Thursday, 29 January 2009

Mergers & Acquisitions and High Marriage Divorce Rates

When the mean average success rate for acquisitions is just 45%, acquisitions must be seen as a high risk strategy. The spend is high and so is the risk. However, the statistical scatter of successes is very broad and with the right knowledge and processes your risk can be dramatically reduced.

When looking at studies that have been conducted on post acquisition success rates, it is obvious that executives have choices to make throughout the acquisition process that, when made thoughtfully, with the right know-how, guidance and more than a little insight they can tilt the odds of success strongly in their favour.

Some Factors for Increased Success
When examining the studies conducted on M&A success one of the most important distinctions that can be drawn between best and worst performances, is that the best deals are more often made in related fields. The worst acquisitions often occur in much less related fields, where the buyer has less market knowledge and expertise. The strategic decision to acquire in a totally new field can seriously effect your chance of success. In-depth market intelligence therefore, is vital.

Secondly, an opportunistic acquisition strategy, as opposed to a proactive approach, has been shown to yield a significantly lower success rate. The reasons behind the higher failure rate (63%) of the opportunistic approach are manifold. However, the problems can be tracked back to a lack of pre-acquisition planning during the early stages of the acquisition process and a lack of choice due, to a passive approach in the identification of a range of prospects.

I have had numerous conversations with senior executives who tell me that their strategic growth plan is via acquisition, yet almost proudly pronounce that their tactical plan is to be “OPPORTUNISTIC”, since they are regularly presented with opportunities from a variety of sources.

To me that makes as much sense as someone hanging around bars and clubs in an “opportunistic” attempt to try and pick-up their future wife (partner)…………………………………. Someone remind me again as to what the average divorce rates are in North America and Europe! Hmmm interesting!

Thursday, 22 January 2009

Autonomy buys Interwoven

Breaking News:

Autonomy have just acquired Interwoven for $775M


Boss M&A Whispers Comment:
If you are a regular reader of Boss News then this was predicted by The Buzz and so would be no surprise. The M&A Market in 2009 is alive and kicking. This acquisition shows that valuations have not nose-dived as some have predicted. Without being one of the dreaded "crystal ball gazers", which most industries have more than a surplus, consolidation at the high, medium and lower end of the market will continue in 2009.

Autonomy expect to have a cash balance of at least $75M after the deal has been completed so they will prove to be some force in the ECM sector. Watch out OpenText, EMC Documentum, Filenet (IBM) and Stellant (Oracle) "The British are coming". This should give much needed life to Interwoven as they battle forward with added weaponry a new lease of life and probably a new name as well.

"What is this life if, full of care, we have no time to stand and STARE?"

William H. Davies
1871-1940, British Poet

Not Knowing What You Don’t Know

The Unknown
As we know,
There are known knowns
There are things we know we know
We also know
There are known unknowns
That is to say
We know there are some things
We do not know
But there are also unknown unknowns
The ones we don't know
We don't know.
Donald Rumsfeld: Feb. 12, 2002, Department of Defense news briefing

Sitting on my desktop and printed in my meeting folder is a mindmap that I created a few years ago. The title is “The Common Causes of M&A Failure”. I refer to the mindmap at least every week. It is a constant reminder to me in my work with my clients of the things to avoid. Our M&A assignment delivery process is based upon avoiding these dangers by preventative action EARLY in the process. This follows the great statistician William Edwards Deming model.

In this blog every now and again when the inclination takes me or when I see a good example from our industry, I will focus on one particular element of the “Common Causes of M&A Failure”. Some of the titles I am intending to write I have listed below, to hopefully entice you to come back:

  • Get Your Ducks Aligned BEFORE you Start
  • Key Hole Vision
  • M&A more a cross country race then a marathon or a sprint
  • Admiring the beautiful flowers and driving in to an oncoming truck
  • Controlling the “BEAN Counters” in M&A
  • M&A & Marriage Divorce Rates
  • Selling in a telephone box
  • In search of the five legged sheep
  • DIY M&A = Crafted Skills or Amateur Bodge
  • Culture Misfits
  • The M&A Process as a Runaway Train
  • Magic M&A Truth Serum

This will be in addition to the latest M&A news within this industry as it happens (or very soon after dependent on my work schedule). Go to the RSS feed above on the right so you can be automatically notified as a new blog post appears.

Wednesday, 21 January 2009

Pegasus haven't sat on their hands in 2009

Following on from my last post about “No Fear” and the M&A opportunities in this recession I thought it worth bringing to your attention that Pegasus Imaging Corporation are definitely not sitting on their hands.

So far in 2009 they have made two acquisitions ...

Pegasus(R) Imaging Corporation acquires AccuSoft® Corporation's imaging business

and ...

Pegasus Imaging Acquires Tasman Barcode SDK Company

As you Americans are prone to say ... “Way to go Pegasus”.

No Fear

“It's a recession when your neighbor loses his job; it's a depression when you lose yours.”
Harry S Truman, in Observer, April 13, 1958
33rd president of US (1884 - 1972)

The Bank of England made history last week when it cut the bank interest rate to 1.5% the lowest rate since the bank was formed in 1694. In the US even Mr Obama’s inauguration oratory promised that an activist Government would move quickly on a massive stimulus programme of public spending but at the same time asked for patience from the American people, warning that it would take time for measures to work. He made no promises that the current situation could be easily overcome and in fact emphasised the importance of the American people had to play in the changes that are needed.

During November UK industrial production saw its largest decline since 1981 (-6.9% y/y) forecasts suggest little chance of a near-term bounce in activity. New orders contracted sharply as the fear factor set-in and horns are pulled in. As a consequence unemployment figures were also hit. Input price inflation eased, but the biggest worry for firms now is demand, not costs. Weakness remains broad-based, with services and manufacturing registering negligible improvements, while construction fell to yet another record low.

