Acquisition strategies (including any form of M&A legal transaction) may follow different goals. It may be to acquire a major target, and leverage synergies. It may also aim at formi
Market Entry Strategies
ng a JV before increasing shareholdership (or take another course of action).
There are a limited number of generic entry market strategies. The slide deck attached presents the different options, and their main steps.
The programme management must be adjusted to the business strategy.
Buying a market leader implies to enforce a structured programme office, with a direct control on key sources of risks and synergies. It the objective of an integration is to build a growth platform over a long period of time, and through this overcome cultural or local regulatory issues, such a design may be counter-productive.
A PMI programme may be customised according a number of dimensions, e.g.: - The scope of the project (purely functional integration, involving operational aspects as well...)
- The depth of the integration required in terms of processes (harmonisation of the operating model vs preservation of the existing ones,...)
- The integration pace (slow process vs big bang approach)
- The type of goals, and hence the type of synergy process to be implemented
This design of the programme in fine defines the nature of the programme management team itself and the type of control required during the transition phase. This plays along a number of aspects, among which:
The use of a strong programme management team design for hands-on operational work vs. a very light one driven by direction-setting and synergy tracking.
The use of specific quantified indicators to monitor the transition phase vs. the leverage of the normal budgetting process setting and follow-up.
Conclusion - Recommendations : .
The PMI success depends very much on the relevance of the programme management design. Because the strategy part and the deal justification work is often separated from the implementation approach and by teams somewhat disconnected from such issues (strategy department, M&A, bankers), the PMI programme design may not be that-well adjusted. Actual achievment of initial strategic goals may therefore be threatened. In order to avoid such a risk, we recommend:
To validate the programme management office preliminary design by the workforce in charge of the initial strategy plans. This should happen when the investment committee approves the signing of the deal.
To maintain pro-active communication flows with the strategy and the M&A department through the entire transition phase period.
Author: Gilles Ourvoie (gilles.ourvoie@pmifactory.com).
Gilles has worked for c.15 years on strategy and PMI projects for major international groups. He has participated to or managed target screening and market entry strategy assignments in the following industries: Financial services (Life Insurance, Investment banking, Mortgage, and Consumer Banking), the Construction and Equipment sector, Paper & Pulp, Defence, Healthcare. Gilles is the founding partner of PMI Factory.