Acquisitive Growth – Workshop 6 (Target Identification)

The Appleton Greene Corporate Training Program (CTP) for Acquisitive Growth is provided by Mr. Chicles Certified Learning Provider (CLP). Program Specifications: Monthly cost USD$2,500.00; Monthly Workshops 6 hours; Monthly Support 4 hours; Program Duration 24 months; Program orders subject to ongoing availability.

If you would like to view the Client Information Hub (CIH) for this program, please Click Here

Learning Provider Profile

Mr Chicles is an approved Certified Learning Provider (CLP) at Appleton Greene who is a business leader and strategist with broad experience in the global multi-industrial, aerospace and defense sectors. He is a seasoned operational leader of global industrial businesses, leading transformational strategies in highly competitive markets.

As a senior, C-suite strategist for multiple major industrial corporations he has led multiple mergers, acquisitions, divestitures and restructurings, as well as corporate break-ups and spin-offs. He has a distinguished track record of successful transformations of complex organizations in dynamic and uncertain market conditions while engendering the trust and buy-in of employees, customers, vendors, owners, corporate leadership and boards of directors.

A highly engaged leader at the personal and team level he has demonstrated the ability to engender effective senior teams and boards. He’s also an active mentor, teacher and community leader.

Mr Chicles is an active board member with AES Seals, global leader in sustainable reliability engineering, and Micro Technologies Inc, an electronics and advanced manufacturing company. He is a principal partner with ProOrbis Enterprises®, a management science consultancy with premier clients such as the US Navy and PwC, as well as the principal of Xiphos Associates™, a management and M&A advisory. Recently, he served as Board Director and Chairman of Global Business Development with Hydro Inc. the largest independent pump and flow systems engineering services provider in the world.

He was President of ITT’s Industrial Process / Goulds Pumps business segment a global manufacturer of industrial pumps, valves, monitoring and control systems, and aftermarket services for numerous industries with $1.2 billion in revenue, 3,500 employees and 34 facilities in 17 countries. Preceding this role he served as Executive Vice President of ITT Corporation overseeing the creation of a newly conceived ITT Inc. following the break-up of the former ITT Corporation to establish its strategy and corporate functions such as HR, communications, IT and M&A, building the capabilities, policies and organizations for each.

He joined ITT Corporation’s executive committee as its strategy chief in 2006 and instituted disciplined strategic planning processes and developed robust acquisition pipelines to respond to rapidly changing markets. Created successful spin-offs of 2 new public corporations Exelis Inc. and Xylem Inc. ITT Corporation was named one of “America’s Most Respected Corporations” by Forbes for exemplary management and performance during his tenure there.

Before joining ITT, Mr Chicles served as Vice President of Corporate Business Development and head of mergers and acquisitions for American Standard / Trane Companies, where he initiated and closed numerous transactions and equity restructurings globally.

Additionally, he created and led the corporate real estate function which entailed more than 275 real estate transactions around the world.

He began his career at Owens Corning rising through the ranks in various operational roles to Vice President of Corporate Development.

Recently, he taught advanced enterprise strategy at Stevens Institute of Technology as an adjunct professor and still supports start-ups through the Stevens Venture Center. He continues to be active as the Founding Board Member with several successful start-up technology businesses and non-profit organizations. A community leader, Mr Chicles has held the role of President of the Greek Orthodox Cathedral in Tenafly, N.J., He also led trips abroad to Cambodia and Costa Rica to build sustainable clean-water solutions and affordable housing.

His formal education includes earning a Masters of Business Administration from The Wharton School at the University of Pennsylvania, and a Bachelors in Finance from Miami University.

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MOST Analysis

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Mission Statement

Target identification in acquisitive growth is the process of identifying potential companies or assets that align with the strategic objectives of the acquiring company. It involves conducting comprehensive research, market analysis, and due diligence to evaluate various factors such as financial performance, growth potential, synergies, industry trends, competitive landscape, and cultural fit. The goal is to identify targets that offer strategic value and can contribute to the acquirer’s growth, profitability, market position, or diversification objectives. This process requires careful evaluation, consideration of risks, and alignment with the acquiring company’s overall M&A strategy to ensure successful integration and value creation.

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Objectives

01. CEO’s Role: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
02. C-Suite’s Role: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
03. General Counsel’s Role: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
04. Corporate Development: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
05. Business Unit Executive: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
06. Business Development: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
07. Sales & Marketing: departmental SWOT analysis; strategy research & development. 1 Month
08. Third Parties: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
09. Finance & Tax: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
10. Environmental: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
11. Business Legal: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
12. Public Relations: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month

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Strategies

01. CEO’s Role: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
02. C-Suite’s Role: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
03. General Counsel’s Role: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
04. Corporate Development: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
05. Business Unit Executive: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
06. Business Development: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
07. Sales & Marketing: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
08. Third Parties: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
09. Finance & Tax: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
10. Environmental: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
11. Business Legal: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
12. Public Relations: Each individual department head to undertake departmental SWOT analysis; strategy research & development.

