BTR 2 SUMMARY

1. Business ethics

 Ethics = moral, intuitive thinking

Values

Moral foundations (J. Haidt)

1. Care – harm
2. Fairness – cheating
3. Loyalty – betrayal
4. Authority – subversion
5. Sanctity – degradation
6. Liberty – oppression

Business norms:
 Triple bottom line
  Trust
 Business ethics

What is an ethical dilemma?

A situation in which a difficult choice has to be made between two courses of action,
either of which entails transgressing a moral principal

Situations where persons, who are called ‘moral agents’ in ethics, are forced to choose
between two or more conflicting options, where neither of them resolves the situation in
a morally acceptable manner

3 conditions for moral dilemmas:

1. The person or agent of a moral action Is obliged to make a decision about
which course of action is best
2. There must be different courses of actions to choose from
3. No matter what course of action is taken, some moral principles are always
compromised
(there is always a loss)

Trolley dilemma:
 How do we decide whats right or wrong?
 Why do people so often disagree about moral issues?
 When we do agree, where does that agreement come from?
 Can a better understanding of morality help us solve the problems that
divide us?

Two types of reasoning in (business) ethics:

Consequentialism utilitarianism Non-consequentialist deontology

Intended outcome-based Principle-based

The greatest happiness principle Doing the right thing for the right reason

Agreed goals:
 3p: people, planet, profit
 Sustainable development goals

Recognizable ‘labels’
 Fairtrade, max havelaar
 Ethical trading initiative

Making global goals for local business

The ten principles | UN Global compact
Human Rights. Businesses should ...
Principle 1: support & respect the protection of internationally proclaimed human
rights
Principle 2: make sure that they are not complicit in human rights abuses
Labour. Businesses should uphold ...
Principle 3: the freedom of association & the effective recognition of the right to
collective bargaining
Principle 4: the elimination of all forms of forced & compulsory labour
Principle 5: the effective abolition of child labour
Principle 6: the elimination of discrimination in respect of employment &
occupation
Environment. Businesses should ...
Principle 7: support a precautionary approach to environmental challenges
Principle 8: undertake initiatives to promote greater environmental responsibility
Principle 9: encourage the development & diffusion of environmentally friendly
technologies
Anti-Corruption. Businesses should ...
Principle 10: work against corruption in all its forms, including extortion & bribery

The principal-agent theory

 Principal is the client
 Agent is the service provider

Employee vs employer
Consumer vs company
Society vs industry

Two factor causing non-alignment

 Moral hazard (of the principle) is the difference of interests between the
principal & the agent
 Information asymmetry is an example of the unequal situation of principle
& agent (e.g. in banking & medicine, etc)

How can these situations be avoided

 Clear contracts
 Strict external supervision
 Reliable reporting
 Self-regulation

Principles of ethical decision making

 Principle of long-term self-interest
o You should never take any action not in your/your organisation’s
long-term self-interest
 Principle of personal virtue
o You should never do anything that is not honest, open and truthful
 Principle of religious injunctions
o You should never take any action that is unkind or that harms a
sense of community
 Principle of government requirements
o The law represents minimal moral standards of society, so you
should never take any action that violates the law
 Principle of utilitarian benefits
o You should never take an action that doesn’t result in greater good
for society
 Principle of distributive justice
o You should never take any action that harms the least fortunate
among us in some way
 Principle of individual rights
o You should never take an action that infringes on other’s agreed-
upon rights

Trends & developments

 AI
 Humanisation (of climate; of animals)
 Inclusion of perspectives

Principles for sustainable AI-powered workforce

 Informed consent
 Aligned interests
 Opt In and Easy Exits
 Conversational transparency
 Debiased and explainable AI
 AI training and development
 Health and wellbeing
 Data collection
  Data sharing
 Privacy and security
 Third party disclosure
 Communication
 Law and regulations

Big tech EU regulations

 The new rules outlaw certain anti-competitive practices
 Consumers will get the choice to use the core services of big tech
companies, such as browsers, search engines or messaging, and all that,
without losing control over their data

Contracting

Business contract: a contract is a spoken or written agreement between two or more

parties. One side agrees to perform a certain obligation for which they receive certain
rights from the other side.

