Corporate Strategy – Growth Through Acquisition
When a company undertakes significant growth, especially through acquisition, it is important that the company does not just become a collection of individual businesses. Instead, the company’s business strategy would need to be carefully analyzed and re-evaluated. The following training session can be delivered to management teams in preparation for a corporate acquisition:
Diversification evaluation:
- Industry and its future prospects for growth, profitability, return on investment
- The cost of entering the industry and barriers to entry for start-up companies
- Identifying synergies, if any and determining strategic fit
- Calculating industry attractiveness scores
Business unit evaluation:
- Evaluate business unit underlying strengths by applying appropriate criteria
- Determining competitive value and assessing value chain activities
Financial and non-financial Assessment:
- Budgeting: determining business unit’s ability to generate internal cash flows; meet its debt obligations
- Rapidly growing businesses versus stable businesses – advantages and disadvantages from the financial perspective
- Determining nonfinancial resource availability – does the acquirer have the needed resources and capabilities to ensure successful implementation of the growth strategy?
Harvard University Learning Materials to be used in group exercises:
- Carrier and Tyler Refrigeration: An Acquisition for Growth: Carrier, a division of mulitbusiness United Technologies Corporation (UTC), is looking for ways to grow its business. Carrier is considering expansion into commercial refrigeration and is examining a proposed purchase of Tyler Corporation--a major player in the display-case market. The case provides detail on various segments of the heating and cooling markets and thus allows analysis of the attractiveness of these segments to Carrier. The case also provides detailed forecasts to use in valuing the target, Tyler. The mechanics of a basic valuation are straightforward. There are, however, several opportunities for a more refined analysis.
Other Resources to be used in the course:
- Growth through acquisitions: a fresh look by Patricia Ansligner and Thomas Copeland
This course has been suggested by AllaVolodina who teaches in university and corporate settings. Alla has developed a variety of training outlines and course outlines (at York University amongst other universities). Check out AllaVolodina blog for more articles: allavolodina.com.
