Automation of Mergers and Acquisitions (eBook)

M&A Strategy Processes: Theory, Tasks and Automatability

Karl Michael Popp (Autor)

Stefan Schneider (Herausgeber)

eBook Download: EPUB

2024 | 1. Auflage
200 Seiten
Books on Demand (Verlag)
978-3-7583-9347-1 (ISBN)

Infos

This book addresses key issues during the creation of corporate strategy and M&A strategy by explaining how to define a complete and consistent strategy, use an all-encompassing scope for the strategy to avoid blind spots, include ecosystem and platform strategy, define M&A strategy and its exact relationships to corporate strategy, and how to define strategic fit of two companies. It also lays the foundation for a data-driven strategy.

Dr. Karl Michael Popp is a member of the Corporate Development team at SAP SE. There, as Senior Director Mergers and Acquisitions, he is responsible for the evaluation of acquisitions of software companies as well as the post-merger integration of the core business of software companies and divestitures. In addition, he is a popular speaker on the topic of mergers and acquisitions as well as on business models and platform business models in the software industry (www.drkarlpopp.com).

Textauszug

4. Defining Strategy

Before we focus on M&A strategy, let us have a look at company strategies in general. What is true for Financial Modeling is true for strategy as well: you can´t measure what you can´t model. So, we are proposing a metamodel for strategies with the goal to be able to check the strategy for completeness and consistency.

4.1 A strategy metamodel

We listed a number of issues in defining and executing strategy in the problem statement. How do we address these issues? We do so by defining and using a strategy metamodel that allows mitigation of the issues.

Modelling of strategies in this book relates to a metamodel for strategy modelling created by [Hart12, Hart14] based on the Semantic Object Model created by Ferstl and Sinz [FeSi97]. Here, the model is changed and amended to our purpose. A strategy consists of strategic assumptions, a hierarchy of strategic goals and corresponding strategic measures. We use the term “measures” to describe tasks that are planned to reach strategic goals. Strategic goals can be monitored using key performance indicators (KPI). The corresponding metamodel is depicted in Figure 15.

Figure 15: A first strategy metamodel

In a simplified view, you could say that a strategy consists of strategic goals and measures under certain assumptions about strategic entities, i.e. the company, its ecosystem including the competition and its business and operational models as well as its capabilities. Let us have a closer look at strategic entities, which are the foundation of building strategy models.

Definition of strategic entities

The M&A reference model contains a data model for the M&A strategy phase. Strategic goals and strategic assumptions relate to strategic entities. Strategic entities contain certain elements of the data model for M&A (see section 11), that are strategically relevant for the buyer company. Examples for strategic entities are Market of the target, Target business model, Buyer customer, Product of the target, Regulatory authority, and many others.

Here is the metamodel for strategic entities (and goals) with examples.

Figure 16: Strategic entities and strategic goals

Why do we use strategic entities? There are three reasons. First, since we have a holistic model, we know which tasks relate to which data objects. So, we can automatically derive to which tasks the strategic goals apply by “following the path” from data objects to tasks in the company. Second, the use of strategic goals based on objects and a strict metamodel allows to check the resulting strategy model for completeness and consistency.

Here´s an example. Let us assume the strategy of a company is to be the price leader by always providing the lowest prices to potential customers. In our model we can derive all tasks that work on prices or set prices. So, all these tasks have to comply with the strategic goal of being price leader.

The third reason is that we try to avoid incompleteness of strategy. By having an exact set of strategic entities, we can enforce having strategic goals for each of the strategic entities to avoid blind spots in our strategy. As we will see later, the relationships between the different objects of the metamodel will also be used to check for completeness of the strategy.

Strategic entities are not just a few, isolated data objects. They are views on the overall, holistic data model, of which you will find an excerpt in Appendix 2.

Example

If you look at a strategic entity called Target Product, you come up with at least the following data objects from our data model: Price of the target products, Discount rules of the target product, Product complementarity between target´s and buyer´s products, Substitutes for target products etc. as displayed in Figure 17.

