The Role of Competitive Intelligence in Strategic Partnerships (M&A, Strategic Alliances, Consortia) Presented by



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The Role of Competitive Intelligence in Strategic Partnerships (M&A, Strategic Alliances, Consortia)

  • Presented by:
  • Arik R. Johnson
  • arik@aurorawdc.com
  • Managing Director
  • Aurora WDC

Introductory Remarks

  • About Arik
  • About Aurora
  • Agenda Items and Process for the Day

Strategic & Tactical Realms

This session is for you if...

  • You would like to contribute to your firm’s relationship-building activity
  • You would like to expand the application and “adding-value” of Intelligence within your firm
  • Your firm’s growth strategy includes M&A
  • You would like to learn what Intelligence processes are applied in relationship-building.

What we have learned about M&A

  • Large consulting firms:
    • Casual scanning is norm
    • “Too-late” deals
    • Are not any more productive than “home-grown” talent in the initial M&A stages
    • Force their acquisition model on you (very large)
  • Firms’ radar screen had better resolution
  • Smaller deals were impressed and intimidated with consulting companies
  • In-house Intelligence departments Intelligence consultants are more efficient and effective on the front-end.

Why M&A as an Intelligence activity?

  • Harvard Business Review reports in 1998 there were 5,000 acquisitions in the US totaling $.5T
  • KPMG Peat Marwick says in 1999 $2T was spent on acquisitions world-wide
  • Cisco Systems grew in 1999 to $12B Rev. via 42 acquisitions, expected to make 25 in 2000
  • IPO’s are at an all time high
  • Strong stock market produces buying leverage faster than lower interest rates

Steps in the M&A process

  • Relationship criteria
  • Scan, Search, and Identify Targets
  • Evaluation and Analysis
  • “Due Diligence” - in situ
  • Recommendation
  • Negotiation
  • Consummation
  • Integration

Steps in the M&A process

  • Relationship Criteria
  • Scan, Search, and Identify Targets
  • Evaluation and Analyzation
  • “Due Diligence” (in situ)
  • Recommendation
  • Negotiation
  • Consummation
  • Integration

Level of functional involvement

  • Stage
  • ID Evaluate Due Consum-
  • Criteria Targets Analyze Diligence Recommend Negotiation mation Integration
  • Intelligence
  • Research
  • Business Units
  • Finance
  • Technical Assessment
  • Legal
  • Executives
  • M&A Specialists
  • Transition Team
  • Logistics
  • HR
  • Level of CI
  • Involvement
  • High
  • Low

M&A process activities

  • Stage
  • Relationship
  • Criteria
  • Identify
  • Targets
  • Evaluate,
  • Analyze
  • “Due Diligence”
  • Negotiation
  • Consummation
  • Integration
  • Delphi
  • Technique
  • Compilation
  • CI
  • Trades
  • Sales
  • Marketing
  • Consultants
  • Criteria
  • Matching &
  • Preliminary
  • Analysis
  • Products
  • Financial
  • Strategy
  • in situ
  • Audit and Examination
  • Criteria
  • Set
  • Candidacy
  • Purchase
  • Candidate
  • List
  • Company
  • Overview
  • (SWOT)
  • Intelligence Processes
  • Management
  • Guides
  • Company
  • Report
  • (checklist)
  • Support,
  • Reference
  • External Internal
  • Candidacy Purchase

Delphi technique

  • Reiterative process with executives
  • 1. Initial criteria is brain-stormed
  • Criteria compiled for ranking
  • 2. Executives rank criteria by importance
  • Criteria sorted by ranking for cut-off
  • Completed relationship criteria
  • Final approval

Criteria for acquisition candidacy

  • Return on Investment (ROI)
  • Break-even (B/E)
  • Compounded Annual Growth Rate (CAGR)
  • Gross Profit Margin (GPM)
  • Fill manufacturing
  • Products and services
  • Intellectual property
  • People and knowledge acquisition
  • Investment scale and scope

Criteria for acquisition candidacy

  • Fit Acceptable
  • Criteria Definition Criteria Exceptions
  • Break-even Break-even should B/E < 36 mos. Leveraged buy-out.
  • occur before EOY3.
  • Must be profitable Y1.
  • Compounded CAGR must be greater CAGR > Ind, There might not be
  • Annual than industry forecast. CAGR > forecasts available
  • Growth CAGR must be greater Our forecast for certain
  • Rate than our forecast. market segments.
  • Investment Total investment should I < $30M Greater investment
  • Scale be less than $30M. would be considered
  • with additional,
  • outside partners.