Without a formal agreement, the following could occur:

1. A simple misunderstanding of what was agreed
2. The “supplier” does not supply what was agreed
3. The “buyer” refuses to pay the agreed amount
4. What the “supplier” delivers is substandard or even dangerous
5. The “supplier” causes damage to the “buyer” on delivery.

5 conditions to enter into a contract:

1. The offer
2. Acceptance
3. Consideration
4. Competency and capacity
5. Legal intent

6 formal elements of a contract:

1. The description of parties involved, including names, addresses, roles etc.
2. The jurisdiction under which the validity, correctness, and enforcement of the
contract will operate.
3. The nature of consideration (fees, services rendered, goods exchanged, rights
granted)
4. The definition and interpretation of terms used in the contract.
5. The duration and territory of the contract, which defines the times and places at
which at contract is in force.
6. The obligations associated with each role, including terms and conditions for
invoicing & payment: warranties, delivery, liability, rejection, termination &
accounting provisions.

Electronic B2B contracts

 Location and time tracking
 Electronic negotiation
Multi parties, throughout various geographical location- block chains
 E-signature and virtual-evident agreements
 Electronic tracking – instant reactions, tracking of deadlines
Shifting renegotiation power
 Monitoring of partnership behaviour, trading patterns
 Enforcing trading behaviour of partnet, so that the contractual goals are met.
 The united nations convention on contracts for the internal sale of goods
(CISG) contracts for the international sale of goods between private businesses.
 The uniform commercial code plays a similar role across the 50 states of the US.

UCC vs CISG
UCC-Article 2  the most important element of the UCC, as it regulates contracts for
transactions related to goods. The laws in individual states often differ in significant
areas. The purpose of the UCC is to provide a general common ground for trading goods:
when contracts apply, and which terms are attached.

Incorrect contracting and failed formalities can cause big problems:

What does your commissioner contract with?

Internally
 Employees
Externally
 Suppliers
 Strategic partners
 Advertisers

Suppliers code of conduct & framework agreements

 In addition to a supplier contract, many large companies also work with a
supplier code of conduct.
 This specifies what is expected of all suppliers and suppliers need to sign up to
this in order to be considered as a supplier
 This can be simplifying the supplier contract, which then needs to cover fewer areas
for each other
 The code of conduct can be published, for example to back up ESG claims.
 Companies can also select a limited number of preferred suppliers with whom
they sign a framework agreement.
 The framework agreement is a form of master contract, containing the key elements
that the two sides have agreed and lasts for a longer period.
 Orders then only require a work order, containing quantities, timing etc.

These increase alignment between purchaser & supplier and reduce the
frequency with which renegotiations are needed.

2. Regulation (contracting & due diligence)

Due diligence: a business exhaustively examining another, to determine whether it is a
sound investment (prior to merger or acquisition)

M&A process:
5 stages of Mergers and acquisitions

10 step acquisitions process

Who is typically involved during a DD?

1. Buying party
Make a “to buy or not to buy” assessment, based on the information/answers provided.
2. Additional buying parties
Each potential buyer makes their own assessment
3. Selling party
Provide access to information & and answers, try to get best deal
4. Lawyers
Ensure all legal details/obligations covered
5. Corporate finance advisors
Ensure correct procedure followed, perform a valuation of target, based on avaiable
information advise their client to go ahead or not.
6. Consultants
Can perform similar role to CF advisors, but can also do more strategic analysis on market
outlook.

Following the due diligence, an M&A transaction can:

1. Goes ahead
Nothing untoward uncovered:
 Relevant information shared:
 Detailed checks done
 No issues found
 Value creation expected
Pay the expected price, adjust price to be paid due to something you discovered, add
additional clauses into contract

2. Do not go ahead
Issues uncovered
 Common deal-killing surprises
 IP issues
 Tech issues
 Finance issues
Pull out of the deal due to something you discovered, and look for an alternative target
candidate.
Due diligence process
Due diligence is the process of gathering and analysing information before a decision and
completing a transaction to ensure that no party is legally accountable for any loss or
damage.

