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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,
• 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.
• 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.
- Spring '10