When Rivals Merge, Think Before You Follow Suit

By Thomas Keil and Tomi Laamanen

Abstract
Theme of Article Reasons of Poor Performance by followers Alternative Responses Choosing the right response Conclusion

Merger
Combination of two or more business enterprises into a single enterprise.
Example: Sony + Ericson = Sony Ericson

Acquisition
Acquisition is the process through which one

company takes over the controlling interest of

another company.

And the Article begins

When Rivals merge, think before you follow suit Self Explanatory Instead of Just Following, Respond Carefully ! .

M & A Domino Effects

With the execution of Merger or Acquisition by

a Major Rival, other companies feel

Under Attack!

Acquisitions taking place.

Ericsson acquired Marconis Telecommunication (2005) Alcatel and Lucent merged (2006) Nokia and Siemens combined equipment units (2006) One Objective:

Keeping their Pace with Ericsson

Ericsson
(Swedish telecommunications equipment maker)

Remained Todays Undisputed market leader While other companies : Failed to seize Ericsson Exposed to Huaweis Attack Emergence of Apples iPhone & Googles Android OS
Same path, does not lead everyone to their Destination !!

Thomas and Tomi Suggested:

Companies that react to a rivals merger with a head-on merger of their own, frequently Display

Poorer Performance
than companies that carefully develop a less direct response.

Reasons for Poor Performance

1. Managers under pressure to act quickly 2. Overvalued transactions due to large number of bids 3. Get less-optimal targets.

If not This, than What

1. A Strategic Retreat 2. An Oblique Maneuver 3. A String of Pearls Acquisition Strategy

Alternative Responses

A strategic retreat:
If the merger attack isnt in your main market, consider retreating to your core market rather than diverting valuable resources to protect a marginal one.

An oblique maneuver:
Sometimes you can obtain more advantage by turning to innovation and organic growth.

A String of Pearls Acquisition Strategy:

Instead of Huge M&A in order to match the rivals deal, go for Small acquisitions. (like SAS institute, Novartis & Microsoft) .

Winning the Battlebut Losing the War

Four Considerations
1. What is the Nature of Attack? 2. Which are best suited Strategies to our particular company? 3. What are Required Resources and Capabilities for each strategy? 4. What critical execution Challenges would we face?

Concluded
Choosing the

Right Response, to the Right Attack at Right Time,

through

Right Resources.

Ended

for your Time and Attention!