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Build, Borrow, or Buy. Laurence Capron
Читать онлайн.Название Build, Borrow, or Buy
Год выпуска 0
isbn 9781422143728
Автор произведения Laurence Capron
Жанр Экономика
Издательство Ingram
Paranoia is a common business condition. Many firms are simply suspicious of collaboration, often for the wrong reasons. As we noted above, many executives overvalue control—and believe that collaboration will reduce their control over resources.
In our conversations with executives from telecommunication incumbents, many viewed alliances “as a route to diminishing our skills,” as a way “of shopping core competencies rather than sharing knowledge,” and as eventually transforming partners into competitors. Fully 80 percent of the surveyed executives shared concerns of exclusivity, control, and resource protection. Not surprisingly, 80 percent also reported that they used M&A, rather than alliances, to gain exclusive access to the firm controlling the needed resource. More than two-thirds of the executives also wanted to keep their own assets closely held, choosing M&A over alliances to protect their differentiation and unique resources.
As you can see, alliances are often tricky to manage. Some analysts suggest that no more than 30 percent of alliances succeed in meeting the partners’ respective goals. Because alliances are almost always transient relationships, executives naturally fear the negative consequences of collaborating with a partner that might abuse them before or during the alliance or after exiting it. Those who can overcome such fears will have to actively manage alliances throughout their life cycles and easily foresee milestones and termination. Despite the risks, however, you should carefully assess the potential of an alliance before jumping heedlessly onto the acquisition path.
Chapter 4 will help you decide how to choose between alliances and acquisitions when interfirm collaboration is needed. As we will demonstrate, alliances are most effective when relatively few people and organizational units from each party must work together to coordinate the joint activities. A limited cast of characters also makes it easier to align the partners’ incentives. But if the joint actions to obtain and develop strategic resources require deep involvement—for coordinating the use of resources or attempting to align goals, or both—you will usually benefit by considering an acquisition. You will have bought not only key resources, but also the assurance of retaining the value of their successful exploitation.
Question 4. Can You Integrate the Target Firm?
Before choosing the M&A path, bear in mind that acquisitions are almost always more time-consuming and expensive than even the most pessimistic scenario you could imagine. Acquisition is, for good reason, the mode of last resort—reserved for cases that don’t suit any other path. However, that doesn’t mean you must undertake an acquisition simply because you’ve analyzed and rejected the other modes.
If you value strategic control over the targeted resources and have already concluded that less integrative modes (contracts or alliances) will not achieve what you seek from the relationship, then you must assess whether you can effectively integrate the target firm’s resources without damaging employee motivation at either firm. In our private-equity example, the team members were ultimately considering whether a skilled local target existed and was willing to sell at a viable price. They had concluded that acquisition appeared to be the optimal path. It offered the fastest way of developing a product. Unlike a team lift-out, in which a team is hired away from a competitor, an acquisition would bring the target’s full pool of assets (including reputation) to the bank. The buy mode also offered greater freedom in restructuring local operations. Finally, the Eastern Europe unit would benefit from the support of its global parent, which has strong skills in pre-acquisition due diligence and postdeal integration of new personnel and assets.
However, the corporate development team was fully aware of the integration challenges and the importance of retaining the targeted resources. An acquisition would work only if the acquired resources could be fully leveraged to generate investment opportunities and strong investment performance. Moreover, the acquirer would have to provide value by bringing its expertise in legal, compliance, and risk management and by securing a solid country distribution base. In short, the team had to assess whether postdeal integration was feasible before deciding on acquisition.
It is very hard to make M&A succeed. For every successful story, there are multiple failures: some studies suggest that—as with alliances—just 30 percent of M&A achieve their goals. The main reason is that integrating the acquired entity almost always involves unanticipated obstacles and expenses. Personnel you wish to retain—because of their strong skills—typically have other opportunities, which they frequently pursue. The tremendous power and potential of the buy mode is matched by the severity of its challenges. For this reason, it is important to use acquisitions selectively.
Chapter 5 will help you decide under what circumstances to commit to an acquisition instead of other options that initially seemed infeasible. If you most likely cannot integrate the acquired target’s resources within your organization, then you must reconsider the alternatives: set up more complex versions of the different sourcing modes and view them as learning experiments; explore the possibility of targeting substitute resources; or review your strategic goals and then revise or abandon the current resource search.
Managing the Portfolio
The framework we describe in this book not only applies to decisions concerning the acquisition of resources but can also help a firm dynamically manage how it owns and manages those acquired resources over time. In chapter 6, therefore, we present a model for continuously assessing existing resources, resource gaps, and needs for divestiture of resources that have outlived their usefulness. Finally, in chapter 7, we help you manage a balanced build-borrow-buy portfolio and develop a strong selection capability within your organization. These responsibilities require not only a rigorous approach to each sourcing decision, but also the ability to balance all such decisions across your organization, over time. In that way, you can maintain a viable combination of building on existing skills and exploring new opportunities. This balance clearly poses significant leadership challenges that we will highlight in our discussion.
Let’s now look at the first choice that you need to make as you embark on the acquisition of a new resource.
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