Orit Gadiesh, Charles Ormiston and Sam Rovit
When merging two companies, after the deal is signed the CEO faces few challenges more risky than integrating the businesses to capture maximum value. Speed is essential to…
Abstract
When merging two companies, after the deal is signed the CEO faces few challenges more risky than integrating the businesses to capture maximum value. Speed is essential to successful merger integration. But it is not everything. Only 25 to 50 percent of deals create shareholder value. This is often because those managing the integration process do not know how to make trade‐offs between speed and careful planning. To keep the value of merger from evaporating, leaders need to manage the integration process actively and steer a course that leads the new organization to its stated strategic goals as swiftly as possible. Start with the strategic goals – there are two general types of mergers: (1) efficiency deals that “play by the rules” (achieve performance improvement in a merger that will have high functional overlap and high predictability of value); and (2) transformation deals that "transform the rules” (low overlap and low predictable value). Top management needs to articulate the purpose of a deal and its strategic rationale long before the merger is consummated. Four rationales are offered and discussed, the first two rationales apply more to type 1 deals and the second two more to type 2 deals. (1) Merging to capture the benefits of scale. In this type of merger, the longer you take, the more risk you incur. Success depends on very early identifying the key people to lead and removing those who will block the process. (2) Merging to expand into adjacent markets, customers, and/or product segments. The big prize comes from revenue growth. Teams from both sides must work together to develop a new marketing plan for the combined company. (3) Redefining the business for a new direction. As a framework for judgments, consider using these reference goals: focus on leading‐edge customers, make decisions quickly, and look for ways to lead change in the marketplace. (4) Re‐inventing an industry. Two initiatives in parallel are required: typical short‐term objectives (cost reduction, consolidation, divestment, etc.) and long‐term direction objectives for the new business. Details from the AOL Time Warner and the Citigroup merger cases are cited as examples. Several examples taken from Cisco System’s many mergers are cited to illustrate process points and insights.
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Orit Gadiesh, Robin Buchanan, Mark Daniell and Charles Ormiston
The legal framework for extending innovation beyond the corporate boundary is the Strategic Alliance (or partnership) Agreement. Before entering into any type of alliance…
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The legal framework for extending innovation beyond the corporate boundary is the Strategic Alliance (or partnership) Agreement. Before entering into any type of alliance involving a joint development arrangement, every company whose core assets are comprised of intellectual property should conduct an internal Intellectual Property Audit. Make certain what you own (or control through licenses) it may be more or less than you think. The second phase of the Intellectual Property Audit is to make sure your Intellectual Property Assets are protected. Begin drafting the Alliance Agreement by articulating the goals of the alliance as specifically as possible. Define the product to be developed or area to be explored in detail. The Alliance Agreement should define the what technology is proprietary to each party. Determine in advance who collects the money, how is the money split, and who does the accounting. Each party should be individually responsible for the cost of defending any claims of infringement. Options can be tied to the development and testing milestones that allow you to get out of the deal entirely or reduce it from an exclusive to a non‐exclusive arrangement.
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Orit Gadiesh, Robin Buchanan, Mark Daniell and Charles Ormiston
Mergers may be the truest test of great leaders.
The High Court judgments in the two appeal cases relating to the sale of cream containing boric acid will be read with considerable satisfaction by those who consider that the…
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The High Court judgments in the two appeal cases relating to the sale of cream containing boric acid will be read with considerable satisfaction by those who consider that the protection of the health of the people is a matter of greater importance than the protection of the interests of a trade. In one case the Westminster City Council appealed against the decision of a Metropolitan Police magistrate who had dismissed a summons taken out by the Council under the third Section of the Act of 1875 for the sale of “preserved cream” containing 23·8 grains of boric acid per pound, and in the other the vendors of a sample of “preserved cream” containing 19·7 grains of boric acid per pound, appealed against their conviction under the same Section of the Act by the Kensington justices. In the first case the appeal was allowed and the case was remitted to the magistrate with a direction to convict; and in the second the appeal was dismissed, the Divisional Court, consisting of Justices Ridley, Bray and Avory being unanimous in both cases.
Insurance and asset holdings are modeled as the jointly determined outcomes of a constrained optimization problem. Consequently, (1) full coverage may be optimal despite limited…
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Insurance and asset holdings are modeled as the jointly determined outcomes of a constrained optimization problem. Consequently, (1) full coverage may be optimal despite limited premium loading, (2) insurance is normal if insurable assets are normal, (3) insurance cannot be a Giffen good, and (4) insurance is a complement to price‐elastic assets.
The Sanitary Committee of a certain County Council, strong with the strength of recent creation, have lately been animated by a desire to distinguish themselves in some way, and…
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The Sanitary Committee of a certain County Council, strong with the strength of recent creation, have lately been animated by a desire to distinguish themselves in some way, and, proceeding along the lines of least resistance, they appear to have selected the Public Analyst as the most suitable object for attack. The charge against this unfortunate official was not that he is incompetent, or that he had been in any way negligent of his duties as prescribed by Act of Parliament, but simply and solely that he has the temerity to reside in London, which city is distant by a certain number of miles from the much favoured district controlled by the County Council aforesaid. The committee were favoured in their deliberations by the assistance of no less an authority than the “Principal” of a local “Technical School”;—and who could be more capable than he to express an opinion upon so simple a matter? This eminent exponent of scientific truths, after due and proper consideration, is reported to have delivered himself of the opinion that “scientifically it would be desirable that the analyst should reside in the district, as the delay occasioned by the sending of samples of water to London is liable to produce a misleading effect upon an analysis.” Apparently appalled by the contemplation of such possibilities, and strengthened by another expression of opinion to the effect that there were as “good men” in the district as in London, the committee resolved to recommend the County Council to determine the existing arrangement with the Public Analyst, and to appoint a “local analyst for all purposes.” Thus, the only objection which could be urged to the employment of a Public Analyst resident in London was the ridiculous one that the composition of a sample of water was likely to seriously alter during the period of its transit to London, and this contention becomes still more absurd when it is remembered that the examination of water samples is no part of the official duty of a Public Analyst. The employment of local scientific talent may be very proper when the object to be attained is simply the more or less imperfect instruction of the rising generation in the rudiments of what passes in this country for “technical education”; but the work of the Public Analyst is serious and responsible, and cannot be lightly undertaken by every person who may be acquainted with some of the uses of a test‐tube. The worthy members of this committee may find to their cost, as other committees have found before them, that persons possessing the requisite knowledge and experience are not necessarily indigenous to their district. Supposing that the County Council adopts the recommendation, the aspirations of the committee may even then be strangled in their infancy, as the Local Government Board will want to know all about the matter, and the committee will have to give serious and valid reasons in support of their case.
The Board of Agriculture has received from the Principal of the Somerset House Laboratory a report on the examination of samples of milk taken by an inspector in connection with…
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The Board of Agriculture has received from the Principal of the Somerset House Laboratory a report on the examination of samples of milk taken by an inspector in connection with an inquiry into methods of sampling milk.