Supply Chain programs cover topics including:
Consulting, Counterfeit Components, Distribution, Facilities, Logistics, Market Trends, Mergers and Acquisitions, Outsourcing, RoHS, Standards, Training and more.
Beth Dickinson, TFI Marketing Analyst
Technology Forecasters, Inc.
From UK EMS provider ACW International�s selling its China facility, to JUKI and Sony EMCS looking at a joint venture, to numerous other M&A search initiatives not yet public, the electronics industry�s merger and acquisition activity is rising � in a variety of regions and up and down the supply chain.
Several years ago, TFI predicted this latest wave of M&A activity (click on chart to view).
But while some electronics-industry M&A matches have been good for the companies and customers (Flextronics� acquisition of Solectron), others have been unproductive (Solectron�s purchase of C-MAC prompted a difficult integration owing to cultural differences and dozens of conflicting ERP systems).
So, it�s time again to coach the industry in choosing and integrating successful acquisitions.
Clarify Your Goals and Strategy
Ensure you have executive agreement on what the acquisition is going to accomplish � will it expand your customer base?
Provide needed capabilities or certifications for prospective or current customers?
Grant you competitive advantage in pricing or location?
If it�s all of the above, be sure your team is aligned on key components.
Weigh and Consider Your Priorities
How important are the following traits in your M&A targets?
Company profitability (do you need a top performer or is risking a turnaround OK?), customer mix (are you adding a key segment to your customer base or will you be weighted down with a high maintenance, low profitability customer list), quality of leadership team and equipment (sometimes the most critical component), location (if location is a consideration, are you opening a new market for current or prospective clients or are you creating a cost center far from headquarters?), compatible IT systems, and culture (more on that shortly).
Identify Basic �Table Stakes� and Key Differentiators
Key to M&A strategy is knowing your market � and your goals � well enough to determine what makes a prospective acquisition really stand out from the pack.
We suggest you define basic qualifications (aka �table stakes�) and key differentiators that align with your strategic goals.
For example, for Tier III EMS companies, in terms of certifications, table stakes could be that they�d be ISO 9001 certified; while a key differentiator (depending on the target customer) could be ISO 14001 or Design-for-Environment certification.
For a design firm, table stakes might include a target number of mechanical and electronics engineers on staff, while key differentiators might include whether or not they have the capability to manufacture prototypes in-house.
Evaluating Strengths and Weaknesses
And then there�s the obvious question: why is the company you�re considering open to being acquired (or to participating in a merger)?
Is it because of some critical weakness in their business plan, capabilities, or target market?
Or is it because they�re strong in their niche, but can�t grow beyond their current scope without your help?
(For more insights on business partnerships, especially for partnerships with start-ups, please check out Peter Cikalo�s blog.)
Don�t Forget Culture
Having worked at organizations prior to TFI that underwent numerous mergers and acquisitions, I can attest to the fact that sometimes cultural fit trumps all other benefits.
Poor transition planning can kill M&As that look terrific on paper.
Don�t assume that you can just plop your management philosophy, methodology, and values into the acquired or partner company and run from there.
Listening to both management and rank and file employees, and evaluating differences in everything from inventory software and quality protocols to development and sales team synergies �and then planning accordingly � can make or break your success.
Executives rarely have time to find candidates (on the buy or sell side) that match strategic needs enough to guarantee a successful joining.
With the help of a firm expert in the tech industry, you�ll widen your purview of M&A targets, receive objective ratings for weighted criteria, and get it all done more efficiently.
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