• Why they are pursuing an acquisition;
• What is the ultimate objective/goal;
• Why an acquisition will provide a better pathway than
other options to achieving that goal;
• What are the expectations (timing, resource alloca-tion/burn rate, financials, internal/external support, etc);
• What criteria will be used to select possible candidates; and
• What are the options that can be considered (alliance,
joint venture, license, etc.).
No significant effort should take place until this is done
as conflicting opinions, positions and understandings will
impede the overall effort. The resulting acquisition strategy should be seen as “the management team’s strategy” and
not “the CEO’s strategy.” This becomes especially critical
when different parts of the buyer’s organization starts
interfacing with the seller’s personnel. What you want to
see happen is that each person conveys exactly the same
understanding of why the acquisition is being made and
how it fits into the buyer’s strategy. We will discuss this in
more detail in the next edition of this subject under “Post
LOI Activities.”
ACQUISITION TEAM PREPARATION
Selecting proper personnel with the best fit of background,
experiences and skills to become participants in the acquisition effort (negotiation, due diligence, etc.) is another
essential success enhancer. An added feature would be to
conduct appropriate training of the various teams to
ensure that everyone is on the same page with the same
understanding. This will be discussed in more detail in the
next edition of this subject matter.
SETTING THE TONE – WALKING THE WALK
An extremely important role for management to play in an
acquisition is to provide commitment, support and oversight to the various acquisition teams. By their very
nature, acquisitions can become a serious diversion of
attention for management and their employees. History
has shown that when an acquisition is announced one of
the first outside entities that get involved are “head
hunters.” If employees inside the buyer or seller are concerned about the acquisition and feel that they are not getting the information they need, the good ones will take
action, which sometimes means that they will look for
employment in a more stable environment.
One of the very first items that management needs to take
ownership of involves communications. Acquisitions bring
about uncertainty and interject a level of confusion and chaos
into the orderly world of most professionals. Management’s
role has to include addressing that issue and calming the
waters wherever possible. Due to the very nature of most
acquisitions a lot of information, especially early on, can’t be
shared with all employees. However, there are things that can
be shared and management should work closely with their
legal advisors in crafting appropriate communications. Above
all, management should not forget to address the question,
“What’s happening to me?” To do so risks losing valuable
employees and critical knowledge.
**NOTE: The data represented in Figure 1 and Figure 3 are
not 100% accurate due to the fact that it is based on information that is required to be made public (Hart-Scott-Rodino Act).
The Hart-Scott-Rodino Act is an antitrust law that requires
companies to file with and get the approval of the Federal
Trade Commission (FTC) before they merge. Information about
the Pre-Merger Notification process is posted on the Hart-Scott-Rodino section of the FTC web site. The European Union laws
equivalent to Hart-Scott-Rodino are posted on Europa. The
Official Journal on Merger Control, cases and other materials
are available through Europa’s Competition page under the
heading “Mergers.” The filing rules are somewhat complicated.
The general rule was a filing was required if three tests are
met; (1) the transaction affects commerce; (2) either (a) one of
the parties has sales each year or assets of U.S.$100 million or
more [as of 2010, raised to $126.9 million] and the other party
has sales or assets of $10 million or more [2010:$12. million];
or (b) the amount of stock the acquirer has is valued at $200
million or more [2010:$253.7 million] at any time; and ( 3) the
value of the transaction is $50 million or more [2010:$63.4 million]. Obviously, there are many “small deals” whose value falls
below the public reporting threshold requirement.
About the author: Dan Watson is vice president of Chemark
Consulting’s Far East operation and specialist in acrylic systems globally. He is the author of Chemark Coatings
Highlights and served for more than 28 years in the Far East
for Rohm & Haas.
