Applying Business Capabilities in a Corporate Buyer M&A Process

278 Pages·2015·8.758 MB·English

by  Andreas Freitag (auth.)

Applying Business Capabilities in
a Corporate Buyer M&A Process
Andreas Freitag
Applying Business
Capabilities in a Corpo-
rate Buyer M&A Process
Andreas Freitag
Garching, Germany
Dissertation, Technische Universität München, Germany, 2014
ISBN 978-3-658-07281-0 ISBN 978-3-658-07282-7 (eBook)
DOI 10.1007/978-3-658-07282-7
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Acknowledgements
This thesis is the result of my activities as an external PhD student at the
Chair for Informatics 19 (sebis) at the Department of Informatics of the
Technische Universita¨t Mu¨nchen. There have been many ways of assistance
during the journey of a doctoral thesis like discussing, proofreading, or just
being there. Here, I would like to express my gratitude to all of you, who
supported me in my research in the one way or another.
Firstandforemost, Iwouldliketothankmysupervisor, Prof. Dr. Florian
Matthes, for providing the opportunity to work on this interesting and
challenging research topic. His constant support, insightful suggestions,
guidance, andadvicegreatlycontributedtothesuccessofthiswork. Iwould
also like to thank Prof. Dr. Helmut Krcmar for our conversations about the
subject and for being the second reviewer of my thesis.
This work is part of a research project on Mergers & Acquisitions and
Enterprise Architecture Management, which has provided an excellent en-
vironment for my research. Thus, I would like to thank my colleagues at
the “chair for software engineering for business information systems” (sebis)
for their passion in discussing ideas, their patience in developing a suitable
research approach, and joint writing of publications. My thanks especially
go to Dr. Sabine Buckl, Sascha Roth, and Christopher Schulz.
IwouldalsoliketothankDr.VerenaSchmidtmannandUweWeber. They
supported my research with valuable ideas and suggestions. Equally impor-
tant,theyhelpedtoadaptmyworkingenvironmentatDeteconInternational
GmbH to my research activities.
Discussing the developed ideas, as well as preliminary and final results
with practitioners greatly contributed to my research. Thus, my thanks
also goes to all interviewees and workshop participants who gave me the
opportunity to discuss my work with them.
And lastly, but most of all, I thank my family, my partner Anna, and my
friends for their support and encouragement during this journey.
Garching b. Mu¨nchen Andreas Freitag
Contents
1 Motivation, Introduction and Overview 1
1.1 Motivation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Goal of Thesis and Research Questions . . . . . . . . . . . . . 3
1.3 Research Approach . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.4 Document Structure . . . . . . . . . . . . . . . . . . . . . . . . 10
2 Introduction to Mergers & Acquisitions 13
2.1 The Rationale behind M&A . . . . . . . . . . . . . . . . . . . . 13
2.1.1 Economic Drivers for M&A . . . . . . . . . . . . . . . . . 13
2.1.2 Company Business Goals . . . . . . . . . . . . . . . . . . 15
2.1.3 History and Current Relevance . . . . . . . . . . . . . . . 17
2.2 Key Challenges in M&A . . . . . . . . . . . . . . . . . . . . . . 20
2.2.1 M&A Success and Failure . . . . . . . . . . . . . . . . . . 20
2.2.2 M&A Boundary Conditions & Constraints . . . . . . . . 21
2.2.3 M&A Success Factors . . . . . . . . . . . . . . . . . . . . 23
2.3 Different Forms of M&A . . . . . . . . . . . . . . . . . . . . . . 23