1. Analyse purpose:
 What is the strategic goal of this deal?
 What do we need to achieve with this deal
2. Pre-analyse case:
 Based on information available early in the process
3. Full check on info:
 To fully understand business model, strategy, team, product, and customers.
 Initially through documents and data
4. Full analysis of the case
 Based on insights from data and information shares
 Access to key team members, customers, etc.
 Does everything add up?
 Are we confident about the key elements?
5. Risk analysis
 What risks, how likely, and how to mitigate them?
6. Final offer
 Based on the full picture, including risks.

10 areas of due diligence:

1. Administrative due diligence
2. Financial due diligence
3. Asset due diligence
4. Human resources due diligence
5. Environmental due diligence
6. Taxes due diligence
7. Intellectual property due diligence
8. Legal due diligence
9. Customer DD
10. Supplier due DD
11. Recruitment

Acquisition process from the seller’s perspective

What should be done in parallel to the DD process

- Once potential acquisition targets have been identified:
1. Start due diligence processes
2. Understand what the combined entity could look like & the potential implications
What impact has this on the market?
1. Would the resulting player be too dominant & therefore not allowed by
competition authority.
 2. What competitor reaction could be expected
3. Are things happening in the market that undermine the reasons behind the deal.

What can go wrong?

1. Unsure of what to ask
2. Lack of structured approach
3. Inadequate communication
4. Time constraint
5. Involved costs
6. Lack of expertise
7. Subjectivity nature of due diligence
8. Limited access to information
9. Legal issues
10. Accurately valuing information gathered

Mistakes made
BUYER SELLER
 3. Financing growth
How to structure your growth idea when selecting an organic growth path?
As a business unit within the commissioner's company
As a special purpose vehicle (SPV)

Financial risks/factors:
 Fiscal factor
 Capital market factor
 Foreign exchange factor
 Country/ political factor
 Economic factor
 Governance factor
 Reputational factor

Implementing a new growth option via creating a new business unit – key
considerations:
 Business unit structure
 Market demand
 Financial resources
 Staffing and talent
 Competitive landscape
 Operations and logistics
 Branding and marketing
 Regulatory considerations
 Integration with existing business
Finance is crucial when implementing a new growth option:
a. Funding: what amount is required
b. Funding sources: potential sources of funding
c. Revenue and cost structure
d. Future cash flow projections

Other most common considerations:

e. Fiscal factor (possibility for tax losses utilization/tax structure optimisation)
f. Capital market factor (cheaper financing attractiveness using the
commisioner’s risk profile
g. Foreign exchange factor (natural hedging is possible when the project is
financed in the same currency as revenues and costs are earned/incurred)
h. Economic factor (being a unit is could be safer than being a stand alone
company, expertise of the commissioner could help and support you)
i. Governance and reputational factors (are at low risk, less flexible to be part
of a bigger organization, decision-making could take some time).

Normally, new projects and ideas structured within the existing company are financed
using the company’s available financial resources:
 Available cash excess
 Internal funding from the parent organization
 Company’s revolving credit facilities
 Bank loans

SPV  special purpose vehicle  a subsidiary created by a parent company to

isolate financial risk  normal company with a specific purpose

An SPV is a subsidiary created by a parent company to isolate financial risk. Its legal
status as a separate company makes its obligations secure even if the parent company
goes bankrupt. For this reason, an SPV is sometimes called a bankruptcy-remote entity. In
any case, the operations of the SPV are limited to the acquisition and financing of specific
assets, and the separate company structure serves as a method of isolating the risks of
these activities.

Benefits of finance via SPV

 Isolated financial risk
 Direct ownership of a specific asset
 Tax savings, if the vehicle is created in a tax heaven
 Easy to create and set up the vehicle
 Flexibility as SPV’s structure could be customised to fit specific needs of the
growth option.

