Post on 20-Jan-2016
description
Jones Partner Leadership Series
Bob Hoskisson Jim HackettRice University Chairman & CEO
Anadarko Petroleum Corporation
January 20, 2011
2
Acquisition Decision Making and Business Integration
Reasons for Acquisitions
Reduce Costs
Gain Market Power
Increase Growth
Learn to Build Capabilities
Manage Risk and Other Financial Objectives
3
Integration Success
More likely when an integration team, including employees from the acquiring firm and the acquired firm, is formed and charged with full responsibility to integrate the two companies to create value
Opportunities for increased growth as learning occurs
Leverage the capabilities of both firms to create value
Pitfalls and Prevention
Because combined firms often lose key target firm managers, it is important to retain valuable human capital
Overconfidence and paying too much
Managerial escalation of commitment Need governance checks and balances
Excessive debt
Over-diversification
6
The Six Determinants of Merger Success
Source: The Determinants and Evaluation of Merger Success (Epstein)
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Leadership in M&A
Have a good strategic sense of business environment
Be willing to do M&A when weak or strong
Be ready to give up your job for the right cause
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Leadership in M&A
Expect that every deal will be different and difficult
Be adaptable but also willing to walk away
Practiced at negotiating/due diligence/selling a deal – don’t learn as CEO
Good CFO and attorneys essential
Relationships and building trust with counterparts, industry, investors, and Board
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Leadership in M&A
Get right people in charge at top right away – within six months
Take integration very seriously: conflict management, quick decisions
Courage of convictions
Candor at almost any cost with employees (handy with counterparties as well)
Over-communication is impossible
Leadership in M&A: The Role of Authenticity during Integration
One way firms uphold and violate psychological contracts with employees is the level of organizational authenticity demonstrated
That is, does the firm live up to the values it espouses during the merger integration process
An Employee View of Leadership
M&A Integration
PsychologicalContract
Opportunities to honor or
breach
Opportunities to honor or
breach
EmployeeProductivity
Stock Performanc
e
Authenticity: consistency between
what the firm says and what it does
Authenticity: consistency between
what the firm says and what it does
• Change • Upheaval• Politics• Uncertainty• P&L pressure
• Change • Upheaval• Politics• Uncertainty• P&L pressure
Some Examples
Value Category Espoused (CATA) Realized (survey)
Employee development
“We invest in education and training”
Skills retraining programs offered
Fairness “…using objectivity in the decision process”
Integration applied consistent decision processes
Employee empowerment
“Our management style is participative…”“This responsive, decentralized organization”
Participation of members of both organizations and at various levels
Accountability “We followed through on our commitments”“…as we work to deliver on our promises…”
Promise keeping
Authenticity: Effects on Productivity
Productivity is high when espoused values ≈ realized values Either strong or weak Trust is reinforced
Minimized when espoused are misaligned with realized Worst when espoused > realized Also low when espoused <
realized
It is the joint effects that drive employee productivity
Espoused Values Weak Strong
Re
aliz
ed V
alu
es
S
tron
g
Wea
k
Best
RunnerUp
Third
Worst
Shareholder Value
Employee productivity is positively related to shareholder value
Employee attitudes and behavior affect post-merger integration performance Productivity Shareholder value
Managers may be well-advised to match reality to rhetoric
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Leadership in M&A
“Sixth” of six determinants of success plays a huge role
Economy, competition, etc.
Duke/PanEnergy
SGO/OEI
APC/KMG/WGR
DCX
Use scenario planningso you don’t rely on luck!
Customers and shareholdersdon’t listen to excuses
Jones Partner Leadership Series