The Fine Art of

Friendly Acquisition

Group 7
Monika Sarangi UH18023
Pramiti Das UH18033
Priyansa Panigrahi UH18037
Rumaani Udgata UH18040
Srijana Chatterjee UH18055
Subhasree Panda UH18058
Arpita Tripathy UH18103
Upasana Mahapatra UH18127
 Merger Acquisition
Occurs when two separate entities
Refers to the takeover of one
combine forces to create a new, joint
entity by another.
organization

A+B=C A+B=A
 Types of Acquisition
Friendly Acquisition
• Occurs through mutual approval of both the companies

Hostile Acquisition
• Carried out against the wishes of the board members of the target company
 SCREENING POTENTIAL DEALS

Acquisition possibilities usually pop up without warning and usually need to be evaluated quickly
Challenge is to balance the need to think strategically with the need to react opportunistically
Experienced acquirers follow two simple rules in screening deals
1. Look at everything
Always on the lookout for deals
Assessing large volume of opportunities helps them to understand what kinds of strategic
acquisition opportunities exists and at what price
Companies can better assess the value of each prospect relative to the others
For example, Cisco Systems evaluates 3 potential markets for each one it decides to enter and then
takes a hard look at 5-10 candidates for each deal it does
2. Keep a strategic focus
A common mistake for the novice acquirers is to cast strategy aside in the face of an exciting
opportunity
Decision should be made keeping the organizational goals in mind
 FROM TALKING TO PLANNING
Initial negotiations can take place by auction or by through conversation between senior executives
The challenge at this stage is for the senior management of both the companies. They can overcome it
through following few rules of thumb in nursing potential transaction:
1. Don’t bogged down over price
It is unwise to try to establish a firm agreement on price
For example as it is being said by one of the founding partners of Stonington, the companies need to
do some preliminary feeling out, if the companies focuses on price at the beginning, they are setting
themselves out for failure.
2.Identify must-haves
 at the initial stage acquirers cannot afford to get tied up with too much details, it is essential to pin
down some details
For example, GTCR focuses on the management team’s experience and its incentive structure
Cisco insists that the management of the target companies believes in employee ownership. It’s also
important to clarify the roles that the target’s top executives will ply in the combined organization
American home products’ merger with Monsanto foundered as the CEOs could not agree of
which of them would be number one.
Finally, it is important that the acquirer be comfortable at this stage with any potential liabilities such
as environmental exposures, retiree health care liabilities or class action that could materially affect
the price of the transaction.
3. Get friendly
Savvy acquirers use early negotiations to foster a sense that both sides are working together in a
good faith to arrive mutually advantageous transaction.
They are flexible and help the target managers to see the career opportunities
According to Jeff Hughes, Vice Chairman of Cypress Group, it is important to built relationship
capital to know what the seller wants, to solve people’s problem and later it may be used during
making the deal.
 GETTING TO THE FINAL TERMS

Negotiations are done

The fourth phase of the Mistakes cannot be
based on price and
deal, most sensitive afforded in this stage
strategy

This phase can attract

Acquirers need to
trivial items which might External threats are the
maintain the momentum
exhaust the goodwill most expected during
of the talks to close the
earned in the previous this phase
deal successfully
phases
 VARIOUS STRATEGIES ADOPTED FOR A
SUCCESSFUL NEGOTIATION

Use multiple negotiation Cultivate Alternatives Anticipate the Competition

channels
Teams are usually divided into two
or more separate negotiating groups
• Managers, Lawyers, Investment
Bankers
Benefits: Parallel Processing
• Legal Team works on acquisition
while the investment bankers
address terms and structure of
financing
Managers focus on the opportunity Assess advantages and disadvantages
to the exclusion of other to other potential bidders
opportunities Anticipate long term cost
Benefits:
• Easier to assess if there are more
alternatives
• Team has more confidence if they
know they have choices
 Ability to
realize
synergies with
the target
Post
acquisition Financing
performance capacity
record

Reputation for Ability to

treating target’s
management make quick
with respect decisions

Attractiveness of
Reputation
currency, in the
for getting
case of stock for
the deal
stock
done
acquisitions
 Achieving Closure: Making It Happen
A surprising number of deals fall apart between final agreement and closure. Because
acquirers do not take the trouble to sell the deal to key stakeholders or
they allow too much time to elapse between agreement and closure.

Sell, Sell, Sell. Move Fast

Keep the time between signing and closing as

Oversell to stakeholders
short as possible

Follow final deal agreements with

Shows the target’s employees and customers that
• Aggressive and carefully planned public relations and
investor relations campaigns • The deal will work
• Involve professional PR advisers • Acquirer’s managers know what they’re doing
• Full and clear disclosure of the terms and the rationale for
the deal is key
 Steel Maker : ISPAT INTERNATIONAL

 One of the largest steel making companies

 Decade long series of acquisitions

Striking Features Of The M&A Activities

M&A Activities similar to LBO shops

Acquisitions : Strictly focussed

Adhere to core business

Vision of M&A
Process Followed For M&A After An Selecting Opportunity

Team of 12-14 professionals sent to visit seller

Seller’s expectation judged

Check labour supply & access to electricity

Learn about company owners

Develop 5 year business plan with Acquisition

Management
 Turn Over all the rocks
The devil lies in the detail - the Size up the other side
acquirer must look very closely Use due diligence to deepen
at the details. Failing to do so knowledge about the target’s
raises questions about the management and to assess
competence of the their abilities and personal
management team agenda

From Talking to planning:

Gearing up for negotiation

(Negotiation is a discussion aimed

at reaching an agreement)

Feed due diligence into Feed due diligence into

business planning business planning
Novice acquirers use due Experienced acquirers link due
diligence for information diligence closely to business
gathering, a break between initial planning
and final negotiations
 Conclusion
Learning from Experience

 LBO Shops constantly refine their activities

 Treat every deal(even the missed opportunities) as a learning experience

 Revisit missed successful deals
 Work upon failed deals
 Pass on lessons to the executives
 Lessons should be clearer and turns out to be different from initial
impressions

 Effective deal management

 Source of sustainable competitive advantage

 Acquisition strategy lead to leadership positions in industries

Master Of Art Of Acquisition Can Be Achieved Only Through Experience!!!