Tiếng anh chuyên ngành kế toán part 61

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must be budgeted as they can have a significant impact on postmerger cash
flows.
The detailed plan must start at the highest levels of the organization. If
executives from the two firms are going to lead the transition, they must be
confident of their future roles and comfortable with their compensation plans.
In the Daimler-Benz-Chrysler deal, there was a good deal of animosity be-
tween executives as the German managers watched their American counter-
parts walk away with multimillion-dollar payoffs from their Chrysler stock
options while simultaneously receiving equity in the newly merged firm. A fair
incentive system must be in place at the corporation’s executive suite before
any implementation plan begins.
Once the key managers have been identified, retained, and given the
proper incentives, they must carry the vision of the merger to the rest of the
organization. To combat the productivity problems discussed above, managers
have two critical weapons, speed and communication. Remember that the
enemy from the employee’s perspective is uncertainty, and absent timely infor-
mation from above, they will usually assume the worst. Executives must move
quickly to convey the vision for the merged entity and to assure key employees
of their role in executing this vision.
While all employees should be part of this process, those that deal with
the firms’ customers should receive special attention. We saw how Cisco moves
quickly to retain key salespeople and reassure important customers that the
merger will only improve product offerings and services. In contrast, the 1997
merger between Franklin Planner and Covey Systems failed to heed this ad-
vice. Combining sales forces was seen as a key source of synergy, but the com-
pany was unsuccessful in merging the two compensation programs.
Divisions were especially strong within the company’s 1,700-person sales force,
which marketed its seminars and training sessions. Former Covey salespeople
got higher bonuses than Franklin staffers. Covey employees also kept their free

medical coverage, while Franklin’s had to pay part of their premiums.
19
This situation created such sniping by sales reps on both sides that productivity
plunged.
The implementation plan must focus management resources on those areas
at the root of the deal’s synergies. If value is going to be created, it will only be
by executing on those aspects of the deal that were the original rationale for
merging. Without a plan, it is too easy for managers to get bogged down in de-
tails of the implementation that have little marginal impact on shareholder
wealth. In the failed AT&T-NCR merger, the hoped-for technological synergies
between telecommunications and computers never materialized as managers
worried more about creating a team environment.
In many cases, the disappointing performance of mergers can be traced
to a failure to account for cultural differences between organizations. These
differences can be based in corporate culture or national culture in the case of
cross-border deals. In many transactions, both corporate and national cultural
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589
differences are present. Because they are difficult to measure and to some ex-
tent intangible, cultural differences are often ignored in the pre-acquisition
due diligence. This is unfortunate since they can ultimately be the most costly
aspect of the implementation process. In mergers where the firms have similar
cultures, the rapid combination of the two organizations can actually be easier.
However, where there are large cultural differences, executives should con-
sider keeping the entities separate for some time period. This allows each to
operate comfortably within its own culture while at the same time learning to
appreciate the strengths and weaknesses of the cultural differences between
the organizations. Such an arrangement may delay the realization of certain
synergies but, in the end, is the most rationale plan. The key is that culture can
have a huge impact on value (both positive and negative), and therefore needs

to be part of the planning process from the very beginning—even before any
acquisition offer is made.
To ensure success, the postmerger implementation process must be care-
fully planned and executed. Even when this is done, there will undoubtedly be
surprises and unanticipated problems. However, a well-thought-out plan should
minimize their negative impact. The most important parts of the plan are
speed and communication, which are critical weapons in the fight against suc-
cessful implementation’s main enemies—uncertainty, anxiety, and an in-
evitable drop in productivity. A plan conceived and implemented swiftly by
the firms’ executives, with their full and active leadership, improves the
chances for a successful transition. As always, we urge acquirers to seek the ad-
vice of knowledgeable experts on the implementation process.
SUMMARY AND CONCLUSIONS
Mergers and acquisitions are a popular way for firms to grow, and as economic
globalization continues, there is every reason to believe their size and fre-
quency will increase. However, it is not that case that profitable growth by ac-
quisition is easy. The empirical data presented in this chapter makes it clear
that corporate combinations have historically failed to meet the operational
and financial expectations of the acquiring firm’s managers and shareholders.
While target firm shareholders typically earn 30% to 40% premiums, M&A
transactions do not create value on average for the acquirer’s stockholders.
This information should make it clear that a carefully designed acquisition
strategy, realistic estimates of the potential synergies, and an efficient imple-
mentation plan are critical if the historical odds are to be overcome.
Managers must understand that the only source of incremental value in
corporate mergers and acquisitions is incremental future cash flows or reduced
risk. These cash flows can come from increased revenues, reduced costs, or tax
savings. The sum of the potential value created from these incremental cash
flows is called synergy. For a deal to be successful financially the premium
paid and the costs of the transaction must be less than the deal’s total synergy.

