【正文】 strategic position of existing businesses or add to the core petencies of the corporation ? Assess impact of acquisitions on longterm shareholder value ? Use acquisition as a vehicle to accelerate growth in key business units Activities: Proactive Strategic Thinking Screening ? Look for all panies that potentially strengthen the corporation ? Don39。MA March1998 1 Bain MA Objectives Introduction ?The purpose of this module is to allow new ACs and Consultants to: – obtain a background understanding of MA –understand what Bain does/doesn?t do in an MA project – review basic analytical tools required in different MA projects at Bain – develop, through an exercise, an important basic analytical skill often used in MA projects 2 Bain MA Agenda Introduction ? Trends in MA ? Guiding Principles for Successful MA ? Bain Approach ? Case Examples – screening – due diligence – sale ? Exercise on Synergy Calculation ? Typical Watchouts ? Key Takeaways 3 Bain MA Agenda Introduction ? Trends in MA ? Guiding Principles for Successful MA ? Bain Approach ? Case Examples – screening – due diligence – sale ? Exercise on Synergy Calculation ? Typical Watchouts ? Key Takeaways 4 Trends F PEC G 80306 01 Drivers of MA Activity Bain MA ? Economy boom or recovery ? Overcapacity in an industry ? Cheap money ? Industry consolidation ? Globalization Strategic Financial Other ?Gain share ?Eliminate petitive threat ?Capture operating opportunities, ., scale efficiencies ?Leverage existing business systems –forward/backward integration –startup alternative ?Diversify/balance portfolio ?Retire excess industry capacity ?Greed ?Ego ?Improve capital markets evaluation of acquirer –meet growth targets –reduce portfolio risk ?Invest idle cash Macroeconomics 5 MA Activity . vs. Europe $52$91$145$161 $163$137$112$133$230$265$361$241$339 $343$220$157$136$193$295$434$641$75901002003004005006007008001987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997$B Europe US CAGR (19921997) 21% 41% European and US MA activity is experiencing similar positive trends. Note: Transaction Value (including Net Debt of Target). Excludes splitoffs. Europe includes 50 major countries Source: SDC Trends Bain MA 6 MA Activity ? MA activity has grown rapidly in nominal dollar terms, peaking in the . in the late 1980s, and then matching those levels last year ? The ferocious merger activity of the late 1980s was driven in large part by the “easy money” afforded by the junk bond market. This resulted in huge, often unsubstantiated, premiums being paid for panies without regard to the value creation opportunities presented (or not presented, as the case may be) by the operations/underlying business of the target ? Growth in merger activity since 1992 has coincided with the economy’s recovery from recession ? Recent MA activity benefiting from: – extended economic health with little recessionary pressure on horizon – a resulting corporate demand for growth – increase in international MA activity as panies pursuing global strategies ? Since late 1997, . and European markets have experienced the resurgence of junk bonds to facilitate the execution of deals getting larger and larger Trends Bain M A 7 Bain MA MA Activity by Country 1996/97 Note: Represents announced deals Source: SDC U S A UK G erm an i cC o u nt ri e sF ran c e B e n e l ux S can d an a v i a I t a l y S p a i n$687$1,028$152$215$81$170$67$88$38$57$37$42$19$34$14$22$ 0 B$ 2 0 0 B$ 4 0 0 B$ 6 0 0 B$ 8 0 0 B$ 1 ,0 0 0 B$ 1 ,2 0 0 BBillions of Dollars1 9 9 71 9 9 6US market dominates the global MA activity. Trends Percent change: 50% 41% 110% 31% 50% 14% 79% 57% 8 Trends US MA Activity by Seller Industry (199297) Source: SDC ( March 98) Value and volume of transactions vary across industries. For example, in the US, puter software and service industries tend to do many small deals. Telemunications, broadcasting and leisure and entertainment have high transaction size. Aggregate Offered Value ($ BN) (bars) Transactions (line) 0 100 200 300 400 500 0 2,000 4,000 6,000 8,000 Bain MA 9 Trends Multiples Paid for Acquisitions E B I T M u l t i p l e s P a i d f o r A c q u i s i t i o n s7012345678910198 88 9 199 29 3 1995 1996Financial BuyersStra tegi c B uye rs Sources: The BUYOUTS Yearbook, Bain Analysis. Over the last five years, the prices paid for acquisitions have been increasing, and reinforces the need for indepth due diligence and analysis to ensure a fair price. Average EBIT Multiple Bain MA 10 Trends Acquisition Success Rates 75%67%50% 50%0%10%20%30%40%50%60%70%80% Harvard Business School Survey of CFOs London Business School Bain Company Study Percent of Acquisitions Failing* in First Five Years Percent of Total The majority of acquisitions have been deemed failures. Notes: Failure defined as earnings less than cost of capital and/or subsequently divested. Bain MA 11 Common Reasons for Failure ?Poor strategic fit –bination does not provide petitive advantage –lack of understanding of the business ?Overpay –imperfect information/wrong valuation –too optimistic in forecasts/synergies –unforeseen industry downturn/emerging technology –auction environment。 failure to set/stick to ?walk away? price –CEO/management ego ? revenue growth vs. profitability ? emotion vs. analysis