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Acquisition Plans:
Phases 1 & 2 of the
Acquisition Process
If you don’t know where you are going,
any road will get you there.
—Alice in Wonderland
Course Layout: M&A & Other
Restructuring Activities
Part I: M&A Part II: M&A Part III: M&A Part IV: Deal Part V:
Environment Process Valuation & Structuring & Alternative
Modeling Financing Strategies
Cross-Border
Transactions
Current Learning Objectives
• Primary learning objectives: To provide students with an
understanding of
– a highly practical “planning based” approach to
managing the acquisition process and
– the issues associated with each phase of the M&A
process
• Secondary learning objectives: To provide students with
an understanding of how to
– select the correct strategy from a range of reasonable
alternatives and
– develop an acquisition plan
The Acquisition Process
User Engages
Create Deliver Analyze
Via Interface
Optimize
Customer Needs: To cost-effectively create content, display/deliver content, generate web user
activity/transactions, analyze how site utilized, and improve process to increase transactions
Adobe External Analysis Continued
Key Trends:
• “Renting” software online
• Customers buying multiple software capabilities
from a single vendor to ensure compatibility
• Business model/strategy based on “perpetual”
licensing of software highly cyclical (i.e.,
customers can postpone upgrades to new
products)
Adobe Internal Analysis
• Adobe’s core skills focused on developing
website design software
• Sales concentrated on only one segment
of the value chain (i.e., create content)
• Limited experience in how to develop a
“subscription-based” business
model/strategy
Adobe’s Mission, Business, and
Implementation Strategies
• Adobe's vision/mission: To revolutionize how the world
engages with ideas and information
• Business Strategy/Model: To move
– From selling customers perpetual software licenses
and increasing revenue by upgrading current clients
and attracting new clients
– To a monthly subscription model
• Implementation Strategy1
– Acquire a vendor targeted at a different phase of the
customer value chain whose revenues are based on
the subscription model
1Alternative implementation strategies include solo venture, partnering, or acquisition.
Discussion Questions
1. Why might Adobe have decided to
acquire Omniture rather than to partner
with Omniture or to build a similar
capability on its own?
2. What considerations might have made
Omniture an attractive acquisition target
for Adobe?
Application
1. Discuss how you would use information
obtained from the external, internal, and
opportunities/threats identification analyses
conducted during the business planning
process to select an appropriate business
strategy. Be specific.
2. Discuss how you would select the appropriate
implementation strategy. Be specific.
(Hint: Consider the resources—broadly
defined--required/currently available to exploit
potential opportunities and threats.)
Phase 2: Acquisition Plan (How to
implement the acquisition)
• Plan objectives (support the realization of key
business plan objectives)
– How will the acquired firm enable the
acquiring firm to better realize its
vision/mission and business plan objectives?
Examples of Linkages Between Business and Acquisition Plan Objectives
Business Plan Objective Acquisition Plan Objective
Financial: The firm will Financial returns: The target firm should have
Achieve rates of return that will equal or exceed its cost of A minimum return on assets of x%
equity or capital by 20?? A debt/total capital ratio y%
Maintain a debt/total capital ratio of x% Unencumbered assets of $z million
Size: The firm will Size: The target firm should be at least $x million in revenue
Be the number one or two market share leader by 20??
Achieve revenue of $x million by 20??
Growth: The firm will achieve through 20?? annual average Growth: The target firm should
Revenue growth of x% Have annual revenue, earnings, and operating cash-flow
Earnings per share growth of y% growth of at least x%, y%, an z%
Operating cash-flow growth of z% Provide new products and markets of x% by 20??
Possess excess annual production capacity of x million units
Diversification: The firm will reduce earnings variability by x%. Diversification: The target firm’s earnings should be largely
uncorrelated with the acquirer’s earnings.
Flexibility: Achieve flexibility in manufacturing and design. Flexibility: Target should use flexible manufacturing techniques.
Technology: The firm will be recognized by its customers as the Technology: The target firm should possess important patents,
industry’s technology leader. copyrights, and other forms of intellectual property.
Quality: The firm will be recognized by its customers as the Quality: The target firm’s product defects must be x per million
industry’s quality leader. units manufactured.
Service: The firm will be recognized by its customers as the Warranty record: The target firm’s customer claims per million
industry’s service leader. units sold should be not greater than x.
Cost: The firm will be recognized by its customers as the industry’s Labor costs: The target firm should be nonunion and not subject to
low-cost provider. significant government regulation.
Innovation: The firm will be recognized by its customers as the R&D capabilities: The target firm should have introduced at least x
industry’s innovation leader. new products in the last 18 months.
Phase 2: Acquisition Plan