Aims

• To understand the key issues and major problems facing mergers and acquisitions (M&As) in the global manufacturing setting, especially at the post M&A integration stage
• To capture 'best practice' in cross-border M&A integration, including tools, techniques and processes
• To develop a strategy process and a set of practical tools, techniques and methodologies requisite for achieving cross-border M&A synergy and global manufacturing system integration

Background

Currently one of the most critical issues facing manufacturing companies is how to leverage capabilities globally. Cross-border M&As have become the most prevalent means of foreign direct investment (FDI) and constitute more than 80% of the world total - some $1 trillion in 2000 alone. And, further growth in this trend is anticipated.

Despite their increased popularity, however, less than 20% of all M&As succeed. According to extensive research by academics and consultants, more than 50% of all transactions lead to an actual decline in shareholder value. This underscores the challenge facing industry to integrate merged systems and ultimately their ability to gain synergies.

Some examples of the causes underlying M&A failure include:

• Hidden weaknesses/problems in acquired companies lead to over-optimistic expectations of the acquirer or failure to anticipate difficulties
• Strong internal/external pressures for swift decision-making encourage a financial focus as opposed to the assessment of crucial operational or cultural issues.
• Control by very few people with a limited time commitment or continuity throughout the pre- and post integration process. Frequently there is no a formal function/team taking responsibility to systematically control M&A projects.
• Lack of processes in place to deal with the complex organisational dynamics necessary in pursuing M&A synergies. Merged companies frequently take years to deliver full organisational integration.

Research scope

The proposed research project seeks to build four strands of knowledge:

• Generic M&A Process - to identify drivers, contingency patterns, major phases, key issues, and there impact on manufacturing systems and business value,
• Post M&A Integration Process - to specify and validate the processes for static design and dynamic transformation of the merged systems,
• New Manufacturing System - to understand and model the new architecture and dynamics of manufacturing networks by extending boundaries along global, cultural, and value dimensions; and
• Value Creation Mechanisms - to model the relationship between new manufacturing systems, strategic capabilities, and business value creation.

Research approach and stages

Research process

Stage 1:Problem/Issue Identification - identifies key problems & their causes during different phases of the M&A process

Stage 2: Understanding/Tackling Isolated Challenges - builds a detailed new or integrated understanding of individual problems/challenges to post M&A integration

Stage 3: Process Integration - develops an integrated process for pursuing cross-border M&A synergies

Stage 4: Process Validation - tests and implements the post M&A integration process

Individual involvement mechanisms

Companies can participate in every stage of the research process.

Stage 1:Review of existing M&A experience, including strategy and approaches, issues, problems, and best practices.

Stage 2: Identification of key challenges and existing practices used in tackling the challenges.

Stage 3: Participation in workshops to discuss and develop integrated strategy processes.

Stage 4: Review of post M&A integration process with the aid of a newly developed workbook.

Outcomes

• a generic cross-border M&A process highlighting key technology and management tasks
• a map of key drivers and triggers for cross-border M&As, and typical M&A patterns
• demonstrative examples and models about challenges and mechanisms in M&A integration
• a model of value creation for global manufacturing networks and its relation to capability
• the post cross-border M&A integration process

Further information

Yongjiang Shi E: ys@eng.cam.ac.uk