Drawbacks
 Complexity: establishing and managing an SPV can be complex and require
specialized legal and financial expertise.
 Cost: establishing and operating an SPV can be expensive, particularly for smaller
growth options.
 Reputation risk: if the project associated with the SPV does not succeed, it may
reflect poorly on the parent company and damage its reputation.

SPV structure and example

Main steps in setting up a SPV

SPV financing
The projects and ideas, which are isolated into separate legal entity, could be structured
via:
i. Intercompany loans provided by the commissioner
ii. Proceeds from selling share in the SPV to an independent investor
iii. Mezzanine financing
iv. Corporate bonds issue
v. Bank loans

Joint venture and M&A

Debt financing structures

Pros of debt financing structures
1. Interest on det is tax-deductible
2. Debt financing allows companies to maintain control over business
3. Debt financing provides a predictable repayment schedule

Cons of debt financing structures

1. Debt financing requires regular payments despite of company’s performance
2. Failure to repay debt can lead to bankruptcy or financial distress
3. Debt financing can result in high interest costs and restrictive covenants

Equity financing structures

Pros of equity financing structures

1. No regular payments are required
2. Equity financing can provide access to expertise and resources from investors
3. Equity financing does not require collateral or personal guarantees.

Cons of equity financing structures

1. Equity financing dilutes ownership and control
2. Shareholders expect a return on their investment, which may require the company
to prioritize short-term profits over long-term growth
3. Equity financing can be expensive due to high transaction costs and legal fees.

Hybrid financing structures

Pros of hybrid financing structures
1. Hybrid financing allows companies to access both debt and equity financing
2. Hybrid financing can provide more flexibilityy in terms of repayment and
ownership structure
3. Hybrid financing can be tailored to the specific needs of the company and project

Cons of hybrid financing structures

1. Hybrid financing can be more complex than debt or equity financing alone
2. Hybrid financing can result in higher costs due to transaction fees and legal
expenses
3. Hybrid can result in dilution of ownership and control

Factors to consider when selecting financing

A joint venture
= a contractual agreement between two or more businesses to pool their resources and
expertise to achieve a particular goal. They also share the risks and rewards of the
enterprise.
- Short or long-term
- Combines resources and expertise
- Can be informal
- Saves money on advertising
- Either creates a separate entity – corporation, limited liability, or partnership – or
operates jointly as separate entities.

Types of joint venture:

1. Project-based venture
 2. Vertical joint venture
3. Horizontal joint venture
4. Functional-based joint venture

Advantages of joint venture

1. Penetrating new markets
2. Synergy
3. Maximum flexibility and limited liability
4. Decreases go to market time

Potential benefits of JV
- Access to new markets: JV can provide access to new markets and customers that the
company may not have been to reach on its own, which can increase revenue and
profitability.
- Shares resources: can result in cost savings by sharing resources, such as facilities,
equipment, and technology, which can improve operational efficiency and reduce
costs.
- Reduces risks: JVs can help to reduce risk by sharing financial and operational
responsibilities, which can help to spread the risk of a new venture across multiple
parties.

Potential financial risks of JV

- Lack of control: the company may have less control over the operations of the JV than
it would over its own operations, which can lead to difficulties in managing the JV
effectively.
- Investment risk: the company may be required to make a significant investment in the
JV, which can result in financial losses if the JV does not perform as expected.

JV financing
When structuring a new project or idea in the form of JV, the following financing could be
used:
- Capital contributions by JV partners in proportions to their ownership stake
- Loans provided by JV partners
- External financing via banks or other lenders, bonds could be possible as well
- Mezzanine financing

Merges and acquisitions

= a general term that describes the consolidation of companies or assets through various
types of financial transactions, including mergers, acquisitions, consolidations, tender
offers, purchase of assets, and management acquisitions.

