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Informative Articles

A Guide To Performance Management
Nowadays, a great significance is being given to Performance Management, as companies incorporate them in their effective management strategies. However, a lot of people find this process a complicated one, mostly because of the many...
Have You Ever Thought of Joining or Forming a Consortium?
Are you an entrepreneur but don't like selling alone? A consortium is a combination of different industry-types of entrepreneurs working together to attract business as a group. Even though each member maintains their individuality and operates as...
Managers, Have You Been Shortchanged?
You have been if you’re a business, non-profit or association manager whose public relations budget is focused largely on nifty brochures, column mentions and broadcast plugs. Especially without a workable plan that helps you persuade your most...
Setting Goals and Implementing Change
One of the most important aspects of management is implementing change and setting goals. Managers must decide what their goals are and how they are going to achieve them. This is a basic part of strategic planning. Setting small goals is a small...
Should You Write Your Own Business Plan?
If you are just starting a company and looking for funding, or looking for additional funding for growth, you will need to develop a traditional business plan. Creating a business plan is a business hurdle that entrepreneurs seem to dread. ...
 
MERGER AND ACQUISITION - AN ENGINE FOR CORPORATE GROWTH

Two companies that are recognized as among the best at making successful acquisitions are General Electric and Cisco Systems. These companies have been star performers in growing shareholder value. The core principal that runs through almost every acquisition is integration. Over the past 10 years Cisco Systems has acquired 81 companies. Their stock price is up a remarkable 1300%. GE outperformed the S&P 500 index over the same period by 300%. There are several categories of strategic acquisition that can produce some outstanding results:

1.ACQUIRE CUSTOMERS – this is almost always a factor in strategic acquisitions. Some companies buy another that is in the same business in a different geography. They get to integrate market presence, brand awareness, and market momentum.

2.OPERATING LEVERAGE – the major focus in this type of acquisition is to improve profit margins through higher utilization rates for plant and equipment. A manufacturer of cardboard containers that is operating at 65% of capacity buys a smaller similar manufacturer. The acquired company’s plant is sold, all but two machines are sold, the G&A staff are let go and the new customers are served more cost effectively.

3.CAPITALIZE ON A COMPANY STRENGTH – this is why Cisco and GE have been so successful with their acquisitions. They are so strong in so many areas, that the acquired company gets the benefit of many of those strengths. A very powerful business accelerator is to acquire a company that has a complementary product that is used by your installed customer base. Management depth and skill, production efficiency/ capacity, large base of installed accounts, developed sales and distribution channels, and brand recognition are examples of strengths that can power post acquisition performance.

4.COVER A WEAKNESS – This requires a good deal of objectivity from the acquiring company in recognizing and chinks in the corporate armor. Let me help you with some suggestions – 1. Customer concentration; 2. Product concentration; 3. Weak product pipeline; 4. Lack of management depth or technical expertise and 5. Great technology and products – poor sales and marketing.

5.BUY A LOW COST SUPPLIER – this integration strategy is typically aimed at improving profit margins rather than growing revenues. If your product is comprised of several manufactured components, one way to improve corporate profitability is to acquire one of those suppliers. You achieve greater control of overall costs, availability of supply, and greater value-add to your end product

6.IMPROVING OR COMPLETING A PRODUCT LINE – this approach has several elements from other acquisition strategies. Successfully adding new products to a line improves profitability and revenue growth. Giving a sales force more “arrows in their quiver” is a powerful growth strategy. You take advantage of your existing sales and distribution channel (strength). You may be able to improve your competitive position by simplifying the buying process - providing your customers one stop shopping.




7.TECHNOLOGY – BUILD OR BUY? This is a quandary for most companies, but is especially acute for technology companies. Acquiring technology through acquisition can be an excellent growth strategy. The R&D costs are generally lower for these smaller, agile, more narrowly focused companies than their larger, higher overhead acquirers. Time to market, window of opportunity, first mover advantage can have a huge impact on the ultimate success of a product. First one to establish their product as the “standard” is the big winner

8.ACQUISITION TO PROVIDE SCALE AND ACCESS TO CAPITAL MARKETS – In this area, bigger is better. Larger companies are considered safer investments. Larger companies command larger valuation multiples. Some companies make acquisitions in order to get big enough to attract public capital in the form of an IPO or investments from Private Equity Groups.

