Mergers and Acquisitions:Be with the winners, not losers

“Mergers and Acquisitions”
Harvard Business Review
Harvard Business School Press, 2001


Hyphenated names have been punctuating the corporate landscape -- Equitable-PCI, Bristol Myers-Squibb, PLDT-Smart, to name a few – rivalling the prominence of high-powered women executives resisting pressures to drop their maiden names in favor of the husbands’ not so famous appellations.

Reason: The marriage of two corporations – by shotgun or by consent – has not spared even our corporate world. Mergers and acquisitions (you must recognize them when they are abbreviated as “M & A” to be “in”) have actually been going on in key financial and business centers around the world.

Sometimes the two names survive in a “merger of equals.” Other times, one name survives and the other is consigned to oblivion, instantly telling us which management team members march in as conquering heroes and who settle for a “second class citizenship” in what was once their domain.

We read the outcomes of these highly dramatic mergers or acquisitions, — and about boards reorganizing to reflect the entry of the “new centurions.” In more mundane terms, we hear happy stories of friends being catapulted to CEO or COO positions, and hear sad tales of those who lose their plush offices, executive parking slots, executive elevator privileges or – worse, their shirts.

Locally, the high-profile mergers and acquisitions even had the Presidential finger dipped into them, transferring big sums of money to finance the corporate move – which is now the subject of a celebrated plunder case. You ask: Is it possible to have a merger from a purely business standpoint, bereft of politics?

That’s the problem. In the Philippine context, business and politics are hard to extricate one from the other. You, therefore, need – just this once – to detach yourself from the Philippine setting to learn the fundamentals and the finer points of this exciting game.

A book titled “Harvard Business Review on Mergers and Acquisitions” is an excellent piece of literature for you if you want to know any of the following: How to make mergers succeed, how to master the fine art of friendly acquisition, how to evaluate if you are paying too much for an acquisition, how to integrate two cultures in a merged company, how to save a merger that is about to collapse, and how to use the experts in merging, acquiring and integrating.

This is not a textbook on the M&A game, one that has acquired a mystique to business observers and spectators like many of us. This Harvard-published book has steered clear of the jargon that succeeds only in confounding, not enlightening, many of us. After all, we also have every right to know what is happening in boardrooms and golf courses.

Don’t miss the CEO roundtable discussion which features the “acquirers” and the “acquired” – particularly one whose company was acquired by Yahoo! for $3.7 billion; or an insurance firm which made two major acquisitions worth $2.2 billion; or a consulting firm which has made a $6.6 billlion takeover; and many more stories.

One chapter in the book offers some food for thought for acquirers: A “low premium purchase” does not necessarily result in a high return on investment. On the contrary, those who pay a high premium generate high returns, as shown by the book in 20 M&A deals.

Some say that the acquiring team should speak with “one voice.” Some featured CEOs and M&A experts disagree. Robert Aiello and Michael Watkins disagree: “Successful acquirers usually divide their deal team into two or three separate negotiating groups – managers, lawyers and investment bankers.”

The book has qualitative and quantitative analyses on any aspect of the M&A deal, and the you are actualy ushered into their strategic and tactical moves to the last detail. However, lest you come away wondering what the best strategy is, one chapter is wholly devoted to GE Capital. After assimilating more than 100 acquisitions for the past five years alone, GE capital has developed, in the process, a model on how to do it – and succeed.

GE Capital’s four consultants offer four valuable lessons: First, begin the integration process before the deal is signed; second, dedicate a full-time individual to manage the integration process; third, implement any necessary restructuring sooner rather than later; and fourth, integrate not only the business operations but also the corporate cultures.

This book is packed with the best strategies formulated to effect and sustain a successful acquisition. There are usually winners and losers in this game, but some smart acquirers have also achieved a “win-win” situation for the conqueror and the conquered. Whatever the case, make this subject personal: Don’t be caught in a situation where you are the loser. Begin reading this book.