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Value in due diligence : contemporary strategies for merger and acquisition success PDF

243 Pages·2010·6.268 MB·English
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Value in Due Diligence Contemporary Strategies for Merger and Acquisition Success Edited by Ronald Gleich, Gordana Kierans and Thomas Hasselbach Value in Due Diligence This page has been left blank intentionally Value in Due Diligence Contemporary Strategies for Merger and Acquisition Success Edited by Ronald GlEich, GoRdana KiERans and Thomas hassElbach © Ronald Gleich, Gordana Kierans and Thomas Hasselbach 2010 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior permission of the publisher. Published by Gower Publishing Limited Gower Publishing Company Wey Court East Suite 420 Union Road 101 Cherry Street Farnham Burlington Surrey VT 05401-4405 GU9 7PT USA England www.gowerpublishing.com Ronald Gleich, Gordana Kierans and Thomas Hasselbach have asserted their moral right under the Copyright, Designs and Patents Act, 1988, to be identified as the editors of this work. British Library Cataloguing in Publication Data Value in due diligence : contemporary strategies to merger and acquisition success. 1. Business enterprises--Purchasing. 2. Business enterprises--Valuation. 3. Consolidation and merger of corporations--Management. 4. Financial risk management. I. Gleich, Ronald. II. Kierans, Gordana. III. Hasselbach, Thomas. 658.1'6-dc22 ISBN: 978-0-566-08982-4 (hbk) ISBN: 978-1-4094-0938-0 (ebk) Library of Congress Cataloging-in-Publication Data Value in due diligence : contemporary strategies for merger and acquisition success / edited by Ronald Gleich, Gordana Kierans, and Thomas Hasselbach. p. cm. Includes index. ISBN 978-0-566-08982-4 (hardback) -- ISBN 978-1-4094-0938-0 (ebook) 1. Consolidation and merger of corporations--Management. 2. Corporations-- Valuation. I. Gleich, Ronald. II. Kierans, Gordana. III. Hasselbach, Thomas. HG4028.M4V35 2010 658.1'62--dc22 2010020423 Contents List of Figures vii List of Tables ix Acknowledgments xi Preface xiii About the Editors xv List of Contributors xvii PART ���� STRATegy DeveLoPmenT AnD TARgeT ��DenT��f��CAT��on Chapter 1 Due Diligence on Strategic Fit and Integration Issues: A Focal Point of M&A Success 3 Michael N. A. Cobblah, Dr Michael A. Graham and Dr Alfred Yawson Chapter 2 Maximizing the Impact of M&A Controlling: Due Diligence’s Link to Corporate Values. Practical Experience from the Consumer Goods Industry 17 Dr Andreas Brokemper and Thomas Herrmann Chapter 3 Accounting for Real Options in the Due Diligence Process 29 Mathias Gerner and Professor Ulrich Hommel PART ���� Due D��L��genCe AnD ReSuLTS evALuAT��on Chapter 4 Marketing Due Diligence 47 Emeritus Professor Malcom McDonald, Dr Brian Smith and Professor Keith Ward Chapter 5 Marketing: Its Valuable Role in the Due Diligence Process 63 Professor Mary Lambkin and Dr Laurent Muzellec Chapter 6 Innovation Capability Due Diligence: Investigating the Innovation Capability of Companies 81 Jan Buchmann and Florian Kissel Chapter 7 IT Due Diligence: Why Information Technology Can Make or Break a Deal 101 Uwe Bloch and Martin Zerfass vi Value in Due Diligence Chapter 8 Due Diligence on Young Companies: A Case Study 119 Dr Gordana Kierans, Professor Ronald Gleich and Thomas Hasselbach PART ������ DeAL negoT��AT��on AnD PoST-meRgeR ��nTegRAT��on Chapter 9 Redefining Due Diligence to Jump Start Effective Integration 139 Professor Timothy J. Galpin Chapter 1 0 Integration Due Diligence: Setting the Stage for Value Creation 155 Professor L. Jay Bourgeois III and Henning Hoeber Chapter 1 1 The Attributes of a Successful Acquisition Leader 171 Professor Athina Vasilaki Chapter 1 2 Post-Merger Growth Due Diligence 187 Mehdi Farhadi and Professor George Tovstiga Index 207 List of Figures 2.1 Typical Phases of M&A 19 2.2 Essential Audit Fields of Due Diligence 22 3.1 Payoff Functions of Financial Call and Put Options 32 3.2 Expanded versus Passive NPV Distribution 34 3.3 Price Determination in Mergers and Acquisitions 36 3.4 Option-Based Organization of the Due Diligence Process 37 3.5 Moneyness and Deal Relevance of Real Options 38 3.6 The Path from Due Diligence to Purchase Price 39 4.1 From Marketing Strategy to Shareholder Value 50 4.2 The Outline Process of Marketing Due Diligence 51 4.3 Questions to Explicate the Strategy 53 5.1 Marketing Due Diligence 68 5.2 Evaluating the Customer Bases 69 5.3 Leveraging Brand Equity through M&A 72 5.4 Marketing Synergies and Performance 76 6.1 Lawson and Samson’s Innovation Capability Framework 84 6.2 Sammerl’s Innovation Capability Model 85 6.3 Bubble Diagrams for Innovation Portfolios 96 7.1 Merger and Acquisition Transaction Timeline 102 7.2 Document Register 106 7.3 Analysis Strategic Fit 107 7.4 Approach IT Due Diligence 108 7.5 IT Value Proposition to Merger and Acquisition Projects 113 7.6 Risk Assessment Integration Scenarios 115 8.1 Due Diligence Process for Young Companies 127 10.1 The PMI Pyramid 156 10.2 Acquisitions by Degree of Relatedness to Core Business 157 10.3 Common Organizational Arrangements 164 12.1 Post-Merger Growth Dilemma 189 12.2 Due Diligence Process 194 12.3 Post-Merger Growth Due Diligence Audit 196 12.4 Alternative Approach to Design an M&A 203 This page has been left blank intentionally List of Tables 1.1 Acquisitions by Firms in G7 Countries during 2007–08 4 2.1 Example of a Simplified Brand Valuation 26 4.1 Sub-components of Market Risk 55 4.2 Sub-components of Share Risk 56 4.3 Sub-components of Profit Risk 58 6.1 Innovation Management 83 6.2 Approaches on Assessing Organizational Learning 87 6.3 Approaches on Assessing Organizational Culture 91 6.4 Measures Throughout the Innovation Process 93 8.1 Incubator and Technology Park Objectives 124 8.2 Due Diligence Checklist on Young Companies 128 9.1 Due Diligence during the Six Stages of the Deal Flow Model 143 9.2 Cultural Comparison Diagnostic 146 9.3 Retention and Re-recruitment Assessment 148 11.1 Leadership Attributes 177 11.2 The Effect of Leadership Attributes on Acquisition Performance 178

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