4-6 - 4-6-2011 David Carroll: Post Merger...

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Unformatted text preview: 4-6-2011 David Carroll: Post Merger Integration—Notes on PMI for Reading • In M&A, must consider process AND human element: value of human interaction (must have a relationship unless doing a hostile takeover) • Why do M&A? o Scarcity (e.g. big run-up in commodity prices like copper or steel) o New products, new technology o Accounting can be favorable (purchase accounting can let you mark assets at market value o Strategic acquisition—same industry to take advantage of expense efficiencies o Financial acquisition—financially engineer a better return (e.g. KKR PE firm levers up companies because that increase returns o Product extension (pharmaceuticals) o Geographic extension (Wells Fargo and Wachovia) • Due diligence 1. validate economic model and have confidence in your assumptions o After access to information, check underlying economic assumptions and POV on industry o Decompose the company: pair off with counterparts to find out how they work 2. For successful DD, you need methodology, enough people to match with counterparts, experience, 3. • objective people to look for black holes Look to see how compatible an successful companies will be in integration In transformational M&A, CEOs must make 5 decisions 1. 1. economics (price) 2. 3. 4. 5. • Who will run it? Where will it be headquartered? What will you call it? What about my people? After merger, must consider post-merger integration (PMI). Post-announcement: o Do a cultural assessment: ask what kind of company do you want it to be? o Identify key talent and see if you can count on them staying o Do due diligence again o Predict menu of companies and get rid of overlap o IT compatibility and consolidation o Communication between people o In a low growth environment, take your time and consider customer feelings and your reputation ...
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This note was uploaded on 03/05/2012 for the course BUSI 599 taught by Professor Ravenscraft during the Spring '10 term at UNC.

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