Description - Breakthrough Performance for Mergers and Acquisitions in the Knowledge Era by Hubert Saint-Onge
Eight-five percent of current acquisitions fail to accomplish their stated goals. This is because the conventional wisdom--that the creation of value is achieved only when expense cutting works is not on the mark. The expense cutting model is what analysts use to determine success or failure of the merger and acquisition undertaking.
In this book, Chatzkel and Saint-Onge present a new approach to Mergers and Acquisitions what they call a generative approach to mergers and acquisitions, with the ultimate focus of the book on how the generative approach is used during the integration process. In the end, this is the stage where most of the value is created or lost. The generative approach sees knowledge as the basis for capabilities and the precursor of performance. It employs the merger and acquisition activity as an opportunity for transformation of the enterprise.
The focus of most acquisitions is on opportunities for cost savings or expense synergies. The underlying basis of this expense savings approach is to build up the economies of scale by the acquiring company, eliminating duplication added to the production platform. There is not much attention during the due diligence or integration phases of these mergers and acquisitions on potential capabilities that could be uncovered and leveraged between and among the organizations involved. It is appropriate up to a point, but after that point it can easily become counterproductive as many opportunities for growth are ignored or eliminated.
The growth synergies approach is the second perspective. It has a perspective that 1 + 1 = 3. It takes the position that when two organizations are combined, thereal gain can be found in opportunities for growth synergies that come freshly into existence. In this approach there tends to be significantly less attention to expense savings. Essentially, in the new combination, the two organizations are left as the two systems they more or less were, and the synergies gained primarily are in the area of having a wider array of our combined products going to the customer. The underlying platform tends to be one of two entities merging but not doing it in a systematic way to optimize synergies. Most frequently this approach turns out to be to be much more of an additive process than a multiplying process. A typical scenario for this approach is to take the two horizontal funnels of products, or distribution channels, and merge them into a common distribution channel, adding more customers to a pipeline. The left hand side of the equation contains the products and the right hand side encompasses customers and relationships. Where the two interact is in the distribution channels. The AOL Time Warner merger can be seen as an example where this type of growth synergy was attempted. There are gains to be made but those gains are conscribed by the extent of the approach.
The third, or generative, approach fuses the above two approaches in a wholly new perspective. The generative approach asks how we can bring the complementary capabilities of the two merging organizations together. It links their value-creating and knowledge-based relationships to optimize the capabilities of the new organization. This brings into play each organization 's set of capabilities and also leverages their value creation in new and greater interaction opportunitiesof the combined structural capital, human capital and customer capital. The wealth generation arising from these relationships creates value by more effectively engaging existing customers and bringing in new ones.
The generative approach also employs expense reduction in areas where there are truly duplicative processes. In this approach, cost reduction is very carefully weighed in relationship to gains that can accrue. The acquiring organization is quite careful not to shut down something just because it is in keeping with its dominant logic. Instead, it is understood that the merger and acquisition is an opportunity to redesign the dominant logic of all concerned to achieve the new organization with the new capabilities. In the generative approach everyone has to change both the acquirer and acquiree. The brutal fact is that not revising the dominant business logic is the cause for the eighty-five percent of mergers and acquisitions that die on the vine.
In the knowledge era, the intangible assets of the firm are key to the survival of the firm. These assets are frequently the targets of the expense savings model of mergers and acquisition that is in predominantly in use. In the expense savings approach there is no way that those assets will be reframed for optimal outcome. In contrast, however, the breakthrough, generative approach brings the expense and growth imperative together as one.
*Hubert Saint-Onge has deep expertise as an executive involved with leveraging knowledge to increase value in mergers and acquisitions in two industries
*Offers an innovative, new strategy for making mergers successful called the generative approach, based on Saint-Onge 's ownexperience
*Illustrates how this strategy achieves breakthrough performance with concrete examples
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