2.3.1 M&A Classification Scheme . . . . . . . . . . . . . . . . . 23
2.3.2 M&A Characteristics . . . . . . . . . . . . . . . . . . . . 24
2.4 Participants in an M&A Transaction . . . . . . . . . . . . . . . 26
2.5 Merger Readiness. . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.6 Basic M&A Process Structure. . . . . . . . . . . . . . . . . . . 29
2.7 IT Transformation during M&A . . . . . . . . . . . . . . . . . 31
2.8 IT Integration Strategies. . . . . . . . . . . . . . . . . . . . . . 33
3 State-of-the-Art of EA Management in the Context of M&A 37
3.1 EA Management Resources and Related Work . . . . . . . . . 37
3.2 Key Definitions and Terminology . . . . . . . . . . . . . . . . . 39
3.3 M&A in EA Management Literature . . . . . . . . . . . . . . . 41
3.3.1 Literature Study . . . . . . . . . . . . . . . . . . . . . . . 41
3.3.2 Analysis of EA Management Books . . . . . . . . . . . . 47
3.3.3 Analysis of EA Management Frameworks . . . . . . . . . 49
3.4 Expert Survey on EA Management and M&A . . . . . . . . . . 57
VIII Contents
3.5 Architecture Viewpoints and Views. . . . . . . . . . . . . . . . 61
3.5.1 Basic Concept and Definitions . . . . . . . . . . . . . . . 62
3.5.2 Method: How to define a viewpoint or view . . . . . . . . 64
4 Towards a Theoretical Foundation for Business Capabilities 65
4.1 Introduction and Overview . . . . . . . . . . . . . . . . . . . . 65
4.2 Business Model . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
4.3 Business Capabilities in Strategic Management . . . . . . . . . 69
4.3.1 Porter’s Strategic Management Theory . . . . . . . . . . 70
4.3.2 Resource-Based View (RBV) . . . . . . . . . . . . . . . . 71
4.3.3 Core Competencies . . . . . . . . . . . . . . . . . . . . . 72
4.3.4 Core Capabilities . . . . . . . . . . . . . . . . . . . . . . 74
4.3.5 Other related Concepts . . . . . . . . . . . . . . . . . . . 74
4.4 Capability-based Planning . . . . . . . . . . . . . . . . . . . . . 78
4.5 Business Capabilities in EA Management . . . . . . . . . . . . 79
4.5.1 EA Management Books . . . . . . . . . . . . . . . . . . . 80
4.5.2 EA Management Frameworks. . . . . . . . . . . . . . . . 80
4.5.3 Business Capability Literature . . . . . . . . . . . . . . . 87
4.5.4 Business Capability Use Cases in EA Management . . . . 93
4.5.5 Domain Concept . . . . . . . . . . . . . . . . . . . . . . . 94
4.5.6 Business Entity Concept . . . . . . . . . . . . . . . . . . 95
4.6 Definitions and Theoretical Foundation for Thesis . . . . . . . 97
4.6.1 Integration of Related Work . . . . . . . . . . . . . . . . 97
4.6.2 Definition and Concept Details . . . . . . . . . . . . . . . 98
4.7 Visualization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
4.7.1 Architecture Viewpoint: Capability Map . . . . . . . . . 101
4.7.2 Architecture Viewpoint: Business Entity Map . . . . . . 102
4.7.3 Architecture Viewpoint: Information Ownership Map . . 102
4.8 Construction of a Capability Map . . . . . . . . . . . . . . . . 103
5 Understanding the Corporate Buyer Scenario 105
5.1 Corporate Buyer Scenario as Basis for Process Development . . 105
5.2 Practitioners View: Expert Interviews and Workshops . . . . . 107
5.2.1 Findings from IT Expert Interviews . . . . . . . . . . . . 107
5.2.2 Findings from Practitioner Workshop at an Insurance
Conference . . . . . . . . . . . . . . . . . . . . . . . . . . 111
5.3 Definition of a Corporate Buyer Scenario . . . . . . . . . . . . 112
5.3.1 Corporate Buyer Classification Scheme . . . . . . . . . . 112