One could argue that defining strategic goals based on attributes of data objects is way too complex due to the sheer number of data objects in a company. The simple solution for this issue is to define strategic goals on the level of strategic entities without looking into the details inside of the strategic entity (i.e. data objects). This allows definition of strategic goals on a higher abstraction level. As soon as you start to detail and cascade strategic goals you can then turn to data objects to define more detailed strategic goals.

Figure 17: The strategic entity Target Product containing data objects

Example of a strategic entity

Our example is the Go-To-Market model of a target company. A company goes to market with its products in certain countries, either directly or indirectly via partners. The products of the company are taken to market with pricings, discounts and through partner channels, which have their own pricing and discounts, and are based on formal partner relationships. But there is more to the topic. The target company runs Go-To-Market operations including processes, people, and application software.

We will analyze the Target Go-To-Market model step by step. For the sake of simplicity, we have split the data schema of the strategic entity into three parts. As we can see in the following picture, the target resides in several target countries, where there are subsidiaries (target companies). To analyze the Target´s Go-To-Market Model, Products of the target are important, as well as the sales numbers of the target. The target also has different relationships with partners in the different countries. The M&A reference model comes with a tool that creates strategic entities as a view on the M&A data model and repositions the data objects and exports windows metafiles that I used to create the figures for this book.

Figure 18: The strategic entity Target GTM (part 1)

Now, let us have a look at the Product of the target and its relationships. Here, the products are sold directly and indirectly. So, we need representations for prices and contracts for direct and indirect sales via partners. As you can see in the next picture, there are two types of customer relationships and contracts, the direct Target customer contract, and the indirect Customer contract of the partner. Both relate to pricing conditions specific to the customer relationship at hand.

Figure 19: The strategic entity Target GTM (part 2)

What else is needed to build a strategy for Go-To-Market? Details of the GTM model and operations. So, we look at the processes and the applications for GTM activities and their cost. In an acquisition situation, we also should look at how well the target GTM fits the acquirer´s GTM model (called complementarity). Since every activity carries a risk, the Target GTM risk must be analyzed. For the indirect channel, for selling via and with partners, partnering models exist and should be analyzed, too.

Figure 20: The strategic entity Target GTM (part 3)

By leveraging the strategic entity Target GTM, the definition of a GTM strategy is enabled. Its details allow to build a holistic strategy, since not only strategy, but also operations are part of the picture, represented by the data objects for processes, applications, and cost.

A detailed strategy metamodel

This leads us to a more detailed version of the metamodel including strategic entities and data objects and relationships to the other data objects of the metamodel. Remember that the relationships define consistency rules between the data objects. So, for a strategic entity there are one or more strategic assumptions and one or more strategic goals. Each strategic entity consists of one or more data objects, while each data object can be included in several strategic entities.

Figure 21: A detailed strategy metamodel

4.2 Strategic goals

Strategic goals are definitions of the desirable future state of one strategic entity that a company can realize based on its existing and future capabilities. In a networked economy, additional capabilities often come from ecosystems, platforms and partnerships including customers and suppliers as well as acquisition targets.

Strategic goals describe future states by leveraging exact numbers or ranges, growth rates and growth ranges as well as other dimensions (e.g., being market leader). All numbers, growth rates or ranges should have confidence intervals.

We are defining consistency rules in the strategy metamodel: Strategic goals must relate to a strategic entity, and we must have at least one strategic goal for each strategic entity.

We aim for completeness of strategy, which means that we must have strategic goals for all strategic entities. Since we have a lot of strategic entities you might argue that no company does such a detailed strategy, and that strategy is only digestible if there is a reasonable, low number of strategic goals.

In our model, it is possible to have no strategic goals for a specific strategic entity, but we keep the statement that there is no goal for a strategic entity still stored in our model for reference and for clarity. So, each strategic entity has a statement about if there are one or more strategic goals for this entity or no strategic goals.

Example

Here is a brief description of the strategic entity, the...

Produkt-Details

• Erscheint lt. Verlag: 17.1.2024
• Sprache: englisch
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Unternehmensführung / Management
• ISBN-10: 3-7583-9347-7 / 3758393477
• ISBN-13: 978-3-7583-9347-1 / 9783758393471