Check list of a new opportunity / option for M&A

Benefits of M&A
- Encourage teamwork
- Lead to bigger market share
- Help with talent recruitment
- Expedite company goals
- Offer economies of scale
- Lead to better performances

Mergers vs acquisitions

Mergers considerations
- Fiscal factor: depending on how the assets of the merging parties are values, tax
consequences might occur.
- Capital market factor: a merger can be executed in different ways (an exchange of
shares, or all cash or a mix), normally, financing need is often less compared to an
acquisition.

Acquisitions considerations
- Fiscal factor: an acquisition transaction itself might have fiscal consequences, in
addition, the target company will continue to be a taxpayer.
- Capital market factor: big financing packages will be involved especially when the
acquisition target will be bought at a premium price.
- Foreign exchange factor: could have a significant impact especially when two
companies are located in different countries.
- Reputational factor: acquiring a company can strengthen or weaken the reputation of
the acquirer.
Financing advantages of M&A
- Increased revenue
- Cost savings
- Improved profitability
- Access to new financing
- Increased market capitalisation

Financial disadvantages of M&A

- Acquisition costs
- Integration costs
- Reduced liquidity: mergers can result in reduces liquidity for shareholders, as the
shares of the merged company may be less liquid than those of the individual
companies.
- Increased debt
- Loss of value: mergers can fail to generate the expected financial benefits, resulting in
a loss of value for shareholders.

M&A financing
Common sources of finance are:
- Exchanging stock
- Debt financing
- Mezzanine financing
- Leveraged buyout
- Cash
- IPO
- Bond issuance
- Bank loan

Other considerations
- Anti-trust law
- Securities laws
- Tax complications
 5. Growth paths
Methods for achieving growth strategies:

Methods of growth:
 100% ownership
Organic growth
Acquisition
 Joint development
Strategic alliances
Joint venture
Franchising
Licensing
Market entry
Entry mode strategies differ in the degree of resource commitment to a particular
market & the extent to which an organisation is operationally involved in a
particular location.

Comparing acquisitions, alliances & and organic development KEY FACTORS:

 Urgency: organic development is slowest, alliances accelerate the process, but
acquisitions are quickest.
 Uncertainty: an alliance means risks and costs are shared, also in the case of an
failure.
 Type of capabilities: acquisitions work best with “hard” resources (production
units), rather than “soft” resources (people). Culture clash can be a big issue.
 Modularity of capabilities: if the needed capabilities can be clearly separated from
the rest of the organisation, an alliance ,may be best.

SAFE MODEL recap

Suitability:
 Strategic alignment
 Control & autonomy
 Legal & regulatory considerations
 Flexibility & adaptability
 Looking to the future

Acceptability:
 Returns
 Risks
 Cultural fit
 Other stake holder considerations
Feasability;
 Speed to market
 Market access & customer base
 Capital requirements
 Resource utilization
 Innovation & technology

Decision tree:

Organic growth
= Organic development is where a strategy is pursued by building on, and developing, an
organisation’s own capabilities.

Reminders:

Resources: the assets that organisations have or can call upon.

Capabilities: the ways those assets are used or deployed.

Core competencies: the linked sets of skills, activities and resources that deliver:
6. Customer value
7. Differentiate a business from its competitors
8. Potentially, can be extended and developed, as markets change or new opportunities
arise.

VRIO model: four key criteria which capabilities can be assessed in terms of providing a
basis for achieving sustainable competitive advantage are captured.
Advantages of organic growth:
 Can enhance organisational knowledge & learning
 Allows the spreading of investment over time
 Fewer availability constraints
 Strategic independence
 Culture management

Disadvantages of organic growth:

 Reliance on internal capabilities can be slow, expensive and risky
 Additional resources & and capabilities may have limited availability.
 Hard to deploy existing capabilities, as a means to leaps of innovations,
diversification, and internalization.

The suitability of the growth path differs according to circumstances:

 Urgency: organic growth is the slowest option, everything needs to be made from
scratch
 Uncertainty: risks of high financial losses entirely on the company.
 Types of resources or capabilities: soft vs hard.

