Harvard Business Review, September 2007 Rules to acquire by Based on the article By Bruce Nolop CFO, Pitney Bowes Harvard Business Review, September 2007

Coverage of this presentation Rule 1 : Stick to adjacent spaces Rule 2 : Bet on portfolio performance Rule 3 : Get a business sponsor Rule 5 : Judge the feasibility Rule 6 : Do not shop when you are hungry Tollgates are key Conclusion

Rule 1 : Stick to adjacent spaces Adjacency makes more sense than an unrelated business Logical extension of current business mix always preferable Scope to leverage management expertise, customer insights and cultural orientation Ensures consistency of brand image in the eyes of customers Key question : Can we add more value to the business than any other acquirer?

Rule 2 : Bet on portfolio performance Do not make one large bet Instead make multiple smaller acquisitions Smaller acquisitions are more manageable Risks are better hedged More predictable financial results come over time Learning curve advantages through managing a number of acquisitions

Rule 3 : Get a business sponsor Do not let staff department drive acquisitions Leaders of business units should originate and drive deals The business sponsor should be closely involved in : Integration of IT systems HR policies Financial controls Management reporting Talent retention

Rule 4 : Judging the feasibility A deal should be judged carefully. Important to make a distinction between Bolt-On-acquisitions and Platform acquisitions Bolt on acquisitions fit neatly into a business the company is already in Focus on portable business synergies How the synergies will sow up in revenue growth and cost savings Short term returns Platform acquisitions take company into a new business space or activity More difficult and risky to manage Near term revenue opportunities and cost savings not so important Strategic issues dominate

Key questions for platform acquisitions Is this a business we want to be in? Is it sufficiently adjacent to our current offerings? Will customers accept the new offerings? Does the new business promise faster growth? Is there cultural compatibility?

Rule 5 : Do not shop when you are hungry An urgent need must not lead to an impulse purchase Define strategic possibilities broadly and generate alternative options Do not make an acquisition to compensate for a poor performance in a company’s existing operations. Apply analytical and emotional discipline Conduct reviews by people who are not involved in the earlier stages

Tollgates are key First bring the idea to a committee, focusing on key issues Next expand the proposal into a brief PPT presentation Then prepare a decision memorandum which gives a much greater degree of clarity History of the transaction Rationale Synergies Integration Branding implications Other considerations

Conclusion Manage acquisitions as a process Map the complex chain of actions involved Pay attention to what can go right and wrong at different stages Standardize effective approaches and tools Continually improve these approaches