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

2. 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

3. 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?

4. 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

5. 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

6. 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

7. 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?

8. 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

9. 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

10. 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