Acquisitive Growth – Workshop 7 (Target Approach)
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 12 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.
MOST Analysis
Mission Statement
All business investors are “financial” investors – the real question is how “strategic” is their ability to leverage the assets of the target. Providing practical guidance on approaching a business target and conducting initial due diligence depends on the investor’s criterion, competencies, and execution bandwidth. At this point, you will have identified a target or group of targets and you are attempting to learn enough about the target to determine whether to proceed with developing a meaningful indication of interest. Of course, an active seller is likely prepared for the sale process and represented by an advisor who is postured to provide the financial and operating information necessary for investors to quickly determine the suitability of a deal (i.e., a pitchbook and defined protocols for communication and information access). However, many desirable targets may not be seeking a sale because business conditions are favorable, and their businesses have been managed to provide options to the owners regarding continued independence and turn-key ownership and management succession. If the former, you, as a prospective buyer may have already pinged on the radar of the seller, and if the later, you have mined for target opportunities and are ready for the next step to accomplish an acquisition.
Objectives
01. Initial Business Research: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
02. Differentiation (Active Process): departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
03. Best Impressions (Active Process): departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
04. Research (Inactive Process): departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
05. Initial Contact – Develop a Narrative (Inactive Process): departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
06. Written Introductory Approach (Inactive Process): departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
07. Phone Calls (Inactive Process): departmental SWOT analysis; strategy research & development. 1 Month
08. In-Person Visits (Inactive Process): departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
09. Persistence is Key (Inactive Process): departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
10. Introductions (Inactive Process): departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
11. Upon Contact – Non-Disclosure Agreement: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
12. Upon Contact – Set up Initial Engagement: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
Strategies
01. Initial Business Research: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
02. Differentiation (Active Process): Each individual department head to undertake departmental SWOT analysis; strategy research & development.
03. Best Impressions (Active Process): Each individual department head to undertake departmental SWOT analysis; strategy research & development.
04. Research (Inactive Process): Each individual department head to undertake departmental SWOT analysis; strategy research & development.
05. Initial Contact – Develop a Narrative (Inactive Process): Each individual department head to undertake departmental SWOT analysis; strategy research & development.
06. Written Introductory Approach (Inactive Process): Each individual department head to undertake departmental SWOT analysis; strategy research & development.
07. Phone Calls (Inactive Process): Each individual department head to undertake departmental SWOT analysis; strategy research & development.
08. In-Person Visits (Inactive Process): Each individual department head to undertake departmental SWOT analysis; strategy research & development.
09. Persistence is Key (Inactive Process): Each individual department head to undertake departmental SWOT analysis; strategy research & development.
10. Introductions (Inactive Process): Each individual department head to undertake departmental SWOT analysis; strategy research & development.
11. Upon Contact – Non-Disclosure Agreement: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
12. Upon Contact – Set up Initial Engagement: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
Tasks
01. Create a task on your calendar, to be completed within the next month, to analyze Initial Business Research.
02. Create a task on your calendar, to be completed within the next month, to analyze Differentiation (Active Process).
03. Create a task on your calendar, to be completed within the next month, to analyze Best Impressions (Active Process).
04. Create a task on your calendar, to be completed within the next month, to analyze Research (Inactive Process).
05. Create a task on your calendar, to be completed within the next month, to analyze Initial Contact – Develop a Narrative (Inactive Process).
06. Create a task on your calendar, to be completed within the next month, to analyze Written Introductory Approach (Inactive Process).
07. Create a task on your calendar, to be completed within the next month, to analyze Phone Calls (Inactive Process).
08. Create a task on your calendar, to be completed within the next month, to analyze In-Person Visits (Inactive Process).
09. Create a task on your calendar, to be completed within the next month, to analyze Persistence is Key (Inactive Process).
10. Create a task on your calendar, to be completed within the next month, to analyze Introductions (Inactive Process).
11. Create a task on your calendar, to be completed within the next month, to analyze Upon Contact – Non-Disclosure Agreement.
12. Create a task on your calendar, to be completed within the next month, to analyze Upon Contact – Set up Initial Engagement.
Introduction
The ‘target approach’ stage in M&A is of utmost importance as it sets the tone for the entire acquisition process and significantly impacts the potential success of the transaction. The way the target is approached is vital for several reasons.
Firstly, the initial approach establishes a positive relationship between the acquiring company and the target. A well-executed approach fosters trust, open communication, and mutual understanding. It lays the foundation for productive negotiations and collaboration throughout the transaction.
Secondly, the target approach plays a crucial role in gaining the target’s cooperation. Approaching the target in a professional, respectful, and well-prepared manner increases the likelihood of the target being receptive to further discussions. Conversely, a poorly executed approach or an aggressive stance may lead to resistance, making it challenging to move forward with the acquisition process.
Moreover, the target approach stage provides an opportunity to request access to crucial information for due diligence. Demonstrating a genuine interest in the target’s business and conveying the importance of the information sought enhances the chances of the target providing the necessary insights into their operations, financials, contracts, and potential risks.
Confidentiality and trust are also paramount during the target approach. Emphasizing a commitment to maintaining the target’s confidentiality and protecting sensitive information is crucial to establishing trust. A breach of confidentiality during this stage can harm the transaction, lead to reputational damage, and hinder future deal-making opportunities.
Furthermore, the target approach stage allows for initial interactions that can provide insights into the target’s culture, management style, and employee dynamics. This early assessment of cultural fit is important as it helps the acquirer evaluate compatibility and anticipate potential challenges or synergistic opportunities during the integration process.
