MA activity is booming l l 3 Globally

M&A activity is booming l l 3 Globally: number and size of deals are heading toward record levels. For many companies, corporate strategy is focused on M&A as a tool to foster growth and create sustainable value YAAKOV WEBER consulting Group ©

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M&A Phenomenon: Main strategy for internationalization 6 YAAKOV WEBER consulting Group ©

השקעות כספיות F. D. I Cross –Bord M&A 2006 1990 YAAKOV WEBER consulting Group © 7

Cross-border M&As 8 l Hot M&A Markets: BRIC (Brazil, Russia, India and China) l Survey - 77% indicate: up to 40% growth from M&As in the next three years YAAKOV WEBER consulting Group ©

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M&A Phenomenon: High failure rates YAAKOV WEBER consulting Group © 10

Recent Surveys l l 11 Only 13% were highly satisfied that acquisition was completed quickly and with minimal distress. 45% that cost synergies had been captured. IT integration is a critical problem Few understand what is required to integrate acquisition and manage cultural differences. YAAKOV WEBER consulting Group ©

Capital Market Perspective : Measure : Stock Market Value YAAKOV WEBER consulting Group © 14

Reasons for failure : - Premium - Ego - Hubris - Status YAAKOV WEBER consulting Group © 15

Strategic Management Perspective - Related vs. Unrelated Mergers/ Diversification Strategic Fit - Synergy Potential YAAKOV WEBER consulting Group © 16

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The effects of culture clash in IM&As Antecedent conditions Affective states Conflictual behavior National Culture Stress and Tension Level of Commitment Level of Integration: Autonomy Removal Turnover Negative Attitudes Level of Cooperation Corporate Culture YAAKOV WEBER consulting Group © 21

Coming together is a beginning, staying together is progress, and working together is success Henry Ford YAAKOV WEBER consulting Group © 24

Post-Merger-Integration A Paradox: l Need to integrate acquisition to exploit synergy BUT l 30 Integration has negative effects on human behavior, turnover of key talents, innovation and performance YAAKOV WEBER consulting Group ©

Value creation in technology acquisition l Two sets of activities: l The target’s technical team develops a product The acquirer deploys its commercialization capabilities l 31 YAAKOV WEBER consulting Group ©

Integration Trade-offs in Technology Acquisitions 32 l Two conflicting objectives: 1. Time to Market 2. Product pipeline Development l Trade-off between short and long-term performance BECAUSE: YAAKOV WEBER consulting Group ©

Acquisition Integration: Opposite Effects 33 l 1. Short-term: development of products requires low level of integration (high autonomy to target firm) l 2. Long-term – commercialization and continued innovative capacity of the entrepreneurial start-ups require high integration (less autonomy to target). YAAKOV WEBER consulting Group ©

Costs and Benefits of Organizational Integration Benefits Acquirer aid in commercialization –relatively smooth transitions from prototype to market: l Manufacturing l Distribution network l Sales force l Brand name l New Product Introduction process 34 YAAKOV WEBER consulting Group ©

Benefits of Linkage YAAKOV WEBER consulting Group © 35

Costs and Benefits of Organizational Integration (cont’) l Costs Decrease in product development capabilities of target firm: l l l 36 Change process disturb routines in target firm Disrupt existing link between efforts and rewards Key-talents leave target firm YAAKOV WEBER consulting Group ©

Costs of Linkage YAAKOV WEBER consulting Group © 37

Launch of First Product YAAKOV WEBER consulting Group © 38

Launch Subsequent Products YAAKOV WEBER consulting Group © 39

Time-to-Market YAAKOV WEBER consulting Group © 40

Managerial Implications 1. Short-term disruption effects, may be followed by subsequent innovation (in case of high level of integration). 2. development of product pipeline is not always universal objective. First product development may be “bird in hand” rather than “two in the bush”. 41 YAAKOV WEBER consulting Group ©

Managerial Implications (cont(’ l 3. Levels of integration may be: A. Intermediate level B. Gradual Process C. Delayed (timing) D. Speed 42 YAAKOV WEBER consulting Group ©

More findings: High integration has negative impact on innovation outcomes for target firms that have not launched products prior acquisition. 2. High integration has better impact on innovation outcomes for target firms that have launched products prior acquisition than targets who did not. 1. 43 YAAKOV WEBER consulting Group ©

High integration: target with and without prior products YAAKOV WEBER consulting Group © 44

More Findings: 3. High integration has a negative impact on innovation outcomes immediately following acquisition. 4. High integration has a better impact on subsequent innovation outcomes than it has on immediate innovation outcomes. 45 YAAKOV WEBER consulting Group ©

High integration: First and subsequent innovations after merger YAAKOV WEBER consulting Group © 46

Concluding Remarks 1. Be aware of integration trade-off 2. The effects of choice of integration on innovation outcomes is contingent on stage of development of target firm (It is not a choice between “quick” and “slow”). 3. Choice of acquisition targets on the basis of development stage. 4. Build capabilities to manage post-merger integration. 47 YAAKOV WEBER consulting Group ©