Why do certain organic growth strategies fail?

1. Focus on existing, most loyal customers, but little room to grow within existing
customer segments.
2. Unable to combine capabilities to create new products or services.
3. Competitors pursue a faster growth path, gaining significant first mover
advantage.

Strategic alliances
= two or more companies share resources and activities to pursue a common strategy.
No or only partial ownership changes.

Types of strategic alliances:

Equity alliance
= one company purchases a certain equity percentage of the other company.
1. Partial ownership
2. Joint venture (JV)
 Project/goal specific
 Functional, structural
 Horizontal
 Vertical
3. Consortium, affiliation (shared proposition, services).
Non-equity alliance
= two or more companies sign a contractual relationship to pool their resources and
capabilities together.
Purely contractual agreements, where no equity structure is created.
Bv. Franchising, licensing, outsourcing

Joint venture
= established when the parent companies establish a new child company.
- 50-50 joint venture
- Majority-owned venture

Licensing vs franchising
 Both are contractual agreements between different companies
 Franchise agreements involve an extensive business relationship between
franchisor and franchisee.
Whereas license agreements are limited and relate to singular activity, such as the
shared use of trademark, patent, copyright.
 Within franchise agreement is a license to use a trademark.
But license agreements do not include the overall control and uniformity found in
franchise agreements.

Motives for alliances:

 Sharing resources or activities
 Entering new markets
 Gaining knowledge
 Reducing risk
 Gain market share
 Gain access to a restricted market
 Maintain market stability
 Try to push out other companies
 Pool resources for large capital projects
 Gain access to complementary resources
 Establish economies of scale

In high dynamic industries:

 Speed up the development of new goods or services
 Share R&D expenses
 Streamline market penetration
 Overcome uncertainty

Creating broader value networks

 Value system: broad, interlinking activities across companies
 Business ecosystem: arrangement of collaborative partners… interacting and
combining their individual offerings into a coherent customer solution to create
value for all.
 Complementors: adding value by adding another product or organisation.

Benefits for everyone

= example of structure
Strategic alliance evolution

Pros of alliances:
 Can enhance speed of strategy delivery
 Co-value creation
 Allows for flexibility, change collaboration forms and partners over time, explore
and extend success.
Cons of alliances:
 No full control, ownership
 Dependency on others
 Takes time and maintenance.

When are alliances most suitable?

 Urgency (alliance accelerates strategy delivery, yet slower than acquisition)
 Higher uncertainty (start with alliance: buy if proven success)
 Access to soft resources and competences is sensitive: rather via alliances than
acquisition.

Key success or fail factors

1. Strategic fit
2. Organisational, cultural fit
3. Valuation (aligned perception of partner contributions and value of their
commitment and resources).

Merger and acquisitions

- A merger: the combination of two previously separate organisations in order to form

a new company.
- An acquisition: achieved by purchasing a majority of shares in a target company.

Hostile  refusing the acquirer’s offer

Friendly  recommend the acquirer’s deal
History

Main types of M&A

- Horizontal acquisition: involve gaining market share through consolidation. Both
companies should be operating in the same space, providing more or less the same
products and services.
- Vertical acquisition: an acquisition between two companies that operate at different
stages of the supply chain. For example, a manufacturer might acquire a supplier or
distributor. The goal of a vertical merger is often to improve efficiency and reduce
costs by streamlining the supply chain.
- Conglomerate acquisition: an acquisition between two companies that operate in
unrelated industries. The goal of a conglomerate merger is often to diversify the
acquiring company’s business and reduce risk.
- Asset acquisition: a type of M&A, where the acquiring company purchases specific
assets of the target company (such as a particular product line or intellectual
property), rather than acquiring the entire company.

Motives for M&A

M&A can support growth strategy in various ways:

4. Accelerate growth
5. Diversify business
6. Access to new technology
7. Increase market share
8. Create synergies

Top reasons why M&A deals fail

Mistakes during deal process
- Mis valuation, including synergies
- Negotiation errors

Mistakes related to management & integration process

- Unclear strategy and objectives
- Unclear governance and decision-making structures
- Poor cultural fit
- Poor integration process
- Lack of trust amongs parties
- Lack of commitment amongst management.