In cases where there are multiple potential acquirers interested in the same target, the way the target is approached becomes even more critical. A carefully planned and respectful approach increases the acquirer’s chances of standing out among competitors and winning the target’s preference and trust.
Finally, an improperly executed target approach, such as an aggressive or hostile approach, can trigger negative reactions from the target company and its stakeholders. This can lead to defensive strategies, counteroffers, resistance from management or shareholders, or even public backlash. A well-considered approach helps minimize such negative reactions, increasing the chances of a smoother negotiation process.
Overall, the target approach stage sets the tone for the entire M&A process, influences the target’s willingness to engage, and plays a crucial role in establishing a cooperative and constructive relationship. A thoughtful, respectful, and strategic approach enhances the chances of successful negotiations, due diligence, and post-merger integration, ultimately leading to a more successful acquisition.
Case Study: Microsoft’s Poor Approach to Acquiring Yahoo (2008)
At the time, Microsoft made a public offer to acquire Yahoo for approximately $44.6 billion. However, Microsoft’s approach was criticized for being aggressive and lacking proper communication with Yahoo’s management and board of directors. The offer was made public before any substantial discussions had taken place between the companies, which caught Yahoo off guard and led to a strained relationship.
Yahoo’s management and board felt that Microsoft’s approach undervalued the company and did not properly consider its potential for future growth. The lack of a private and collaborative negotiation process created animosity and mistrust between the companies, making it difficult to reach a mutually beneficial agreement.
Additionally, Microsoft’s attempt to bypass Yahoo’s management and appeal directly to its shareholders further exacerbated the situation. This move was seen as an attempt to force Yahoo into accepting the deal without allowing the company’s leadership to evaluate other alternatives or negotiate better terms.
As a result of Microsoft’s poor approach, Yahoo’s management and board of directors rejected the offer, leading to a prolonged period of uncertainty and instability for both companies. The failed acquisition attempt had a significant impact on Yahoo’s market value and ultimately led to a decline in its overall performance and competitiveness.
This example highlights the importance of a thoughtful and respectful approach when approaching a target in M&A. Proper communication, engagement with management, and transparent negotiation processes are vital to building trust, fostering cooperation, and increasing the chances of a successful acquisition.
How target approaching has evolved over the years
Approaching targets in M&A has evolved significantly over the years, reflecting changes in business practices, technology, and regulatory frameworks. Here is an overview of how the approaches to targeting companies in M&A have changed:
Traditional Market Research
In the past, companies relied on traditional market research methods to identify potential targets. This involved conducting industry analysis, identifying companies with strategic fit or growth potential, and reaching out to them through personal contacts or industry networks.
Shift to Data-driven Approach
With the rise of technology and the availability of vast amounts of data, the approach to targeting has become more data-driven. Companies now leverage advanced analytics, machine learning, and big data to identify potential targets based on specific criteria such as financial performance, market share, customer demographics, and synergistic opportunities.
Professional Intermediaries
Over time, the role of professional intermediaries, such as investment banks, has become increasingly important in M&A transactions. These intermediaries assist in identifying potential targets, facilitating negotiations, conducting due diligence, and structuring deals. They provide valuable expertise and access to a broader network of potential targets.
Enhanced Due Diligence
Due diligence, the process of assessing a target company’s financial, legal, operational, and commercial aspects, has become more thorough and comprehensive. Advances in technology and increased availability of information have allowed acquirers to conduct in-depth due diligence, including financial audits, legal reviews, market analysis, and cultural assessments.
Competitive Bidding
In today’s M&A landscape, competitive bidding has become more prevalent. Rather than relying solely on friendly negotiations, companies may participate in auctions or bidding processes to acquire their desired targets. This approach can drive up the acquisition price but allows acquirers to select the most favorable deal structure.
Regulatory Scrutiny
Regulatory oversight and antitrust regulations have become more stringent over the years, especially in large-scale M&A transactions. Companies now face increased scrutiny from regulatory bodies, requiring them to navigate complex approval processes, provide extensive documentation, and address potential competition concerns.
Focus on Strategic Fit
In recent years, there has been a shift toward targeting companies that align strategically with the acquiring company’s goals and objectives. This strategic fit goes beyond financial considerations and includes factors such as technological synergies, market access, product diversification, talent acquisition, and geographic expansion.
Emphasis on Cultural Integration
Recognizing the importance of cultural integration, companies now place more emphasis on assessing cultural compatibility when targeting potential acquisitions. Ensuring alignment of values, management styles, and corporate cultures has become crucial to the success of post-merger integration.
Digital Transformation
The digital era has had a profound impact on the approach to targeting in M&A. Companies now consider the target’s digital capabilities, technological infrastructure, intellectual property, and data assets as critical factors in evaluating their suitability for acquisition.
Increased Collaboration
Collaboration and strategic partnerships have gained prominence in M&A targeting approaches. Instead of pursuing outright acquisitions, companies may opt for joint ventures, alliances, or minority investments to access complementary capabilities, technologies, or markets.
These changes reflect the evolution of M&A practices, driven by advancements in technology, a greater emphasis on strategic alignment, regulatory developments, and a more sophisticated understanding of the factors that contribute to successful mergers and acquisitions.
Active Vs Inactive Approach
In the context of acquisitive growth, the terms “inactive” and “active” are often used to describe different approaches or strategies that companies may take when pursuing a target company for acquisition. These approaches refer to how aggressively a potential acquirer engages with the target company and its management during the acquisition process.
1. Active Approach:
In an active approach, the acquiring company takes a more proactive and assertive stance in pursuing the target company. This typically involves direct and open communication with the target’s management team, expressing a strong interest in acquiring the company, and potentially making a formal offer or pr