1,Bain M failure to set/stick to walk away price CEO/management ego revenue growth vs. profitability emotion vs. analysis Poor post acquisition integration inadequate planning failure to exploit revenue/margin potential disrupted relations with customers, employers and suppliers culture clash; failure to involve acquired people,Strategic, financial and operating causes,Trends,Bain M Management Interviews),Bain M Bain Analysis.,The M Bain Analysis.,Retail,Allied,Federated,Technology/Telecommu-nications,AT Bain Analysis,However, many companies have created enormous value through successful acquisitions.,Bain M open communication of strategic vision,Manufacturing,Crown, Cork Bain Analysis,Healthcare,Columbia,HCA,Build national healthcare group,Good strategic fit and due diligence capture of cost-sharing and scale economies,$5.7B,However, many companies have created enormous value through successful acquisitions.,Bain M Customers Interviews,Foundry Whole grain:,Foundry Resin coated:,Frac Whole Grain:,Frac Resin coated:,$40,$150-250,$20-25,$160-240,Notes: In percent of end user price,End-User Price,Bain M downturns generally track broader economic slowdowns Each market segment of the silica sand industry is volatile and only frac has shown significant long-term volume growth: However, frac volume is still below its 1985 peak Real industry revenues have fallen by 1.6% since 1980 Real revenues per ton have fallen by 0.5% since 1980 Extraction, manufacturing and distribution should be viewed as different businesses with unique returns, customers and competitors Future environmental and health risks appear to be limited - regulations limiting access to and use of silica sands are not expected to become more burdensome in the near future,Summary,Bain M some impact on headcount,Marketing and sales Retail Marketing teamsClient Servicing teamsInstitutional Marketing teams Combining under one brand eliminates ad spend and rationalisation of marketing teams,Business Unit Overhead Office costsIT supportLocal HRLocal accounting Combining facilities enables closure of offices and economise of scale amongst support functions,Corporate Centre Central Management Human ResourcesFinanceAudit Combining to similar sized companies should result in significant economies of scale. Anticipate significant savings,Function Description Rationale Impact(Cost savings on smaller operation),Synergies from merging AMD with a potential bidder can be evaluated by examining each segment of the value chain separately.,Bain M intermediaries intermediaries strengthen pan-European operation Limited Limited,401K operation incl. admin ($33B),Bain MROS based on three year average to 1996/97, as available Source: FAME; Company Accounts; Information Memoranda; MBD Report; Bain analysis,Return on Sales (Operating Profit/ Turnover),Relative Channel Share*,Leader,S,G,P,Given the large number of players performing with low relative channel share, there exists potential for consolidation in the industry.,R = 74%,Bain M Industry interviews,Note: * In this exercise, players product sales overlap in garden furniture * For this exercise, full impact on todays EBIT is considered, rather than full NPV calculation,Bain M Information memorandum; FAME; Bain analysis,Click Here for Back-up Data,Bain M Information memorandum; FAME; Bain analysis,Social,Private,Builders Merchant,Specialists,DIY,Sales %,85 M,21 M,105 M,35 M,Click Here forBack-up Data,Bain M Information memorandum; FAME; Bain analysis,Player 1 Relative Distribution Strength,Player 2 Relative Distribution Strength,Bain M Information memorandum; FAME; Bain analysis,Our current focus is on only a few channels. The obvious growth for us would be to start going into others, but only if we had good access to them Operations Manager, Competitor Competitor X are very well known, and their brand has been a key lift for its acquired company Sales Director, Retailer I think G believe that by buying target some of their reputation could rub off onto Gs own products. target is a good name Marketing Manager, Competitor,Channel Complementarity:,Portfolio Strengthening:,Bain MROS based on three year average to 1996/97, as available Source: FAME; Company Accounts; Information Memoranda; MBD Report; Bain analysis,Consolidation of S+Ps positions would create significant ROS improvement thanks to the realization of synergies.,Return on Sales (Operating Profit/ Turnover),Relative Channel Share*,Leader,R = 74%,S+P,G,Bain M&A,109,Exercise,Summary of Two-Company Combinations,*Notes:More refined synergy analysis using the measure of product complementing was used in the project, which makes figures different from that of the exercise,Analysis of all combinations enabled the Bain team to highlight the best consolidation option. The S and B combination shows the highest hard as well as soft synergy potential. However, the difference of value created in each combination is limited. A close analysis of the p