Making the deal real how GE Capital integrates acquisitions

The integration-acquisition process by GE Capital Services is divided in four

stages:

1. Preacquisititon: Goes before the acquisition even begin, before the deal
closes. It’s the stage where negotiations take place, identification of barriers
and assessments of the companies functions and leaders but also the
cultural environment. All of this to develop a communication strategy in
order to close the deal.

2. Foundation building: Executives are familiarized with GE practices, where

together they formulate the integration plan that included the communication
plans and the plan for the first 100 days. The different senior managers are
included in this process, and sufficient resources were provided for the
optimal performance of the processes.

3. Rapid integration: They seek to accelerate the integration processes

through mapping and CAP, continuous auspices are carried out both on the
staff and on the processes. The process is under continuous learning in
order to improve and refine it, they use feedback to adapt the process. In
this stage they resort to manager exchange for a short period of time.

4. Assimilation: At this stage, they focus on developing tools to be successful,

this includes improving company practices, processes and language. Staff
are educated through the Crotonville platform and different educational
centers, doing continuous audits that are integrated into the processes.
Manager exchanges become long-term.

Lessons learned by GE from the process:

1. The acquisition integration doesn’t start when the papers are signed but
the process start way before that, the company has to do research and
determined unknown information about the acquisition party and decide
whether the acquisition is a good decision or not. Paying close attention
on the actual management staff of the new company.

2. Integration management: it’s a different area of the company, the people

involved in this process has to focus solely in this process, the manager
handles a lot of money and the person in this position has to have
experience and needs to be trained to do this successfully, therefore this
have to be recognize as a distinct business function, just like other more
common like marketing or finance.
 3. The company has to be clear since day 1 about what’s next. Primary
about the management structure, how is going to work and whose doing
what. And if changes are un order, they have to be announced as soon
as possible, uncertainty can make the staff feel insecure and mistakes
can be made, which and start to drain value.

4. In order to have a successful integration with the acquired company, the

most important part that have to keep in mind is the meld of the cultural
differences, and this can be achieve by the people involve, get them to
work together and quickly solve problems and accomplish results.

Models used to select the country in which to start internationalization

 Incremental internationalization model:

The incremental internationalization model argues that managers’ lack of

knowledge about foreign markets and their aversion to risk explain the firm’s
selection of countries into which to expand. This is why Managers select countries
based on the psychic distance between home and host country. Avoiding
differences in language, education, business practices, culture, and industrial
development, managers select countries in which the characteristics of competitors
and customers are similar to those of the home country in order to use the most of
this existing business knowledge. The firm internationalizes sequentially,
expanding first into countries that are psychically closer to the country of origin and
later entering more distant countries.

 Born-global firms’ model:

The model assumes that managers have internationalization knowledge before the
firm ventures abroad. Managers developed the attitudes, experience and
entrepreneurial capabilities needed to manage across countries by working in other
companies before joining the firm. The success of the internationalization process
based in the advance technology and continues innovations made by the home
company and can be applied abroad. They expect the host country to accept and
use their products and services even if they do not completely meet their needs
due to their reputation.

 Non-sequential internationalization model

A firm may develop, in its home operations, knowledge that is useful to overcome
foreign expansion difficulties. As a result, they can enter countries that are very
different from its home country for the first foreign expansion. The model’s
assumption is that are three types of knowledge needed to internationalize:

o International knowledge: complex information about the needs of

consumers, the characteristics of distribution channels, the nature of
 competitors, the firm alters its structure and routines and develops a
capability to coordinate multiple operations and deal with the
additional diversity, they need to manage a variety of sources of
knowledge and deal with the challenge of operating at a distance.

o Business knowledge: The characteristics of customers vary across

countries because of differences in religion, language, wealth, or
culture. The characteristics of competitors vary across countries
because of differences in the structure and rivalry of industries and a
firm that operates in an industry whose customers are other
companies is able to use business knowledge across countries more
easily and may engage in non-sequential internationalization.

o Institutional knowledge: about how to operate and manage in a

different institutional environment. The institutional environment is the
set of norms, rules and regulations that determine economic
relationships in a society.