15 Summary Acquisitions and Global Expansion Opportunity is rare, and a wise person will never let it go by him. Bayard Taylor Summary How can entrepreneurs best manage expansion via acquisitions and entry into new geographic markets? A new venture may start as a purchase of an existing company by a team of entrepreneurs. Most, if not all, acquisitions are justified on the basis of an expected synergy, which is the increased effectiveness of the combined firms. Chapter 15: Summary Technology Ventures: From Idea to Enterprise

15 Acquisitions and Global Expansion Acquisition: when one firm purchases another. Synergy: the increased effectiveness and achievement produced as a result of the combined action of the united firms. Syn = VN - V Chapter 15: Acquisition and Synergy Technology Ventures: From Idea to Enterprise

15 Acquisitions and Global Expansion Type Overcapacity Reduction Geographic Extension (Roll‑Up) Product or Market Extension Technology Acquisition Industry Convergence Objective To reduce excess capacity and increase efficiencies To extend a companies reach geographically and build economies of scale and scope To extend the product line or reach a new market segment To quickly add new technologies and capabilities To establish a position during the convergence of an industry or sector Example Daimler-Benz and Chrysler ----------------- Hewlett-Packard and Compaq Bank of America Nations Bank ------------------- Waste Management and numerous local firms Tyco Raychem ------------------ J.M. Smucker and Jif peanut butter Cisco Systems acquired 60 companies in 1980-2000 -------------------- Medtronic acquired 7 companies in 1998-2000 AOL Time Warner Disney ABC-TV and Radio The Five Different Types of Mergers and Acquisitions Chapter 15: Table 15.1 Technology Ventures: From Idea to Enterprise

15 Acquisitions and Global Expansion Issues Type Overcapacity Reduction Geographic Extension (Roll‑Up) Product or Market Extension Technology Acquisition Industry Convergence Issues What to eliminate in the merged company and how to get it done in a timely way How to merge two firms with different cultures Merging two cultures and distribution channels Overvaluation of the technology acquisition and loss of leaders from the acquired firm The convergence may not materialize or be of low value The Five Different Types of Mergers and Acquisitions (cont.) Chapter 15: Table 15.1 Technology Ventures: From Idea to Enterprise

15 Acquisitions and Global Expansion Rules for the Acquiring Firm and the Acquired Firm The Acquiring Firm Use your highly valued stock as payment Identify the key people and get their agreement to stay Decide who to keep and build relationships fast Contain the tendency toward hubris Integrate the culture and the operations of the two firms Appoint an integration manager or team The Acquired Firm Demand cash, not stock as payment Agree to stay for a short period Avoid a non-compete agreement or keep its duration short Explain the benefits that accrue to the employees and managers of the acquired firm Tell people who will have and who will not a job Restructure with respect for people Chapter 15: Table 15.2 Technology Ventures: From Idea to Enterprise

15 Acquisitions and Global Expansion The Four Roles of the Integration Manager Inject Speed into the Process Push for decisions and progress Keep the pace 2. Create a New Structure Create joint teams Lead an integration team Provide the new structure framework 3. Make Social Connections Interpret the cultures of both companies Actively be present in both companies Bring people together 4. Build Success Identify and communicate synergies Show short-term benefits Demonstrate corporate efficiency gains Chapter 15: Table 15.3 Technology Ventures: From Idea to Enterprise

15 Acquisitions and Global Expansion Globalization involves the integration of markets, nation-states, and technologies, enabling people and companies to reach around the world to offer and sell their products in any country in the world. What???? Chapter 15: Globalization Technology Ventures: From Idea to Enterprise

15 Acquisitions and Global Expansion What???? Chapter 15: Figure 15.1 Technology Ventures: From Idea to Enterprise

15 Acquisitions and Global Expansion The Advantages and Disadvantages of the Four Global Strategies Advantages Disadvantages Multidomestic Ability to customize products for local markets. Failure to reduce costs and to appropriate learning from other nations. Transnational Ability to reduce costs and learn from other nations. Ability to be locally responsive. Difficult to implement due to many independent organizations. International Transfer of unique products and competencies to other nations. Low local responsiveness. Failure to reduce costs. Global Ability to reduce costs and gain worldwide learning. Lack of local responsiveness. Difficult to coordinate. Chapter 15: Table 15.4 Technology Ventures: From Idea to Enterprise

15 Acquisitions and Global Expansion Reasons to Develop A Global Strategy for A New Venture Access low cost labor or materials Work around trade barriers Access unique capabilities and learning from others Obtain economies of scale Access attractive markets for the firm's products The industry is global and all competitors are worldwide Possession of a strong brand that is known worldwide Chapter 15: Table 14.6 Technology Ventures: From Idea to Enterprise

15 Acquisitions and Global Expansion All new technology business ventures should formulate a clear acquisition and global strategy. Chapter 15: Principle Technology Ventures: From Idea to Enterprise

15 Acquisitions and Global Expansion A new electronic game firm has launched its first product in the US with good initial success. Select and design a global strategy for this firm. Chapter 15: Exercise Technology Ventures: From Idea to Enterprise

Acquisitions and Global Expansion 15 VENTURE CHALLENGE Describe your approach to acquisitions and mergers as a growth strategy. Discuss the plans for acting globally and describe your approach using table 15.6. Chapter 15: Venture Challenge Technology Ventures: From Idea to Enterprise

DVD Video 15 “Global Acquisition: eBay” Stephanie Tilenius (eBay) Acquisitions and Global Expansion 15 DVD Video “Global Acquisition: eBay” Stephanie Tilenius (eBay) Chapter 15: DVD Video Technology Ventures: From Idea to Enterprise