun Microsystems surprisingly shared many of the same best practices in merging very different kinds of sales forces.  Both recommended that compensation plans stay in place through the first year even when very different.  The difficult decisions regarding job loss and relocation were important to execute early in the integration process.  Organizationally they did differ.  See our article on Best Practices: Sun Microsystems for more information on Sun’s approach.

    Jack Prouty of Step-Change Management reinforced our ThirdWave Integration™ approach by classifying the integration process into three stages, each with a different objective – value retention, value realization, and value creation.

    I’m sure there were many different “take-aways” for other attendees but these were a few of the comments and practices that I thought were significant.

    Quick Links...

    Oracle Weighed 9 Bids

    MergerStat free reports

    Winning the Merger End Game

    New White Papers on AW site


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