5.3.2 Transformation Challenges . . . . . . . . . . . . . . . . . 114
6 The Corporate Buyer M&A Process (CBMA Process) 115
6.1 Process Development Approach . . . . . . . . . . . . . . . . . . 115
Contents IX
6.2 CBMA Process Structure: Phases and Dimensions . . . . . . . 117
6.2.1 CBMA Process Phases . . . . . . . . . . . . . . . . . . . 117
6.2.2 CBMA Process Management Dimensions . . . . . . . . . 118
6.3 Pre-Merger Phase . . . . . . . . . . . . . . . . . . . . . . . . . 121
6.3.1 Process Step: Corporate Analysis . . . . . . . . . . . . . 122
6.3.2 Process Step: Environment analysis . . . . . . . . . . . . 124
6.3.3 Process Step: Define M&A Strategy and Goals . . . . . . 125
6.3.4 Process Step: Identify Candidates . . . . . . . . . . . . . 127
6.3.5 Process Step: Candidate Assessment and Simulation. . . 129
6.4 Transaction Phase . . . . . . . . . . . . . . . . . . . . . . . . . 130
6.4.1 Process Step: Contact and Negotiations . . . . . . . . . . 131
6.4.2 Process Step: Due Diligence . . . . . . . . . . . . . . . . 133
6.4.3 Process Step: Pre-Merger Integration Planning . . . . . . 134
6.4.4 Process Step: Pricing . . . . . . . . . . . . . . . . . . . . 136
6.4.5 Process Step: Deal Execution. . . . . . . . . . . . . . . . 137
6.5 Post-Merger Phase . . . . . . . . . . . . . . . . . . . . . . . . . 138
6.5.1 Process Step: Post-Closing Integration Planning . . . . . 139
6.5.2 Process Step: Post-Merger Transformation . . . . . . . . 141
6.5.3 Process Step: Post-Merger Audit. . . . . . . . . . . . . . 143
7 Applying Business Capabilities in the CBMA Process 145
7.1 Business Capability Models . . . . . . . . . . . . . . . . . . . . 145
7.1.1 Company Business Capability Map (C-BCM) . . . . . . . 145
7.1.2 Business Capability Map - Color Code (BCM-CC) . . . . 145
7.1.3 Business Capability Map - Border Code (BCM-BC) . . . 146
7.1.4 Business Capability Map - Texture Code (BCM-TC) . . 147
7.1.5 Business Capability Map - Attributes (BCM-A) . . . . . 147
7.1.6 Combination of Coding Methods . . . . . . . . . . . . . . 148
7.2 Identification of Anchor Points for Capability Models . . . . . 149
7.3 Pre-Merger Phase . . . . . . . . . . . . . . . . . . . . . . . . . 150
7.3.1 Process Step: Corporate Analysis . . . . . . . . . . . . . 150
7.3.2 Process Step: Environment Analysis . . . . . . . . . . . . 155
7.3.3 Process Step: Define M&A Strategy and Goals . . . . . . 157
7.3.4 Process Step: Identify Candidates . . . . . . . . . . . . . 157
7.3.5 Process Step: Candidate Assessment and Simulation. . . 159
7.3.6 Summary for Pre-Merger Phase . . . . . . . . . . . . . . 161
7.4 Transaction Phase . . . . . . . . . . . . . . . . . . . . . . . . . 163
7.4.1 Process Step: Contact and Negotiations . . . . . . . . . . 163
7.4.2 Process Step: Due Diligence . . . . . . . . . . . . . . . . 163
7.4.3 Process Step: Pre-Merger Integration Planning . . . . . . 166
X Contents
7.4.4 Process Step: Pricing . . . . . . . . . . . . . . . . . . . . 168
7.4.5 Process Step: Deal Execution. . . . . . . . . . . . . . . . 168
7.4.6 Summary for Transaction Phase . . . . . . . . . . . . . . 168
7.5 Post-Merger Phase . . . . . . . . . . . . . . . . . . . . . . . . . 169
7.5.1 Process Step: Post Closing Integration Planning . . . . . 169
7.5.2 Process Step: Post Merger Transformation . . . . . . . . 172
7.5.3 Process Step: Post-Merger Audit. . . . . . . . . . . . . . 174
7.5.4 Summary for Post-Merger Phase . . . . . . . . . . . . . . 176
7.6 Capability-based Methods . . . . . . . . . . . . . . . . . . . . . 176
