What will distinguish successful corporate takeovers and mergers
The chemicals segment Mergers & Acquisitions reported a record high for 2015. This momentum will also continue in 2016. The great trends and success factors for sustainably effective corporate acquisitions are Specialisation, “Buy and Build”, “The Best of Both Worlds” as well as “Think Customer”. This is the result of a current market and customer survey conducted by the management consultancy CAMELOT Management Consultants.
The emerging billion dollar deal between Dupont and DowChemicals marks the culmination of a chemicals year with corporate takeovers and mergers at record levels. The next billion dollar corporate takeover followed shortly before Christmas with the Chinese chemical corporation Chemchina’s offer for Syngenta. Analysts assume that the strong M&A activity in the chemicals segment will also continue in 2016. Dr. Sven Mandewirth, Partner and Industry Lead Chemicals at CAMELOT, summarises the challenges for the affected companies as follows: “With the increasing volume of Mergers & Acquisitions, a growing number of companies are faced with the question of how the merger or acquisition could unfold the desired effect, especially in light of increasing market volatility.”
CAMELOT has identified the central trends and success factors in Mergers & Acquisitions within the scope of a current market and customer survey in the chemicals segment:
Specialisation and market leadership
In the case of the marriage between Dupont and Dow, this only supposedly pertains to market power through size, because the break-down into specialised segments after the merger has already been planned. Successful M&As of the future no longer peruse the principle of size but rather a specialisation strategy with regard to products and markets with the objective of becoming global market leaders in these segments. This assumes a clear definition of the future business model, as well as the intended market segments.
“Buy and Build” Strategy
With a “Buy and Build” strategy, businesses are specifically acquired over a longer period of time in order to reach a leading position in a defined market segment. In this case, a suitable business model plays an important role. A “Buy and Build” strategy is frequently followed by mostly new companies or sub-groups. Merck Life Science exemplifies the fact that an acquisition is no longer a once-off action. Over a longer period of time, Merck has specifically strengthened in this segment through larger and equally focussed take-overs. This course is now continued with the take-over of Sigma-Aldrich.
“Best of both worlds“ – the race for the best solution
The traditional merger, during which the purchasing company leaves its mark on the purchased one, is no longer sustainable. Best practices are already specified in both companies and used as “blueprint” for integration during the preliminary stages of successful takeovers. In future, those companies taking into consideration the “best of both worlds” principle will also be the most successful. This considerably reduces the challenges faced by Change Management and the affiliation of the employees.
“Think customer” – before and after the takeover
An acquisition burdens the internal organisations and can therefore have a negative impact on the development of customer and market relations. It is frequently observed that, before and even after integration, the focus is unduly placed on internal topics such as organisation and standardisation. A stronger focus on the customer, starting with the selection of takeover objectives to way past operative integration, ensures that the existing business is developed and new market potentials are realised throughout the entire acquisition process.
“Additionally important success factors for M&As are the early setup of a transformation program, a precise target image from a market and customer perspective, as well as proactive program control and Change Management,” adds Ferhat Eryurt, Head of the Chemical Markets & Strategy Competence Centre at CAMELOT.
The study is provided for free download on www.camelot-mc.com.
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