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Tasks

01. Create a task on your calendar, to be completed within the next month, to analyze CEO’s Role.
02. Create a task on your calendar, to be completed within the next month, to analyze C-Suite’s Role.
03. Create a task on your calendar, to be completed within the next month, to analyze General Counsel’s Role.
04. Create a task on your calendar, to be completed within the next month, to analyze Corporate Development.
05. Create a task on your calendar, to be completed within the next month, to analyze Business Unit Executive.
06. Create a task on your calendar, to be completed within the next month, to analyze Business Development.
07. Create a task on your calendar, to be completed within the next month, to analyze Sales & Marketing.
08. Create a task on your calendar, to be completed within the next month, to analyze Third Parties.
09. Create a task on your calendar, to be completed within the next month, to analyze Finance & Tax.
10. Create a task on your calendar, to be completed within the next month, to analyze Environmental.
11. Create a task on your calendar, to be completed within the next month, to analyze Business Legal.
12. Create a task on your calendar, to be completed within the next month, to analyze Public Relations.

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Introduction

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Target identification in mergers and acquisitions (M&A) refers to the process of identifying potential acquisition targets that align with the strategic goals and objectives of a company seeking to expand its business through mergers or acquisitions. The history of target identification in M&A can be traced back to the early stages of corporate deal-making.

Source: Apparent Market Research

Here’s an overview of its evolution:

Early M&A Practices

Mergers and acquisitions have been a part of business activities for centuries, but the formalization of target identification began in the late 19th and early 20th centuries. During this period, industrial consolidation was a common trend, with companies seeking to expand their operations and market presence. However, target identification was primarily driven by personal contacts, networks, and word-of-mouth referrals.

Rise of Investment Banks

In the mid-20th century, investment banks played an increasingly significant role in M&A activities. These banks acted as intermediaries and advisors, providing expertise in target identification, valuation, due diligence, and deal structuring. Investment banks developed proprietary databases and research capabilities to identify potential targets based on various criteria such as industry, financial performance, growth prospects, and synergies.

Technological Advancements

With the advent of technology and the digital age, target identification underwent a transformation. Access to vast amounts of data, improved computing power, and advanced analytical tools enabled companies and investment banks to conduct more comprehensive and data-driven analyses. They could leverage databases, market research reports, financial statements, and industry-specific information to identify potential targets more efficiently.

Data Analytics and Big Data

In recent years, the increasing availability of big data and the rise of data analytics have revolutionized target identification. Companies now employ sophisticated algorithms and machine learning techniques to analyze large volumes of structured and unstructured data from various sources. These techniques enable them to identify patterns, trends, and potential targets with greater accuracy and efficiency. Data analytics also facilitates the assessment of market dynamics, competitive landscapes, and customer behavior, helping identify targets that align with strategic goals.

Industry-specific Approaches

Target identification in M&A has evolved to include industry-specific approaches. Companies focus on identifying targets that provide complementary products, technologies, or market access. They may also seek targets that can help them expand into new geographic regions, gain access to intellectual property, or enhance their research and development capabilities. Industry-specific expertise and market knowledge have become crucial for successful target identification.

Strategic Partnerships and Collaborations

In addition to traditional M&A, companies now explore strategic partnerships and collaborations as alternative ways to achieve their objectives. Such partnerships may involve joint ventures, licensing agreements, or strategic alliances. Target identification in these cases involves identifying potential partners with compatible goals, complementary strengths, and shared values.

Overall, the history of target identification in M&A reflects the increasing importance of data, technology, and industry expertise in the process. Companies continue to refine their approaches, leveraging advanced tools and methodologies to identify targets that offer the greatest potential for synergies, growth, and value creation.

Target Identification Methods


Source: Stamford Advisory

Let’s compare the old target identification methods to the new ones in the context of M&A:

Old Target Identification Methods:

1. Personal Contacts and Networks: In the past, target identification heavily relied on personal contacts, networks, and word-of-mouth referrals. Executives and dealmakers would leverage their relationships and industry connections to identify potential targets. This approach was subjective and limited in scope.

2. Limited Information Access: Before the digital age, access to information about potential targets was limited. Companies relied on public records, industry publications, and personal interactions to gather information. Due diligence was time-consuming and often relied on incomplete or outdated data.

3. Manual Research and Analysis: Target identification involved manual research and analysis, requiring significant time and effort. Investment banks and companies would review financial statements, industry reports, and other available information to evaluate potential targets. The process was labor-intensive and susceptible to human bias.

New Target Identification Methods:

Source: Stamford Advisory

1. Data-Driven Approach: Modern target identification methods are more data-driven. Companies leverage advanced analytics, machine learning, and big data to analyze vast amounts of structured and unstructured data from various sources. They can identify potential targets based on specific criteria, such as financial performance, growth prospects, market dynamics, and customer behavior.

