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When merging two companies, after the deal is signed the CEO faces few challenges more risky than integrating the businesses to capture maximum value. Speed is essential…
When merging two companies, after the deal is signed the CEO faces few challenges more risky than integrating the businesses to capture maximum value. Speed is essential to successful merger integration. But it is not everything. Only 25 to 50 percent of deals create shareholder value. This is often because those managing the integration process do not know how to make trade‐offs between speed and careful planning. To keep the value of merger from evaporating, leaders need to manage the integration process actively and steer a course that leads the new organization to its stated strategic goals as swiftly as possible. Start with the strategic goals – there are two general types of mergers: (1) efficiency deals that “play by the rules” (achieve performance improvement in a merger that will have high functional overlap and high predictability of value); and (2) transformation deals that "transform the rules” (low overlap and low predictable value). Top management needs to articulate the purpose of a deal and its strategic rationale long before the merger is consummated. Four rationales are offered and discussed, the first two rationales apply more to type 1 deals and the second two more to type 2 deals. (1) Merging to capture the benefits of scale. In this type of merger, the longer you take, the more risk you incur. Success depends on very early identifying the key people to lead and removing those who will block the process. (2) Merging to expand into adjacent markets, customers, and/or product segments. The big prize comes from revenue growth. Teams from both sides must work together to develop a new marketing plan for the combined company. (3) Redefining the business for a new direction. As a framework for judgments, consider using these reference goals: focus on leading‐edge customers, make decisions quickly, and look for ways to lead change in the marketplace. (4) Re‐inventing an industry. Two initiatives in parallel are required: typical short‐term objectives (cost reduction, consolidation, divestment, etc.) and long‐term direction objectives for the new business. Details from the AOL Time Warner and the Citigroup merger cases are cited as examples. Several examples taken from Cisco System’s many mergers are cited to illustrate process points and insights.
The legal framework for extending innovation beyond the corporate boundary is the Strategic Alliance (or partnership) Agreement. Before entering into any type of alliance…
The legal framework for extending innovation beyond the corporate boundary is the Strategic Alliance (or partnership) Agreement. Before entering into any type of alliance involving a joint development arrangement, every company whose core assets are comprised of intellectual property should conduct an internal Intellectual Property Audit. Make certain what you own (or control through licenses) it may be more or less than you think. The second phase of the Intellectual Property Audit is to make sure your Intellectual Property Assets are protected. Begin drafting the Alliance Agreement by articulating the goals of the alliance as specifically as possible. Define the product to be developed or area to be explored in detail. The Alliance Agreement should define the what technology is proprietary to each party. Determine in advance who collects the money, how is the money split, and who does the accounting. Each party should be individually responsible for the cost of defending any claims of infringement. Options can be tied to the development and testing milestones that allow you to get out of the deal entirely or reduce it from an exclusive to a non‐exclusive arrangement.
The Strategic Leadership Forum's Conference in Washington, D.C. (April 27–30, 1997) was a showcase of advanced leadership insights. More than 30 top management experts told of their most recent experiences and their latest theories about meeting the management challenges of the next decade. There were many real‐life examples of how the old, “control” style of leadership, which grew out of the Industrial Era, is being replaced by the newer leadership styles that match the realities of the Knowledge Era.
Increasingly, companies see mergers and acquisitions as a strategic tool and expect to benefit from synergies – improvements in competitiveness, customer value, or product…
Increasingly, companies see mergers and acquisitions as a strategic tool and expect to benefit from synergies – improvements in competitiveness, customer value, or product innovation – that can be achieved by integrating two entities. This added complexity means executives have a more difficult task trying to identify, value, and negotiate closure on attractive deals. Also, as investment banks pitch deals more aggressively, executives fear being trumped by competitors and thus feel more pressured to act. To improve the chances of success in merger and acquisition efforts, the authors offer suggestions for screening potential candidates strategically, setting the “right” price, and negotiating preemptively to outrun competitors.
Alert global firms that China plans to become an incubator for top companies rather than simply a low‐cost manufacturing base.
Outline the strategies for MNCs to penetrate China's expanding market and defend their global position.
MNCs have figured out the six keys to success: differentiate your products, bring production costs down in line with local cost structures, design offerings for local tastes, create smart partnerships, develop close government relationships and hire strong, “China‐fluent” management, both local and expatriate.
Actions for MNCs to take: Develop Chinese toehold operations into self‐standing and profitable units. Dramatically reset the standards for cost competitiveness. Protect the value segments in your core markets. Treat human resource management as a strategic global function. Accelerate and globalize R&D. Ensure that each business is delivering what it promises to core customers.
Assesses the strategic strengths and weakness of MNCs and potential Chinese rivals.