M&A: Target the Right Acquisition

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>> Many mergers and acquisitions stories read like a Harlequin Romance novel filled with white knights, hostile takeovers and poison fills--understandably so. M&A's are much like a marriage--just because you're fond of a company doesn't necessarily make it a good match. A successful M&A requires planning and strategy at every step.

>> It's really about value creation. It's about taking two things, putting them together and having one plus one equals three. Of course that's hard to do and so it's really important to pick the right two companies and then to execute well.

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>> Richard Karo assumed spelling is CEO of Tangible Future, Inc. He's here today to talk us through the necessary steps leading up to a possible merger or acquisition.

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>> Richard: Approaching an M&A opportunity is really about asking three questions: What is your company like and what would its future look like if it went along; what would be a good M&A strategy that would allow you to really add extra value over and above that going it along scenario; and then finally what's the exact target profile of a company you could take, put together with yourself to really create that extra one plus one equals three synergy that we're looking for.

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>> Richard: So let's take a look at M&A's using the dating world as an analogy.

>> So I see you're an ice cream maker and you're clear about wanting to go with an international merger.

>> Crafting a perfect M&A transaction is a bit like putting together a jigsaw puzzle. Think of your company as one piece. It's really important then to understand what it looks like.

>> Your company looks really attractive; your dairy is organic; your ice creams are relatively inexpensive and really a solid track record.

>> Richard: And then you need to go look for another piece that will complement your piece interlocking to make something that's bigger than either of those would be together.

>> Based on your profile we've got three companies that we think will be well-suited. Here's some information about them. Check them out, here are three videos you can watch, take a look and let us know if you want move forward with any of them.

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>> Richard: If you wake up one morning and decide you want to do a transaction or put together a team that has a set of skill sets that will ultimately allow them to do a transaction, and then identify a set of potential companies that you can merge with.

>> We have a Galato assumed spelling Supremo. A Galato is as the name suggests--Supremo.

>> Ola. The company is called a Lato assumed spelling Perfecto. We've been in business for 18 years. We're based in Argentina but we cover all of South America with eight factories.

>> By Chinese standards we are a relatively small company, although we do have over 2,600 employees. The major ice cream makers here hold a combined 57% share of the tiniest mainland ice cream market. We feel a merger with a Western company would add texture and flavor to unlock it.

>> Richard: You know like most things in life the more homework you do the better the outcome is likely to be.

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>> If they've been in three litigations in the past five years, what are the chances that I'm going to get sucked into one of those things?

>> Richard: In business in especially of these types of M&A transactions, there are often competing time pressures and so willing it's about doing the most analysis you can squash into the time available, and then making the best decision possible.

>> Johnny? Oh, yep, our COO & Financial Analysts have given us the go-ahead with all three companies.

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>> Richard: I favor an intuitive approach to getting to know companies. I think you have to start with a real understanding of the type of deal you're trying to do and a vision of what that company is supposed to look like to be a good match to you, but then as soon as you have that in your mind, you really need to go and engage with a company.

>> The Leaning Tower of Pisa.

>> Wow oh it's beautiful. Oh I never thought I'd see it in person.

>> Original Gelato Supremo--this is the place where we'll be putting the newsstand in this location.

>> I just didn't realize that Buenos Diaz was so cosmopolitan.

>> Yes of course it's cosmopolitan. It's the capital of Argentina; lots of culture from Europe and Italy.

>> I really appreciate you taking the time to meet up with me so we could kind of get to know each other better and talk business.

>> It's my pleasure. Have you been to the Forbidden City before?

>> Richard: Often success in these types of transactions is about the fit between two cultures, or about whether specific people that are at your company and the other company are really going to be able to work together to pull it off.

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>> Richard: Now once you've got that initial feel for whether there's a match, then there are all sorts of details that need further digging--financial issues and things like that. So either of it is really the way to go.

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>> When I first started off it was just me and my two sisters and now I have over 100 employees working for us.

>> Richard: There are really lots of potential red flags that might just say this fit is not going to work.

>> Noni soli assumed spelling. I have no money. I must have grabbed the wrong wallet. I am so sorry.

>> Oh that's okay. I got this one--again. There's something that I'm tasting in the chocolate and I'm trying to place it. I'm wondering if it maybe it has something to do with organic versus non-organic.

>> It's good--it's chocolate. It's good organic chocolate ice cream.

>> Richard: There are some obvious ones--are there any outstanding legal issues, lawsuits and the like? Are there financial inconsistencies? But I think in addition to those obvious ones the really important things to understand are details about the business itself, the products--are the products at the end of their life cycle, are they at the beginning of the life cycle, how do they mesh with your products, are their customers like your customers, will they relate well to each other; all sorts of nitty gritty details about how that company and your company will go together.

>> The flavor is just incredible.

>> We're really proud.

>> Richard: Evaluating a company for an M&A is really about getting answers to specific questions and you need to keep digging until you've got those answers at a level that you're comfortable with.

>> I see lots of possibilities.

>> Richard: And only when you've got answers to all those things, do you feel comfortable that the fit is right and it's time to move forward.

>> You want to take this forward?

>> I like the way you're thinking.

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>> For more information go to bnet.com.

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