Compilation from all sources

  • Allow for multiple input sources
  • Executives
  • Sales and sales support personnel
  • Suppliers
  • Customers
  • Surveillance
  • Trade publications
  • Specialty newsletters
  • Venture capital activity

Candidate list

  • Company name, address, phone, contact(s)
  • Year founded
  • Product-markets
  • Differentia vs. competitors’
  • Funding history
  • Revenues
  • Employees
  • Sales structure
  • Existing relationship with our firm
  • Notes and source of info

Company overview

  • Description of Company
    • Recent sales, GPM, NIAT, employees, sales/emp, market cap, stock price, cash, founded, IPO date, revenue history
  • Summary of situation and appeal
  • Founders, investors
  • Management
  • Products
  • Customers
  • Intellectual property
  • Acquisition criteria fit summary
  • Begin SWOT analysis

In-situ audit and examination

  • “Due diligence”
  • Checklist
    • Topical
    • Specific questions for interviews
  • Preliminary Audit
  • Presentations
  • Interviews
  • Extended SWOT analysis
  • Company Report (20 - 50 pages)
  • Recommendation

Extended SWOT Analysis

  • Market share gain
  • Market entry
  • Intellectual property
  • Financial
  • Management team
  • Owners, founders
  • Products/services
  • Manufacturing
  • Strategic fit

Extended SWOT Analysis

  • Criteria Strengths Weaknesses Opportunities Threats
  • Gain - ext. current - no prod. history - Prod1 CAGR>250% - major competitors
  • Mkt Share prod. line - may have over - Prod2 CAGR>54%
  • - entry into designed prods - Prod3 emerging
  • Mkt 6
  • Intellectual - 4 patents - unclear if SW - some leveraging - 2 possible
  • Property - 3 pending patents okay with our R&D infringement - 9 2B submt’d - need license for suits
  • - clear tech 1/2 of roadmap
  • roadmap
  • Product - prods extend - EDP is not our - can take Prod1 - time to mkt
  • Leverage our Mkts primary focus into our Gamma - no resources
  • 1 & 2 - Prod2 requires with extra FAB’s to leverage
  • cust support
  • we don’t have
  • Criteria Strengths Weaknesses Opportunities Threats
  • Gain - ext. current - no prod. history - Prod1 CAGR>250% - major competitors
  • Mkt Share prod. line - may have over - Prod2 CAGR>54%
  • - entry into designed prods - Prod3 emerging
  • Mkt 6
  • Intellectual - 4 patents - unclear if SW - some leveraging - 2 possible
  • Property - 3 pending patents okay with our R&D infringement - 9 2B Submt - need license for suits
  • - clear tech 1/2 of roadmap
  • roadmap
  • Product - prods extend - EDP is not our - can take Prod1 - time to mkt
  • Leverage our Mkts primary focus into our Gamma - no resources
  • 1 & 2 - Prod2 requires with extra FAB’s to leverage
  • cust support
  • we don’t have
  • Criteria Strengths Weaknesses Opportunities Threats
  • Gain - ext. current - no prod. history - Prod1 CAGR>250% - major competitors
  • Mkt Share prod. line - may have over - Prod2 CAGR>54%
  • - entry into designed prods - Prod3 emerging
  • Mkt 6
  • Intellectual - 4 patents - unclear if SW - some leveraging - 2 possible
  • Property - 3 pending patents okay with our R&D infringement - 9 2B Submt - need license for suits
  • - clear tech 1/2 of roadmap
  • roadmap
  • Product - prods extend - EDP is not our - can take Prod1 - time to mkt
  • Leverage our Mkts primary focus into our Gamma - no resources
  • 1 & 2 - Prod2 requires with extra FAB’s to leverage
  • cust support
  • we don’t have

Negotiation, consummation, integration

  • Pass project to M&A specialists, stay involved
  • Personal intelligence
  • Negotiation strategy formulation
  • Negotiation support
  • Testing of assumptions
  • Monitoring of directional changes
  • Transitional support
  • On to the next project...

Benefits from Intelligence involvement in M&A

  • To the firm
    • Provides an “in-house” front end process
    • Provides continuous scanning resource
    • Reduces costs
    • “Due diligence” vs. intelligence
  • To the Intelligence department
    • Extension of service into high-impact activities
    • Very visible “value-adding” service
    • Cross-pollination learning
    • Adrenaline rush

Summary

  • Understand Intelligence’s contribution to business relationship development
  • Understand the M&A process and Intelligence’s role as a “front-end” processor
  • Possess a tested methodology for business relationship development
  • Access to templates and examples
  • Questions?

For Further Information

  • Society of Competitive Intelligence Professionals
  • www.SCIP.org
  • Recon Best Practices Knowledgebase:
  • www.AuroraWDC.com/essays


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