Integration games
First Investment bank
EMBA 2017 – 2018: Integration games - Individual assignment
By: Karim Cheniour
I. Deal summary
1.1.
Position
Member of First Investment Bank team
1.2.
Deal summary table
Deal
elements
Price
Actual deal
£ 83m
Ideal deal
(Power
Bank’s deal)
£ 82m
Performance Gap
Power bank proposed a deal that saves
1 million compared to First Bank’s
deal.
Payment
The purchase price was No retention We noted during the due diligence that
methods
agreed to be £83m was proposed. there is some unclear areas identified>
(with 20% retention
Accordingly, we decided to propose a
subject to the final)
retention. It was strange that Power
including
to
Bank accepted to pay the full amount
commitment to the
upfront.
reimbursement of the
£10m given to Mr Van
Meerden Father. The
Seller will take in
charge the expenses
related to the assembly
of dismantled machine
and the dissolution of
the US JV.
Engagement
Paying
legitimate Shutting down The agreement included the clause that
creditor claims against the
joint sellers agree to pay any legitimate
the Company.
venture
in creditor claims against the Company
USA
and within one year of closing. However,
recovering
we noted that this clause wasn’t
machines.
written and presented in a proper way
to protect the company. A better care
was supposed to be made to this area.
Due diligence £ 530k
£ 730k
We have invested in due diligence
expenses
process less than the allocated budget
allocated. We believed that the Due
Diligence wouldn’t be efficient and
reveals all needed information.
Power bank succeeded to get more
useful information from their Due
Diligence investigation and that helped
them to win the deal.
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EMBA 2017 – 2018: Integration games - Individual assignment
By: Karim Cheniour
Management
Securing the
same
management
by
offering
them
incentives and
promotions
with a 3 years
noncompetition
condition.
Deferred
The payment of 20% of No concrete
consideration the deal price was deferred
subject to the final actions.
valuation after a full
and
detailed
due
diligence which will be
conducted within sixmonth from the date of
contract signature.
Keeping
the
same
Securing
the
same
management
by
offering them incentives
and promotions with a
3
years
noncompetition condition.
We understood that the management
was a key element in the company.
However, subsequently, we noted that
it is diicult to retain skilled top
management even with retention
conditions.
It was a good idea to insert such
condition to be able to allocate any
subsequent expenses on the deal price.
II. Reflections and learning
2.1.
First Investment bank’s deal versus the other deals:
Although the power of negotiation of Firs Investment Bank wasn’t important, we succeeded to
propose some crucial conditions such as the retention of 20% of the price and shutting down the
US joint venture.
The weakness in what our bank did compared to some of the others is the fact that we ignored
the environmental impact of the business and we didn’t keep attention to the importance of an
environmental audit.
Regarding the investigation and Due Diligence work, we believe that we did a good job. Our
questions and request were focused and clear and helped us to get useful information. But, at a
certain point of time, we understood that we are not going to obtain more useful data and that’s
why we stacked below the allocated budget for Due Diligence.
2.2.
Learning:
 I think that the most important learning and takeaway from the simulation is that
Finance is not everything.
Indeed, we used to believe that financial information is the most important element to
understand a business, conduct a due diligence and make the best deal. However, the
simulation showed us that finance is only a single piece of the puzzle. Understanding the
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EMBA 2017 – 2018: Integration games - Individual assignment
By: Karim Cheniour
business, assessing the risks, dealing with the management are other elements that are
also so important to consider.
 Also, I understood that the post-acquisition strategy is as important as the acquisition
process in itself or even more important. Accordingly, the acquirer must draw-up an
efficient strategy to protect himself from potential bad surprises.
 Writing the deal contract is not an easy task. We finally understood that every word has
an impact and we have to be very prudent and diligent while writing the contract. We
must incorporate all required umbrellas to protect our buyer.
 Apart from that, we understood that it’s difficult to retain skilled people in a
transformation process. Negotiation with them was very tough and we understood that
even a better compensation and non-competition conditions are not enough to ensure
their loyalty.
 Negotiation is an important asset to conduct and arrange any deal. It requires skills and
talents.
 Impact of culture: the impact of culture is real and effective and should be taken into
account. Managing a deal in Tunisia is different tha managing a deal in Japan or in United
Kingdom. We noted that the Japanese potential buyers did not draw much more
attention to the financial aspect but were more focused on the social, environmental and
organisational aspects. This was a valuable learning from the simulation which shows
that the people’s culture should be highly taken into account in such processes.
2.3.
Other thoughts:
 Team work: The experience showed that team work was more efficient and profitable
than individual work. Even with the stressful environment and pressure, we were able to
organise tasks between ourselves and perform ensure communication between all the
members of the team.
 Public speaking: The experience helped us to improve our public speaking skills.
Although the aggressive behaviour of the Japanese board, we were able to deal with
them and impose our opinion and suggestions.
 Being on time: The experience helped us to improve our public speaking skills. Although
the aggressive behaviour of the Japanese board, we were able to deal with them and
impose our opinion and suggestions.
 Time management: We understood that time management is important to ensure the
success of the process. Being on time is appreciated by the other stakeholders and allows
us to optimise and improve the decision making process.
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