Acquisition Strategy
Episode 07
Strategy: Episode 05 Transcript
Hi, I’m Bonnie Janzen with Decision Analyst. Thank you for joining us with our video series on strategy. Today we’re talking about mergers and acquisitions and, of course, one of the first things that everyone thinks of is the big blockbuster mergers that have happened.
The largest of those at this point has been AOL and Time Warner, which happened in the year 2000. That was for a staggering $165 billion and, of course, AOL was the “You’ve Got Mail.” If you’re a little too young, or maybe you’ve forgotten, they were the people that brought us the beginning (for most Americans) of email and internet and that lasted about a decade until they spun those two companies off, which happened around the time of the dot-com bubble. And then, Dow Chemical and DuPont combined, and that was announced in 2015 and completed in 2017; it was a $130 billion but that didn’t last either, and they were spun off in 2019. Then Anheuser-Busch InBev combined with SABMiller for about a $104 to $107 billion. HJ Heinz and Kraft recently combined for about a $100 billion, almost acquired Unilever for another $143 billion, but that did not go through. And then one of the most successful (according to many sources) has been an Exxon and Mobil combined merger and acquisition for about $74 to $81 billion, and most people feel that has been a very successful merger and acquisition.
And when you think about mergers and acquisitions, of course, most people kind of think of an army of investment bankers and attorneys and accountants, and certainly there are all of those people involved, and they’re thinking through contracts and valuations but there’s also a large amount of strategy research that goes into these evaluations as well.
Understanding the markets, the market sizing, the brands, their brand equity, and the innovation, and innovation pipeline for all these organizations is also very important and can be very critical in making your decision. So, both companies may have aggressive growth strategies, and growth plans for their companies that may not be achievable through organic growth, and that’s where they decide that a merger and acquisition could be really important.
So, what they’re looking to do could be acquiring new product lines. Other reasons might be to add new knowledge, new facilities, or operational efficiencies, expanding new markets, adding intellectual property. They may want to do this overall in their business, or it may be something that they’re looking to do, maybe in just the high-margin part of their business. They may also be combining to create barriers of entry for other competitors, enhancing the capabilities or capacity to reduce capital expenditures, improving their financial or their credit position.
If it was a professional services company or a group of companies combining, they may be looking to improve their credibility or to change the balance of power. Essentially what they’re looking to do. If it’s two or maybe three companies combining. Is really creating a win-win situation for the companies that are involved.
Of course, when you do combine companies there’s always dangers beyond just the financial situation. It can be a real culture clash, and that is a major issue that many of these companies are dealing with-no matter how happy everyone is and excited in the beginning, there’s always the concern and worry, and it can involve or devolve essentially into an us-versus-them situation at some point. And so it’s really important to evaluate that.
It’s also a concern that it can be a real destruction for the key leadership of both organizations, no matter how you set it up, but that, if they’re spending a lot of time trying to figure out how to integrate systems, are they really thinking about how to make both companies really effective, and are the right people working on running the businesses? There can be a loss of differentiation; there can also be a lot of confusion in the marketplace. If this company stood for this, and that company stood for something else, then our customers and the market―are they confused about what this new company really stands for? Does everyone really understand? And what do these brands really mean now? So, there are major considerations for mergers and acquisitions, and it can be a really great thing. But it can also be a very scary time for both internal components and constituents, [and] the shareholders as well as for external customers.
So, it has been our privilege to help a lot of our clients as they were evaluating brands and product lines, and we did that with brand-equity assessments and evaluations and we look forward to helping many more of our clients. So, sometimes it was something that they did acquire and [they] kept those brands for many years and other times it was situations where they decided to walk away. So anyway, doing this strategy research has been a very interesting part of our business and we look forward to helping many more of our clients in the future.
Thank you for joining us.
Presenter
Bonnie Janzen
President
Bonnie helps drive growth for client companies based on strategic consumer insights, innovation, and analytics to shape marketing campaigns and new product development programs. She has consulted with clients on new business mergers and acquisitions including global expansion. Advertising and messaging research is a particular passion. She has been very involved in strategic direction of the company.
