Smarter Acquisitions: Ten steps to successful deals (Financial Times Series)

Acquisitions have a poor record of creating value for shareholders. Some even bankrupt the acquiring company. Why is this? This title makes sure that you get it right. By following ten key steps you can ensure that you get real value from your acquisitions. Cover......Page 1 Smarter Acquisitions......Page 4 Contents......Page 8 Preface......Page 12 About the authors......Page 14 Publisher's acknowledgements......Page 16 Part 1 The context......Page 18 Introduction......Page 20 Drivers of growth......Page 21 The reasons for the present boom......Page 22 The outcome......Page 26 How it works......Page 32 Implications for corporate acquirers......Page 36 Why acquisitions fail......Page 42 Aborted acquisitions......Page 43 Poor returns from completed acquisitions......Page 48 Types of transaction......Page 64 Implications......Page 68 Part 2 The process – the ten steps to successful acquisitions......Page 70 The four rules......Page 72 Integration and portfolio acquisitions......Page 79 Whether to acquire or ally......Page 88 Integration acquisitions......Page 94 Portfolio acquisitions......Page 95 Guidelines......Page 99 Sources......Page 102 The approach......Page 105 Negotiating team......Page 108 Implementation team......Page 110 Valuation methodologies......Page 112 Practical guidelines......Page 119 Cost of capital......Page 122 Step 6 Negotiating a good deal......Page 126 Determining price......Page 127 Intermediate undertakings......Page 129 Learning from private equity firms......Page 134 The logic of due diligence......Page 135 Financial condition......Page 137 Specialist matters......Page 141 Commercial due diligence......Page 144 Key areas for negotiation......Page 148 Strategic relevance......Page 155 Cash versus shares......Page 158 EPS enhancement strategies (‘bootstrapping’)......Page 160 Acquisition bank finance......Page 162 Step 10 Implementation and integration......Page 164 Lessons from the front......Page 165 Avoiding failure......Page 176 Ensuring value creation......Page 178 Managing a tight process......Page 179 Applying good parenting......Page 180 Appendix A AT&T’s acquisition of BellSouth......Page 182 Appendix B Imperial Group’s acquisition of Altadis......Page 186 Endnotes......Page 190 Index......Page 194 Cover 1 Smarter Acquisitions 4 Contents 8 Preface 12 About the authors 14 Publisher's acknowledgements 16 Part 1 The context 18 Introduction 20 Drivers of growth 21 The reasons for the present boom 22 The outcome 26 Private equity 32 How it works 32 Implications for corporate acquirers 36 Why acquisitions fail 42 Aborted acquisitions 43 Poor returns from completed acquisitions 48 Acquisition mechanics 64 Types of transaction 64 Implications 68 Part 2 The process – the ten steps to successful acquisitions 70 Step 1 Formulating strategy 72 The four rules 72 Implications of the four rules 79 Integration and portfolio acquisitions 79 Whether to acquire or ally 88 Step 2 Setting criteria 94 Integration acquisitions 94 Portfolio acquisitions 95 Guidelines 99 Step 3 Conducting a search 102 Sources 102 The approach 105 Step 4 Acquisition planning 108 Investigation team 108 Negotiating team 108 Implementation team 110 Step 5 Using the right financial logic 112 Valuation methodologies 112 Practical guidelines 119 Cost of capital 122 Step 6 Negotiating a good deal 126 Determining price 127 Intermediate undertakings 129 Step 7 Performing responsible due diligence 134 Learning from private equity firms 134 The logic of due diligence 135 Financial condition 137 Specialist matters 141 Commercial due diligence 144 Step 8 Sale and purchase agreement 148 Key areas for negotiation 148 Strategic relevance 155 Step 9 Financing 158 Cash versus shares 158 The impact of different financing methods on EPS outcomes 160 EPS enhancement strategies (‘bootstrapping’) 160 Further guidelines 162 Acquisition bank finance 162 Step 10 Implementation and integration 164 Lessons from the front 165 Summary of best practice 176 Avoiding failure 176 Ensuring value creation 178 Managing a tight process 179 Applying good parenting 180 Appendix A AT&T’s acquisition of BellSouth 182 Appendix B Imperial Group’s acquisition of Altadis 186 Endnotes 190 Index 194