Key highlights from this interesting read on Mergers and Acquisitions written by Professor Alexander Roberts from the Edinburgh Business school:
The strategic focus wheel:
Strategic Planning - The options available to the company. The company should be clear on its strategic positioning and the rationale.
Making strategies work - Connecting overall strategy to individual tactics in everyday functioning.
Project Management of change - Providing the managers with the right sets to tools to ensure the change implementation is smooth and as per the plan to achieve the aims.
Strategic Risk Management
Employment law can be major hurdle in various Mergers and Acquisitions. Especially in the EU, when the acquiring or merging company is not from the EU there could be subject to strict employment laws. Germany has a lot stricter employment laws as compared to UK which could expose the company to various employee commissions or groups who could resist such corporate moves.
In hostile takeovers the acquirers buys large portions of the target's share, however this can cause the market price to rise, to minimize this rise in price the acquirer would try to buy as much as possible in a small span of time. This is usually as soon as markets open, know as "dawn raid". Once Tactic to avoid a hostile takeover is for the target company to merge with another firm or get acquired by another firm of its preference. This 3rd company is called the "white knight".
A cash deals offers the target company's shareholders an immediate profit, while if the deal has been structured in a way in which the acquiring firms shares are offered the profit will be unrealized and in the longer term. During a booming market the acquiring company may find it easier to acquire target companies as their stocks can be used to be buy them as compared to a cash offer, meanwhile a bear market can allow these firms to take advantage of the lower valuations.
Numerous researchers have found that diversification and non business related acquisitions do not reduce the risk profile of the company as a part of their risk management strategy.
Merger Lifecycle:
Inception
Feasibility
Pre-Merger Negotiation
Contract Formulation
The deal
Implementation
Commissioning (longer term phase in which the organization gets used to the new bigger organization and its structure)
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