The Role of Competitive Intelligence in
Strategic Partnerships
(M&A, Strategic Alliances, Consortia)
Presented by:
Arik R. Johnson
arik@aurorawdc.com
Managing Director
Aurora WDC
Introductory Remarks
• About Arik
• About Aurora
• Agenda Items and Process for the Day
Strategic & Tactical Realms
This session is for you if...
• You would like to contribute to your firm’s
relationship-building activity
• You would like to expand the application and “addingvalue” of Intelligence within your firm
• Your firm’s growth strategy includes M&A
• You would like to learn what Intelligence processes are
applied in relationship-building.
What we have learned about M&A
• Large consulting firms:
– Casual scanning is norm
– “Too-late” deals
– Are not any more productive than “home-grown” talent in the
initial M&A stages
– Force their acquisition model on you (very large)
• Firms’ radar screen had better resolution
• Smaller deals were impressed and intimidated with
consulting companies
• In-house Intelligence departments Intelligence
consultants are more efficient and effective on the frontend.
Why M&A as an
Intelligence activity?
• Harvard Business Review reports in 1998 there were
5,000 acquisitions in the US totaling $.5T
• KPMG Peat Marwick says in 1999 $2T was spent on
acquisitions world-wide
• Cisco Systems grew in 1999 to $12B Rev. via 42
acquisitions, expected to make 25 in 2000
• IPO’s are at an all time high
• Strong stock market produces buying leverage faster
than lower interest rates
Steps in the M&A process
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Relationship criteria
Scan, Search, and Identify Targets
Evaluation and Analysis
“Due Diligence” - in situ
Recommendation
Negotiation
Consummation
Integration
Steps in the M&A process
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Relationship Criteria
Scan, Search, and Identify Targets
Evaluation and Analyzation
“Due Diligence” (in situ)
Recommendation
Negotiation
Consummation
Integration
Stage
Criteria
Level of functional involvement
ID
Targets
Evaluate
Analyze
Due
Diligence
Recommend Negotiation
Consummation
Integration
Intelligence
Research
Business Units
Finance
Technical Assessment
Legal
Executives
M&A Specialists
Transition Team
Logistics
HR
High
Level of CI
Involvement
Low
Stage
M&A process activities
Identify
Targets
Relationship
Criteria
Intelligence Processes
Delphi
Technique
Management
Guides
Criteria
Set
•Candidacy
•Purchase
Compilation
•CI
•Trades
•Sales
•Marketing
•Consultants
Evaluate,
Analyze
“Due
Diligence”
External
Internal
Criteria
Matching &
Preliminary
Analysis
in situ
Audit and
Examination
•Products
•Financial
•Strategy
Candidacy
Candidate
List
Negotiation
Consummation
Integration
Purchase
Company
Overview
(SWOT)
Company
Report
(checklist)
Support,
Reference
Delphi technique
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Reiterative process with executives
1. Initial criteria is brain-stormed
Criteria compiled for ranking
2. Executives rank criteria by importance
Criteria sorted by ranking for cut-off
Completed relationship criteria
Final approval
Criteria for acquisition candidacy
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Return on Investment (ROI)
Break-even (B/E)
Compounded Annual Growth Rate (CAGR)
Gross Profit Margin (GPM)
Fill manufacturing
Products and services
Intellectual property
People and knowledge acquisition
Investment scale and scope
Criteria for acquisition candidacy
Fit
Criteria
Acceptable
Exceptions
Criteria
Definition
Break-even
Break-even should
occur before EOY3.
Must be profitable Y1.
B/E < 36 mos.
Leveraged buy-out.
Compounded
Annual
Growth
Rate
CAGR must be greater
than industry forecast.
CAGR must be greater
than our forecast.
CAGR > Ind,
CAGR >
Our forecast
There might not be
forecasts available
for certain
market segments.
Investment
Scale
Total investment should
be less than $30M.
I < $30M
Greater investment
would be considered
with additional,
outside partners.
Compilation from all sources
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Allow for multiple input sources
Executives
Sales and sales support personnel
Suppliers
Customers
Surveillance
Trade publications
Specialty newsletters
Venture capital activity
Candidate list
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Company name, address, phone, contact(s)
Year founded
Product-markets
Differentia vs. competitors’
Funding history
Revenues
Employees
Sales structure
Existing relationship with our firm
Notes and source of info
Company overview
• Description of Company
– Recent sales, GPM, NIAT, employees, sales/emp, market cap, stock
price, cash, founded, IPO date, revenue history
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Summary of situation and appeal
Founders, investors
Management
Products
Customers
Intellectual property
Acquisition criteria fit summary
Begin SWOT analysis
In-situ audit and examination
• “Due diligence”
• Checklist
– Topical
– Specific questions for interviews
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Preliminary Audit
Presentations
Interviews
Extended SWOT analysis
Company Report (20 - 50 pages)
Recommendation
Extended SWOT Analysis
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Market share gain
Market entry
Intellectual property
Financial
Management team
Owners, founders
Products/services
Manufacturing
Strategic fit
Extended SWOT Analysis
Criteria
Strengths
Gain
Mkt Share
- ext. current
prod. line
- entry into
Mkt 6
Intellectual
Property
Product
Leverage
Weaknesses
Opportunities
Threats
- Prod1 CAGR>250%
- Prod2 CAGR>54%
- Prod3 emerging
- major competitors
- 4 patents
- unclear if SW
- 3 pending
patents okay
- 9 2B Submt
submt’d - need license for
- clear tech
1/2 of roadmap
roadmap
- some leveraging
with our R&D
- 2 possible
infringement
suits
- prods extend - EDP is not our
our Mkts
primary focus
1&2
- Prod2 requires
cust support
we don’t have
- can take Prod1
into our Gamma
with extra FAB’s
- time to mkt
- no resources
to leverage
- no prod. history
- may have over
designed prods
Negotiation, consummation,
integration
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Pass project to M&A specialists, stay involved
Personal intelligence
Negotiation strategy formulation
Negotiation support
Testing of assumptions
Monitoring of directional changes
Transitional support
• On to the next project...
Benefits from Intelligence
involvement in M&A
• To the firm
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Provides an “in-house” front end process
Provides continuous scanning resource
Reduces costs
“Due diligence” vs. intelligence
• To the Intelligence department
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Extension of service into high-impact activities
Very visible “value-adding” service
Cross-pollination learning
Adrenaline rush
Summary
• Understand Intelligence’s contribution to business
relationship development
• Understand the M&A process and Intelligence’s role as
a “front-end” processor
• Possess a tested methodology for business relationship
development
• Access to templates and examples
• Questions?
For Further Information
•
Society of Competitive Intelligence Professionals
www.SCIP.org
•
Recon Best Practices Knowledgebase:
www.AuroraWDC.com/essays