2. Technology and Automation: The use of technology has transformed target identification. Companies employ advanced software, algorithms, and automation tools to streamline the process. This includes data mining, natural language processing, and predictive analytics, which significantly improve efficiency and accuracy.

3. Industry-Specific Insights: Target identification now incorporates industry-specific expertise and insights. Companies focus on identifying targets that align with their strategic goals and possess complementary products, technologies, or market access. In-depth knowledge of the industry and market dynamics helps identify targets that offer the most potential for synergies and growth.

4. Broader Information Access: With the advent of the internet and digital platforms, access to information has greatly expanded. Companies can access a wide range of data sources, including financial databases, market research reports, news articles, and social media. This enables comprehensive due diligence and a deeper understanding of potential targets.

5. Collaborative Tools and Platforms: Collaboration tools and platforms facilitate target identification in M&A. Companies can leverage online platforms, data repositories, and virtual data rooms to share and analyze information with potential partners or investors. This streamlines the due diligence process and fosters collaboration between stakeholders.

6. Real-Time Monitoring and Alerts: Modern target identification methods incorporate real-time monitoring and alerts. Companies can track market trends, competitive landscapes, and other relevant factors to identify potential targets proactively. Automated alerts and notifications help companies stay informed about potential opportunities as they arise.

Overall, the new target identification methods leverage data, technology, and industry-specific insights to enhance efficiency, accuracy, and strategic alignment. These methods enable companies to identify potential targets with greater precision, analyze comprehensive datasets, and make more informed decisions during the M&A process.

Here are real-life examples of different target identification methods being used in M&A:

1. Traditional Market Research:

• Example: Coca-Cola’s acquisition of Costa Coffee (2018): Coca-Cola identified the growing consumer demand for coffee and the expansion of the coffee shop market. Through market research, Coca-Cola recognized Costa Coffee as a leading coffee shop chain with a strong brand presence and market share. This led to Coca-Cola’s decision to acquire Costa Coffee to diversify its beverage portfolio and capitalize on the growing coffee market.

2. Industry Analysis:

• Example: Amazon’s acquisition of Whole Foods Market (2017): Amazon analyzed the grocery industry and recognized the increasing consumer shift towards online grocery shopping and demand for organic and natural products. Through industry analysis, Amazon identified Whole Foods Market as a leading organic grocery chain with a well-established brand and a network of physical stores. Amazon’s acquisition of Whole Foods allowed it to enter the grocery sector and strengthen its position in the retail industry.

3. Technology and Innovation Focus:

• Example: Google’s acquisition of YouTube (2006): Google recognized the rising popularity of online video consumption and the potential for user-generated content. Google identified YouTube as the dominant player in the online video-sharing space with a large user base and innovative platform. Google’s acquisition of YouTube enabled it to enhance its online video capabilities, leverage its advertising platform, and tap into the growing digital video market.

4. Collaborative Approach:

• Example: Walt Disney Company’s acquisition of Pixar Animation Studios (2006): Walt Disney Company and Pixar had a successful collaborative relationship through a distribution agreement for several animated films. Based on this collaboration, Disney recognized the strategic and creative value of Pixar’s animation expertise. The two companies entered into negotiations, leading to Disney’s acquisition of Pixar. This collaborative approach allowed Disney to strengthen its animation capabilities and expand its creative content portfolio.

5. Strategic Partnerships and Alliances:

• Example: Walmart’s acquisition of Flipkart (2018): Walmart identified the potential for e-commerce growth in India and the need for a strong local partner. Instead of directly acquiring targets, Walmart formed a strategic alliance by acquiring a majority stake in Flipkart, a leading e-commerce company in India. This allowed Walmart to leverage Flipkart’s local expertise, customer base, and infrastructure to enter the Indian e-commerce market and compete with rival Amazon.

These examples illustrate how companies employ various target identification methods based on market research, industry analysis, technology focus, collaboration, and strategic partnerships. Successful M&A transactions often involve a combination of these methods to identify targets that align with the acquirer’s strategic objectives and offer opportunities for growth and value creation.

How important is the target identification phase?

The target identification phase is of critical importance in the acquisitive growth process. It lays the foundation for a successful merger or acquisition and significantly influences the overall outcome. Here are the key reasons why target identification is vital:

Strategic Alignment

Target identification ensures strategic alignment between the acquiring company and the potential target. It involves evaluating the compatibility of business models, goals, cultures, and market positioning. Identifying targets that align with the acquirer’s strategic objectives helps maximize the potential for synergies and value creation.

Value Creation

The target identification phase directly impacts the potential value creation of the M&A deal. By identifying targets with complementary products, technologies, or market access, companies can unlock new revenue streams, cost efficiencies, and competitive advantages. Target identification enables the identification of opportunities for growth, market expansion, and enhanced shareholder value.

Due Diligence

The target identification phase is closely linked to the due diligence process. Thorough due diligence involves evaluating the financial,