M&A path
A merger is the combination of to previously separate organisations in order to form a
new company.
An acquisition is achieved by purchasing a majority of shares in target company.

Step 1: acquisition strategy

What problems are you trying to solve with this growth path?
- Gain access to new technology or resources and capabilities
- Acquire talent or new expertise
- Increase or protect market share
- Achieve economies of scale and synergies
- Access new markets
- Diversify the business
- Acquire new product or service.
Key missing elements frequently leading to failure:
- Human resources: insufficient resources allocated to the M&A deal
- Financial goals: synergies are overstated
- Risk tolerance
- Timeframe: the deal could take longer than expected.

Step 2: acquisition criteria

Determine key criteria for identifying potential target companies:
- Size
- Geographic location
- Revenue and earnings growth
- Customer base
- Unique assets: technology, expertise, talents
- Financing constraints
- Complete versus partial acquisition

Step 3: Searching for target

Two main criteria apply:
- Strategic fit – Does the target firm strengthen or complement the acquiring firm’s
strategy?
- Organizational fit – is there a match between the management practices, cultural
practices and staff characteristics of the target firm and the acquiring firm.

Step 4: Acquisition planning

The acquirer makes contact with one or more companies that meet its search criteria and
appear to offer good value: the purpose of initial conversations is to get more information
and to see how amenable to a merger or acquisition the target company is.

Step 5: Valuing & evaluating

Acquirer asks target company to provide substantial information that will enable the
acquirer to further evaluate the target, both as a business on its own and as a suitable
acquisition target.
Step 6: Negotiation
After producing several valuation models of the target company , the acquirer should
have sufficient information to enable it to construct a reasonable offer. Once the initial
offer has been presented, the two companies can negotiate terms in more detail.

Step 7: Due Diligence

DD is an exhausting process that begins when the offer has been accepted. DD aims to
confirm or correct the acquirer’s assessment of the value of the target company by
conducting a detailed examination and analysis of every aspect of the target company’s
operations.

Step 8: Purchase & sales contract

Assuming due diligence is completed with no major problems or concerns arising, the
next step is executing a final contract for sale; the parties make a final decision on the
type of purchase agreement, whether it is to be an asset purchase or share purchase.

Step 9: financing
The acquirer will have explored financing options for the deal earlier in the process, but
the details of financing typically come together after the purchase and sale agreement
has been signed.

Step 10: integration of the acquisition

Two key criteria are important for structural integration:
1. The extent of strategic interdependence – the need for transfer or sharing of
capabilities and or resources.
2. The need for organisational autonomy – sometimes the distinctiveness of the
acquired company can be an advantage, but sometimes it is problematic.
 4. Change
Preconditions for change models
- Motivating change
Creating readiness for change
Overcoming resistance to change
- Creating vision
Describing the core ideology
Constructing the envisioned future
- Developing political support
Assessing change agent power
Identifying key stakeholders
Influencing stakeholders
- Managing the transition
Activity planning
Commitment planning
Management structures
- Sustainable momentum
Providing resources for change
Building support system for change agents
Developing new competencies and skills
Reinforcing new behaviours
Staying on course

An intervention
= activity, action or event intended to help the organization change.
1. Activities
2. Strategy
Push interventions
 Fear, anxiety, paralysis, anger, aggression, leave
Pull interventions

Why do interventions fail?

- Wrong problem
- Wrong intervention
- Unclear or overambitious goal
- Implementing an event rather than a program
- Not enough time devoted
- Poorly designed intervention
- Unskilled change agent
- Ownership not transferred to the client
- Resistance to change
- Lack of readiness for change

The importance of leadership and culture

Strategic leadership styles

Common causes of resistance

Cummings & Worley’s three strategies
1. Empathy and support
2. Communication
3. Participation and involvement

Change models: