A while back I researched how m&a’s are used or architected even, to bring success to a partnership or benefit a company through division or expansion and still be able to effect the market place.
Using industry examples I was able to review how a few m&a’s were used to support strategy for growth and recovery across many industry sectors. There are many business justifications for mergers and acquisitions. A technology company may want to acquire medium level skilled Engineers so may purchase a generic IT Company or stakeholders may wish to create more wealth based off capital, may be looking for a customer user base to acquire or economic analysis may also show that the market entered by the company is no longer attractive and as such needs to change their growth strategy or contemplate M&A. I was able to understand the impact m&a’s have on management, strategic planning and its impact on operation policies and methods of resolution for any strategic problems using industry methods.
International assets can also be realigned by acquiring different geographic companies to create a global one being stronger to better embrace the emerging markets. To suggest a phrase of Transactional Architecting for mature markets and Transformational Architecting for potential markets comes to mind. Beyond global realignment as growth strategy, growth can be achieved by acquiring smaller successful companies in the same sector. Sometimes cross border M&A activity can be subject to disruption, cross cultural dislocations, higher purchase prices and produce unexpected entries by buyers that can effect changes in strategic assumptions about a market.
This was seen by the Security Incident Eventing Monitoring (SIEM) market where SIEM Silicon valley companies were acquired by larger companies in 2012. IBM acquired Q1 Labs, Nitrosecurity by Mcafee and Arcsight by HP in the space of 12 months. This is because the niche firms in the attractive economy had saturated natural growth through techniques like vendor lock-in organically and further growth was with customers who had already strong loyalties with larger companies. So all the small Silicon Valley companies niche players understood that their new market p lace was within the portfolio of larger companies as a value add service.
This approach stabilised entry barriers and protected intellectual capital and technology of an industry and likely to hold corporate presence in the market place that other mature markets may not allow. This distinction would be the reason for limitations to engage growth such as emerging markets. Should Europe have a homogeneous market framework only, as the domestic European market involves different European countries each having a individual local economy whose flexible dynamics mirrors the dynamics of emerging economies allowing territorial growth opportunities, though only for benefit got local portions of the actual global business.
In contrast, the technology industry, credit card processing business where initial transactions were processed through third party, though, as large amounts of revenue was generated the cost of paying for a third party service was not justified, their profits allowed acquisition acquire them to save money. This example of Vertical merger strengthens the view that Vertical mergers provide efficiency enhancements and consumer benefits because it internalised a vertical pricing externality, where by downstream monopolisation and competition would only be motivated by efficiency considerations as there would be a single monopoly profit upstream only creating possible anti trust issues. Though a trend might be seen where most companies are now using vertical mergers as a tool to create better customer satisfaction rather than horizontal mergers that only offer streamlining of processes and downstream customers.
Value chain mechanism can also be a tool for growth strategies, a growth strategy for beer companies was to increase production space closer to the mass market which was the normal strategic approach however. Another strategy was of packaging to increase volume produced. A new approach is to maximise selling of shelf space first by increasing shelf sales through using an exclusive distributor as they will actively brand promote within the channel making it easier to distribute through a major distributor channel. Not having a growth strategy on a bottle line allows producers to do a lot more product in the same space this complementing the distribution channels supply and demand model.
The distributor channel will allow them to organically grow the beer industry and then when critical mass is achieved they can diverse into the bottle line. This would allow them to use distributor channels for corporate events and also remain true to their local markets that originally gave them success. In this case embracing the distribution value chain as a value add mechanisms like complementary activities of Amit and Zott specified by Amit and Zott Model as it helps promote growth where suggesting having global account management network through out the value chain to give better value thus fuelling strategic growth.
IT was observed strong value brands had a strategy that was prospecting, defending and incorporated situational analysis that allowed them to operationally plan policies of growth keeping them in line with strategic goals. Though some profit making brands demonstrated cost leadership where their operational plan which worked at a geographically level rather than a global corporate one driving more total sales as they were able to price sensitive locally to the customer . Some value brands differentiate from their own high quality premium brand enabling implementation of their functional strategies of operation and marketing confidently without being challenged by competitor entry.
From the industry examples of m&a reviewed, the challenges of M&A activity can be summarised as management commitment, innovating thinking, long terms planning, flexibility and correct forecasting. In such as case, the solutions discussed are to provide a sense of direction, integrating work forces to reduce uncertainty which enhances competitive strength. The challenges of m&a can be further overcome by the use of discussed models such as Planning pyramids, scorecarding, benchmarking and management involvement to ensure that the high level aims are being actioned across organisational structure though other models such as hierarchy of aims.
Characteristics of architecting a strategy is to think about the consumer and how to keep them loyal, specifically, for example, for large technology companies, they purchase smaller unique technology companies whose software is adding value to consumers and then incorporates that service into the global brand.
Strategy and commitment to consumers is very and completely different reason for m&a to those who are seeking opportunities in mainstream technologies such as cloud computing, mobile devices and social media. The subtle difference is about product diversification and development and rather than reflecting market penetration for profit. With different factors allowing technology innovations to create new fresh companies or augment current core offerings, Mergers and Acquisitions, is an interesting business concept that can fuel technology innovation.
Using industry examples I was able to review how a few m&a’s were used to support strategy for growth and recovery across many industry sectors. There are many business justifications for mergers and acquisitions. A technology company may want to acquire medium level skilled Engineers so may purchase a generic IT Company or stakeholders may wish to create more wealth based off capital, may be looking for a customer user base to acquire or economic analysis may also show that the market entered by the company is no longer attractive and as such needs to change their growth strategy or contemplate M&A. I was able to understand the impact m&a’s have on management, strategic planning and its impact on operation policies and methods of resolution for any strategic problems using industry methods.
International assets can also be realigned by acquiring different geographic companies to create a global one being stronger to better embrace the emerging markets. To suggest a phrase of Transactional Architecting for mature markets and Transformational Architecting for potential markets comes to mind. Beyond global realignment as growth strategy, growth can be achieved by acquiring smaller successful companies in the same sector. Sometimes cross border M&A activity can be subject to disruption, cross cultural dislocations, higher purchase prices and produce unexpected entries by buyers that can effect changes in strategic assumptions about a market.
This was seen by the Security Incident Eventing Monitoring (SIEM) market where SIEM Silicon valley companies were acquired by larger companies in 2012. IBM acquired Q1 Labs, Nitrosecurity by Mcafee and Arcsight by HP in the space of 12 months. This is because the niche firms in the attractive economy had saturated natural growth through techniques like vendor lock-in organically and further growth was with customers who had already strong loyalties with larger companies. So all the small Silicon Valley companies niche players understood that their new market p lace was within the portfolio of larger companies as a value add service.
This approach stabilised entry barriers and protected intellectual capital and technology of an industry and likely to hold corporate presence in the market place that other mature markets may not allow. This distinction would be the reason for limitations to engage growth such as emerging markets. Should Europe have a homogeneous market framework only, as the domestic European market involves different European countries each having a individual local economy whose flexible dynamics mirrors the dynamics of emerging economies allowing territorial growth opportunities, though only for benefit got local portions of the actual global business.
In contrast, the technology industry, credit card processing business where initial transactions were processed through third party, though, as large amounts of revenue was generated the cost of paying for a third party service was not justified, their profits allowed acquisition acquire them to save money. This example of Vertical merger strengthens the view that Vertical mergers provide efficiency enhancements and consumer benefits because it internalised a vertical pricing externality, where by downstream monopolisation and competition would only be motivated by efficiency considerations as there would be a single monopoly profit upstream only creating possible anti trust issues. Though a trend might be seen where most companies are now using vertical mergers as a tool to create better customer satisfaction rather than horizontal mergers that only offer streamlining of processes and downstream customers.
Value chain mechanism can also be a tool for growth strategies, a growth strategy for beer companies was to increase production space closer to the mass market which was the normal strategic approach however. Another strategy was of packaging to increase volume produced. A new approach is to maximise selling of shelf space first by increasing shelf sales through using an exclusive distributor as they will actively brand promote within the channel making it easier to distribute through a major distributor channel. Not having a growth strategy on a bottle line allows producers to do a lot more product in the same space this complementing the distribution channels supply and demand model.
The distributor channel will allow them to organically grow the beer industry and then when critical mass is achieved they can diverse into the bottle line. This would allow them to use distributor channels for corporate events and also remain true to their local markets that originally gave them success. In this case embracing the distribution value chain as a value add mechanisms like complementary activities of Amit and Zott specified by Amit and Zott Model as it helps promote growth where suggesting having global account management network through out the value chain to give better value thus fuelling strategic growth.
IT was observed strong value brands had a strategy that was prospecting, defending and incorporated situational analysis that allowed them to operationally plan policies of growth keeping them in line with strategic goals. Though some profit making brands demonstrated cost leadership where their operational plan which worked at a geographically level rather than a global corporate one driving more total sales as they were able to price sensitive locally to the customer . Some value brands differentiate from their own high quality premium brand enabling implementation of their functional strategies of operation and marketing confidently without being challenged by competitor entry.
From the industry examples of m&a reviewed, the challenges of M&A activity can be summarised as management commitment, innovating thinking, long terms planning, flexibility and correct forecasting. In such as case, the solutions discussed are to provide a sense of direction, integrating work forces to reduce uncertainty which enhances competitive strength. The challenges of m&a can be further overcome by the use of discussed models such as Planning pyramids, scorecarding, benchmarking and management involvement to ensure that the high level aims are being actioned across organisational structure though other models such as hierarchy of aims.
Characteristics of architecting a strategy is to think about the consumer and how to keep them loyal, specifically, for example, for large technology companies, they purchase smaller unique technology companies whose software is adding value to consumers and then incorporates that service into the global brand.
Strategy and commitment to consumers is very and completely different reason for m&a to those who are seeking opportunities in mainstream technologies such as cloud computing, mobile devices and social media. The subtle difference is about product diversification and development and rather than reflecting market penetration for profit. With different factors allowing technology innovations to create new fresh companies or augment current core offerings, Mergers and Acquisitions, is an interesting business concept that can fuel technology innovation.