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Making Key Strategic Decisions
Only then will the bidder’s shareholders see their wealth increase. This sounds
simple, but in a competitive market for corporate control, there must be a rel-
atively unique relationship between the bidder and the target that other firms
cannot easily match. The market must perceive the target as worth more as
part of your firm than alone or with some other firm.
There are many practical details that potentially impact the creation of
value in M&A transactions. These include the choice of payment (cash vs.
stock), the accounting method (purchase or pooling), tax considerations, and
antitrust concerns. Each of these may affect future cash flows and synergies
and therefore must be part of the premerger due diligence process. We de-
scribe briefly how each factor can impact value creation, but refer potential
bidders to investment bankers, professional accountants, tax experts, and attor-
neys for the most timely and customized advice.
The final and most important part of the process is the postmerger imple-
mentation plan. Managers often focus on completing the transaction, which is
unfortunate, since the transition to a single organization is where the keys to
value creation lie. A detailed implementation plan must be developed before
the transaction closes and communicated quickly and effectively to employees
by the firm’s new leadership. The plan must focus on the roots of synergy in
the deal to ensure the successful creation of the anticipated shareholder value.
In deals where there are major cultural differences, special attention must be
paid to smoothly integrating these differences. Failure to do so can doom an
otherwise sound transaction.
In the end, profitable growth by acquisition is possible but difficult. The
market for corporate control is competitive and it is easy for bidders to overes-
timate potential synergies and therefore overpay for acquisitions. To avoid this,
managers must develop and stick to an acquisition plan that makes strategic
and financial sense. Only then can they hope to overcome history, human

nature, and the odds against successfully creating shareholder value through
mergers and acquisitions. Our hope is that this chapter provides the basic in-
formation needed to embark on such a course.
FOR FURTHER R EADING
Morosini, Piero, Managing Cultural Differences (New York: Elsevier, 1997). A com-
prehensive discussion of culture’s role in mergers and other corporate alliances.
The focus is on cross-border deals, but the strategies for effective implementa-
tion can be used by all.
Sirower, Mark L., The Synergy Trap: How Companies Lose the Acquisition Game
(New York: Free Press, 1997). Focuses on assessing the potential for synergies
and value creation in mergers.
V
lasic, Bill, and Bradley A. Stertz, Taken for a Ride: How Daimler-Benz Drove Off with
Chrysler (New York: HarperCollins, 2000). A fascinating behind-the-
scenes look
Profitable Growth by Acquisition
591
at the Daimler-Benz-Chrysler deal. Clearly shows the roles of culture, human
nature, and managerial hubris in M&A transactions.
Weston, J. Fred, Kwang S. Chung, and Juan A. Siu, Takeovers, Restructuring, and
Corporate Governance (Upper Saddle River, NJ: Prentice-Hall, 1998). An ex-
cellent reference for developing and implementing an effective M&A strategy.
INTER N ET LINKS
www.cnnfn.cnn.com/news/deals Up-to-date stories on deals, all free
information
www.stern.nyu.edu/∼adamodar Academic site with numerous
quantitative examples and spreadsheets
that can be used to value potential
synergies
www.mergerstat.com Comprehensive source of M&A data;

some good free information
www.webmergers.com Good reports on M&A activity of
internet companies
NOTES
1. For a concise summary of and more detail on empirical tests of M&A perfor-
mance see chapter 7 of J. Fred Weston, Kwang S. Chung, and Juan A. Siu, Takeovers,
Restructuring, and Corporate Governance (Upper Saddle River, NJ: Prentice-Hall,
1998).
2. Anup Agrawal, Jeffrey F. Jaffe, and Gershon N. Mandelker, “The Post-
Merger Performance of Acquiring Firsms: A Re-examination of an Anomaly,” Journal
of Finance 47 (September 1992): 1605–1621.
3. Weston, Chung, and Siu, 133, 140.
4. Business Week, October 30, 1995.
5. Merger & Acquisition Integration Excellence (Chapel Hill, NC: Best Prac-
tices, 2000).
6. For a more thorough discussion of this topic, see Weston, Chung, and Siu,
chapter 5.
7. The Wall Street Journal, November 30, 2000, B4.
8. Ibid.
9. Business Week, April 20, 1998, 37.
10. Business Week, October 16, 1995, 38.
11. The Wall Street Journal, September 21, 2000, C22.
12. The Wall Street Journal/New England, July 28, 1999, NE3.
13. See Harvard Business School case #285053, Gulf Oil Corp—Takeover, for a
complete discussion of this value creation.
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Making Key Strategic Decisions
14. Adapted from Brian Coyle, Mergers and Acquisitions (Chicago: Glenlake,
2000), 32.
15. J. Fred Weston and Brian Johnson, “What It Takes for a Deal to Win Stock

Market Approval,” Mergers and Acquisition 34, no. 2 (September/October 1999): 45.
16. Weston and Johnson, 45.
17. “M&A Time Line,” Mergers & Acquisitions, 35(8) (September 2000): 30.
18. Ira Smolowitz and Clayton Hillyer, Working Paper, 1996, Bureau of Business
Research, American International College, Springfield, MA.
19. Business Week, November 8, 1999, 125.