mergers & acquisitions: target identification
TRANSCRIPT
M&A: Target Identification & Selection
Reducing Risk and Maximising Value when Choosing Potential
Acquisition Targets
Ryan Sherring
Regional Head of Africa
Growth Implementation Solutions
August 2013
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Today’s Presenter
Ryan brings a wealth of experience in designing and implementing corporate growth strategies across the
African continent. Particular expertise in:
• M&A (Target Identification, Due Diligence, Post Deal Integration)
• Strategy Design & Implementation
• Business Optimisation
• Business Transformation
• Geographic Expansion
Ryan has over 7 years of consulting experience with a strong education
• MBA
• Bcom: Finance & Economics
Ryan Sherring
Head of Africa
Growth Implementation
Solutions
Frost & Sullivan
Follow me on:
za.linkedin.com/in/ryansherring/
@rdsherring
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Focus Points
Today we will Cover:
Context
The purpose of this briefing
Overview of the M&A process
Performing successful target identification & selection
The importance of target identification
Benefits & Pitfalls
Setting objectives and value proposition / goal statement
Developing a formal process / strategic approach
Taking the opportunity forward
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Context
• Acquisitions are expensive both from a time and resource perspective
• Ask the tough questions!
• Why are we doing this?
• Does it fit in with our growth strategy?
• Does it align with our objectives (Good strategic fit?)
• Pressure from stakeholders to grow can cause CEO’s to make ill
advised decisions
• Grow at any cost!
• The purpose of this briefing is to:
1. Give context to the art of identifying worthwhile targets
2. Prioritise those opportunities best utilizing limited resources ($’s!)
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Overview of M&A
Industry analysis / Pre due
diligence
Target identification
Due diligence
Business integration
1. Industry analysis / Pre-due diligence: Performing a
sector and economic analysis as well as understanding
the market dynamics to better understand the potential for
businesses in the sector
2. Target identification: Using strong primary and secondary
research capabilities, as well and deep industry knowledge
to identify and assess potential acquisition targets
3. Due diligence: In depth analysis to confirm all material facts
with regards to the acquisition including the potential for
growth and profitability
4. Business integration: Review of strategy, identification of
best practices and implementation excellence are used to
integrate the target with the existing business or improve
current operations
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The importance of planned target identification and
careful selection
• Countless business periodicals reference troubling statistics attesting to the
seemingly insurmountable difficulties that accompany M&A, as outlined in part
below
• 75% of larger mergers destroy, rather than create, shareholder value
• 50% of companies decline in productivity following a merger announcement
• 47% leadership attrition can be expected within the three years following a merger
• 14% drop in employee satisfaction can be expected immediately after a merger
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There are many benefits as well as pitfalls when growing
through acquisitions
Expand Geographies
•Gain traction easier and faster when entering into new markets that are
lucrative but saturated
Top Line Growth •Accelerate your company’s top-line growth rate
New opportunities•Unearth new growth opportunities that align well with your company’s
culture, structure, and objectives
Increase Market Share
• Increase market share through acquisitions into similar industry segments
within a geography
Informed planning•A solid growth strategy coupled with a pre-due diligence market analysis (fact
foundation) should guide the strategic decision and mitigate risk
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There are many benefits as well as pitfalls when growing
through acquisitions (continued)
The wrong fit•Choosing a company that does not fit with your own can cause operational,
strategic and cultural issues
People, People, People
•Without a clear direction pre acquisition, confusion can reign in both the
acquiring and the target company causing anxiety leading to key staff leaving
Avoid Expensive Mistakes
•Failed acquisitions are expensive and hard to explain to stakeholders
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Frost & Sullivan’s Strategic Approach
• Develop the Goal Statement
• Setting objectives and value proposition
• Agreement between you and your colleagues
• Exclusive focus on options that align with the
stated purpose
• Define your strategic approach
• Make sure your process is replicable
• Difference between Cisco and Gillette
Identify & prioritise companiesPlan & align organisation
Develop metrics & model for prioritisation
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Frost & Sullivan’s Strategic Approach
• Through an interactive workshop
process develop evaluation criteria
and screening metrics as well as
define weightings
• Strategic attractiveness
• Financial attractiveness
• Implementation difficulty
• Uncertainty & risk
• Alignment with stakeholders
• Management strength
• Operational fit
• Technology
• Manufacturing / Services
• Competitor Assessment
• Distribution / logistics
• Geographies
Tools Frost & Sullivan uses:• Strategic options grid
• Target questionnaire
• Target assessment template
• Target ranking tool
• Strategic fit matrix
• Opportunities evaluation grid
• Short list presentation
• Due diligence preparation
check list
Identify & prioritise companiesPlan & align organisation
Develop metrics & model for prioritisation
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Frost & Sullivan’s Strategic Approach
• Revisit the goal statement
• Market / Industry analysis
• Study each sectors market fundamentals
• Analyse each sectors competitive climate
• Assess each sectors economic landscape
• Identify all companies in the market sector
• Profile potential targets analysed to identify those with the best fit according to screening metrics
• Evaluate without bias
• Select final candidates
• Align stakeholders and confirm buy-in
• Contact all shortlisted opportunities to assess the willingness of owners to consider the sale of the business
• If company is willing to purchase complete due diligence
Identify & prioritise companiesPlan & align organisation
Develop metrics & model for prioritisation
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Conclusion Slide: Key Take-Aways & Recommendations
• Define why acquisition suits your growth strategy
• Goal Statement
• Stakeholder alignment
• Define and capture measurable success
• Prioritise opportunities
• Develop and build a good toolkit!
• Understand the markets in which the target investment operates
• Fundamentals, Trends, Competitors etc, etc
• Build your fact foundation
• Due Diligence
• Contact us for guidance / facilitation
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Next Steps
Develop Your Visionary and Innovative Skills
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join our GIL Global Community
Join our GIL Community Newsletter
Keep abreast of innovative growth opportunities
Phone: 1-877-GOFROST (463-7678) Email: [email protected]
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For Additional Information
Michelle Da Silva
Account Executive
Sales
(+27) 021 680-3267
Ryan Sherring
Regional Head of Africa
Growth Implementation Solutions
(+27) 021 680-3564
Samantha James
Corporate Communications
Africa
(021) 680-3574