Search results

Wholesaling is a brutal business. Only 20 percent of all wholesale distributors managed to beat the S&P 500 over the last five years, while more than 50 percent consistently destroyed shareholder value. To understand what drove a 1,000 percent difference in returns between the best and worst distribution performer, the author interviewed the managers of firms that have consistently out performed the market. One counterintuitive insight ‐ distribution must focus on local business. Local, not national, market share drives profitability. The interviewers also learned the ingenious tactics the most successful companies have adopted to capture higher gross margins than their competitors, and how these leading companies have reduced operating expenses. The best distributors share a three‐legged strategy: they focus investments to gain local market share, they select their service offering carefully to pump up gross margins and they slice operating expenses to the bone.

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.

To discern what makes some acquirers more successful than others, Bain & Co. performed a 15‐year longitudinal study of 1,600+ companies in the US, the UK, France, Germany, Italy and Japan doing 11,000+ deals plus interviews with senior executives. Bain’s analysis of the companies that succeed at deal making and integration shows that they share some key practices which can be boiled down to this simple playbook: get into the game in good times and bad. If you’re not doing deals, your odds of outperforming go down relative to your competitors that buy steadily. Do not try to time the market. Start small. Cut your teeth on smaller, lower‐risk deals before you try the big ones. Build your team and your expertise in an environment where mistakes will have the least impact. Create a core deal team. Set up a standing team that will keep gaining transactional experience and will not be subject to much turnover. Pull the line in early. Ensure that line managers buy into the deal and that they know what they’re buying. After all, the operators are the ones who will have to integrate the acquisition and make it a success. Chill deal fever. To cool down deal fever, insist on high‐level approvals for deals or set up the compensation system to tie rewards to the long‐term success of the business, rather than deal completion. Most important, set a walk‐away price and be prepared to walk away from a deal that doesn’t meet your high standards.

Even when global players are increasingly dominating an industry, smaller competitors can win in local markets by paying attention to the different needs and expectations of their customers. The top‐down standardization of strategy adopted by many multinational consumer product companies can fail badly if these differences are ignored. Consumer needs and desires are not necessarily consistent across different market segments. Competitors can often exploit these differences to great advantage, particularly if some core competencies, like distribution or market intelligence, can be brought to bear. The old adage “Think global, act local” still applies in many industries. This SuÄrez Company beer case study demonstrates the impact that local market knowledge and positioning can have on a product’s success. Nimble local or regional players may dethrone even the largest of multi‐national or global competitors who often fail to recognize or embrace cultural differences and unique market conditions. These same multinationals may derive global benefits by re‐integrating local market experience into their broader positioning, as Coors is doing now.

This study aims to test the relationship between two measures of sociocultural adjustment (perceived acceptance and work standard) with work attitudes and behavior and with psychological distress following an internal merger of two previously distinct working groups within the one business.

A field study, using a cross‐sectional design, was used to assess the reactions of 250 employees (host employees=170; relocated employees=80) who had undergone an internal merger within a communications company.

Perceived acceptance and work standards following the merger were significantly related to work attitudes and behavior for both the host and the relocated employees. There was no direct relationship between perceived acceptance and work standards with psychological distress. However, work attitudes and behavior were found to mediate the indirect effect of perceived acceptance and work standards on psychological distress.

The findings must be considered within the limitations of the study which include the use of a cross‐sectional design and testing within one business setting.

The research suggests that ensuring that employees from both pre‐merger groups are assisted in feeling accepted in the new culture and that both groups are giving support and resources to maintain work standards are important factors in managing post‐merger integration.

The study is the first to empirically test Berry's concepts of sociocultural adjustment, neutrality and asymmetry within an internal business merger.