7.6.1 Development of an Initial Capability Map . . . . . . . . . 176
7.6.2 Capability-based Dependency Analysis . . . . . . . . . . 179
7.6.3 Capability-based PMI Planning . . . . . . . . . . . . . . 181
8 Evaluation 187
8.1 Evaluation Goals . . . . . . . . . . . . . . . . . . . . . . . . . . 187
8.1.1 Research Environment. . . . . . . . . . . . . . . . . . . . 188
8.1.2 Evaluation Method Selection . . . . . . . . . . . . . . . . 190
8.2 Evaluation Approach . . . . . . . . . . . . . . . . . . . . . . . . 192
8.3 Expert Workshops and Questionnaire . . . . . . . . . . . . . . 193
8.3.1 Combination of M&A and EA Perspective . . . . . . . . 193
8.3.2 National Bank Case Study . . . . . . . . . . . . . . . . . 194
8.3.3 Questionnaire . . . . . . . . . . . . . . . . . . . . . . . . 199
8.3.4 Open Discussion . . . . . . . . . . . . . . . . . . . . . . . 202
8.3.5 Expert Workshop Results . . . . . . . . . . . . . . . . . . 202
8.3.6 Questionnaire Results . . . . . . . . . . . . . . . . . . . . 212
8.4 Introduction of the Developed Approach . . . . . . . . . . . . . 217
8.4.1 Application Scenario. . . . . . . . . . . . . . . . . . . . . 218
8.4.2 Introduction Options . . . . . . . . . . . . . . . . . . . . 219
8.4.3 Prerequisites for Introduction. . . . . . . . . . . . . . . . 220
8.5 Review of Transformation Challenges . . . . . . . . . . . . . . 221
9 Summary 225
9.1 Summary of Key Findings . . . . . . . . . . . . . . . . . . . . . 225
9.2 Critical Reflection and Future Research . . . . . . . . . . . . . 228
A Appendix: Survey on EA Management in M&A 231
B Appendix: Expert Interviews on IT Integration in M&A 233
C Appendix: M&A Case Studies 237
D Appendix: Evaluation Workshop Questionnaire 241
Bibliography 247
List of Figures
1.1 EA Management and M&A . . . . . . . . . . . . . . . . . . . 4
1.2 Research Process, following [Of09] . . . . . . . . . . . . . . . 7
1.3 Structure of Thesis . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1 Value of an Acquisition (Buyer Perspective), following [BU05] 21
2.2 M&A Classification Scheme . . . . . . . . . . . . . . . . . . . 24
2.3 M&A Process . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.4 IT Integration Strategies [Ec12] . . . . . . . . . . . . . . . . . 35
3.1 Practical Relevance of EA Frameworks [VP09] . . . . . . . . 50
3.2 TOGAF 9 Structure [Th09] . . . . . . . . . . . . . . . . . . . 52
3.3 TOGAF EA Model (following [Th09]) . . . . . . . . . . . . . 54
3.4 Zachman Framework (simplified, following [Za11]) . . . . . . 55
3.5 BEAMS EA Management Activity Framework [BMS11] . . . 56
3.6 BEAMS EA Model (following [BMS11]) . . . . . . . . . . . . 57
3.7 Expert Survey: Participant Industry and Role . . . . . . . . . 59
3.8 Expert Survey: Business Architecture Management . . . . . . 59
3.9 Expert Survey: EA Management support per M&A Phase . . 60
3.10 Basic Architectural Concepts acc. to ISO 42010:2007 [In07] . 63
4.1 Business Model Canvas [OP10] . . . . . . . . . . . . . . . . . 68
4.2 Competence Mapping, following [SG10] . . . . . . . . . . . . 73
4.3 Capability Dimensions and Increments [Th09] . . . . . . . . . 82
4.4 Capability Increments Radar [Th09] . . . . . . . . . . . . . . 82
4.5 Business Capability Information Model [Kl10] . . . . . . . . . 91
4.6 Business Capability Context . . . . . . . . . . . . . . . . . . . 98
4.7 Viewpoint Capability Map . . . . . . . . . . . . . . . . . . . . 101
4.8 Viewpoint Business Entity Map . . . . . . . . . . . . . . . . . 102
4.9 Viewpoint Information Ownership Map . . . . . . . . . . . . 103