9.PROTECT AND EXPAND MATURE PRODUCT LINES – This has been very effectively done in the pharmaceutical sector where a new technology is acquired to repurpose and re patent drugs.

10.PROTECT CUSTOMER BASE FROM COMPETITION – The telephone companies have done studies that show that with each additional product or service that a customer uses, the likelihood of the customer defecting to a competitor drops exponentially. Get your customers to use local, long distance, cellular, cable, broadband, etc and you will not lose them. Multiple products and services provided to the same customer dramatically improve retention rates.

11.ACQUISITION TO REMOVE BARRIERS TO ENTRY – For example, a large commercial IT consulting firm acquires a technology consulting firm that specializes in the Federal Government. The larger IT consulting firm has valuable expertise that is easily transferable to government business if they could only break the code of the vendor approval process. After many fits and starts, they simply acquired a firm that had an established presence. They were able to then bring their full capabilities from the commercial side to effectively increase their newly acquired government business.

Many larger firms have established business development offices to execute corporate growth strategies through acquisition. These experienced buyers search for companies that fit their well-defined acquisition criteria. In most cases they are attempting to buy companies that are not actively for sale. The win for the successful corporate acquirer is to target several candidates, buy them at financial valuation multiples, integrate to strength and achieve strategic performance.

About the Author

Dave Kauppi is a Merger and Acquisition Advisor with Mid Market Capital, Inc. MMC is a business broker firm specializing in middle market corporate clients. We provide M&A and divestiture, succession planning, valuations, corporate growth and turnaround services. Dave is a Certified Business Intermediary (CBI), a licensed business broker, and a member of IBBA and the MBBI. Contact (630) 325-0123, davekauppi@midmarkcap.com or www.midmarkcap.com.

 

Strategic Planning (in nonprofit or for-profit organizations)
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Basic Description of Strategic Planning (including key terms to know)
Adapted from the Field Guide to Nonprofit Strategic Planning and Facilitation. ... Strategic planning often includes use of several key terms. ...
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Strategic Planning
FAQs regarding strategic planning - geared primarily toward non-profit organizations but with enough detail and general information to provide useful ...
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Frequently Asked Questions
Strategic Planning · Fundraising · Financial Management · Risk Management · Credit Card Acceptance. The FAQs (Frequently Asked Questions) listed on this ...
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Strategic planning - Wikipedia, the free encyclopedia
Strategic planning involves defining objectives and developing ... Strategic planning uses "the big picture" to pursue large scale, long term objectives. ...
en.wikipedia.org
 
08/26/96 STRATEGIC PLANNING
You guessed it: strategic planning. Suddenly, the idea of rising above the ... But if strategic planning is back with a vengeance, it's also back with a ...
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Dr. Strategy - Dr. Pete Johnson, Keynote Speaker, Marketing ...
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Strategic Planning Society: Strategy Development and Implementation
Strategic Planning Society: Strategy Development and Implementation.
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Strategic Planning in Smaller Nonprofit Organizations ... In short, as a result of a strategic planning process, an organization will have a clearer idea of ...
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STRATEGIC PLANNING MANUAL
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BPubs.com: Strategic Planning & Business Planning Articles
Business Publications related to Corporate Strategic Planning.
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Strategic Planning Tools
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Center for Simplified Strategic Planning, Inc.
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HEFCE : Publications : 2000 : 00/24 - Strategic planning in higher ...
This guide reviews good practice in strategic planning in higher education (HE). It originated in a consultation exercise which we held in 1998 to review ...
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The Association for Strategic Planning
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Amazon.com: Strategic Planning for Nonprofit Organizations: A ...
Amazon.com: Strategic Planning for Nonprofit Organizations: A Practical Guide and Workbook: Books: Michael Allison,Jude Kaye by Michael Allison,Jude Kaye.
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