However, there are still companies within the eDM, ECM & BPM sector that are continuing to grow profitably. Is it that they have yet to be hit by the credit crisis or is it something else?

I recently read a very interesting fact that more millionaires were made per capita during the Great Depression of the 1930’s than at any other time in history. How could that be? Could it be that they were the few that were not frozen by fear who did not just “stand and watch”?

Fear is the biggest killer of success. It can consume your mind and thoughts and create pictures in your head, so that you are constantly looking to where you really don’t want to go. Those who give in to fear and anxiety, become paralysed by uncertainty and confusion are likely to do two things with their hands, either sit on them and do nothing or hold them up and surrender to what they have created in their own mind as an inevitability.

The reality is that you have to work harder and you have to invest in your future. Take the recession as a time to zig when the others zag so that you will stand-out head and shoulders amongst the rest who have their heads bowed in their inevitable defeat. Lift your chin and look towards your goals. Waiting for things to change are not the actions of a winner. You need to take control of the things that are within your control. Take action that takes you in the direction you really want to travel. This recession will make others react often in a negative manner, including your competitors. What opportunity does that open up for you? That point is worth repeating:

Many of your business competitors will be paralysed by the recession so what opportunity does that give you? List them. Make a plan then take action. Activity within regarding acquisitions is still strong but we are seeing a new group of companies come to the fore. Companies looking to merge or sell may see the recession as too testing a time if they have limited resources. Companies that have cash to spend are thinking this may be a good time to act and make up ground on their competitors. I think the next year will be an interesting time for M&A in this sector and will probably surprise some of the crystal ball gazers.

93-year-old John D. Rockefeller during the Great Depression wrote, "These are days when many are discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again."

Murders & Executions

I can hardly believe I am doing this?
When I first came across the concept of blogs I must admit I did not foresee myself one day being a blog author. At the time it seemed all a bit too geeky and trendy but as time has passed I have found myself visiting a few blogs of interest on a more and more regular basis. To the extent I now see their value.

So who is this Blog for?
Predominantly, senior executives who work in the ECM, EDM & BPM technology sectors; companies that supply any of the above technology solutions including hardware to end users. You may think that this is a highly niche area and you are right to an extent but worldwide most people would be amazed at how many companies operate in this sector.

This blog will be a commentary and source of news regarding ECM, EDM and BPM mergers and acquisitions for senior executives with an eye on growth or divestment opportunities.

I intend for the blog to be direct, informative, sometimes humorous without the commonly heard “corporate speak” that can so quickly bore and rarely prove useful. I also hope that this blog will be uplifting for those that operate in this sector. Despite the current financial crisis there are many rays of light and opportunities for those of us that have our eyes open and our blinkers off.

This blog will also be a “heads up” for potential opportunities to acquire. Obviously due to the nature of my work (more of that later) I cannot always present as many opportunities in this medium as I wish but there may be opportunities for me to provide an anonymous profile.

So what do I think readers of this blog will get out of “Boss M&A Whispers”?
Well as the name suggests I will be publishing and commenting on many things that I think need to be said. It is very much a personal comment from me and is not a “Document Boss blog”. I don’t doubt that at times it will be controversial and upset a few people but for that I make no advance apology. I want this blog to be direct and to the point.

Over 50% of acquisitions in our sector fail to reach their business objectives. Many are a disaster and some even bring down the acquiring company. However, this is not unique to our sector just look at the following high profile acquisitions:

• AOL - Time Warner ($164B)
• MCI - WorldCom ($42B)
• Daimler Benz - Chrysler ($37B)
• Sprint - Nextel ($36B)
• HP - Compaq ($25B)
• JDS - Uniphase - SDL ($13B)
• Alcatel - Lucent ($11B)
• Excite - @Home ($6.7B)
• Mattel - The Learning Company ($3.5B)
• Borland - Ashton Tate ($440M)

Some of the above brought down the combined companies. My interest is not in any of the above sectors just eDM, eCM & BPM software companies across Europe, North America & AsiaPAC but they can sometimes illustrate the point without me upsetting anybody from our industry.

Summary: Why write this blog?
So this blog will provide news and comment on current acquisitions to let you know what is happening with your competitors, partners and maybe inform you to new players to enter the sector. This blog will also help put you in a position where your next acquisition success does not have worse odds than the flipping of a coin. As well as opening your eyes to the true vista of opportunities that can be had for the executives who are “in the know”. So if you are considering growth for your company via acquisition or maybe divestment to gain return your equity and you operate in this sector (ECM, EDM or BPM) then read on.

I also promise to make my blog articles much shorter than this first introduction so they are just a quick dip-in to that can be slotted in to your busy work schedules.

To end with a quick funny story.
A few months ago I had arranged to meet a friend of mine. I knew this chap through my interest in photography but we had never discussed our work. On this particular occasion he had brought his eleven year old son with him who sat listening intently whilst he had something to eat.

My friend asked me “so what is it you do? I saw your company, Document Boss but was not clear what you did” (note to marketing: we need to be clearer). I decided to give him the short answer as most people don’t want to be bored with the details if you are not in this sector, “Mergers & Acquisitions” I said. I noticed my friends son stop eating and look up with a puzzled look on his face. The conversation continued and I did not think anymore about it.

The next time we met, my friend said “Oh by the way if my son is a little nervous of you, don’t be concerned it is just a misunderstanding” apparently he thought I had said that I was involved in “Murders & Executions”. If I had been involved in the above acquisitions perhaps he would not have been too far from the truth :-)