The Role of Competitive Intelligence in Strategic Partnerships (M

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The Role of Competitive Intelligence in Strategic
Partnerships(MA, Strategic Alliances, Consortia)
Presented by Arik R. Johnson arik_at_aurorawdc.com
Managing Director Aurora WDC
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Introductory Remarks

• About Arik
• About Aurora
• Agenda Items and Process for the Day

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Strategic Tactical Realms
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This session is for you if...

• You would like to contribute to your firms
  relationship-building activity
• You would like to expand the application and
  adding-value of Intelligence within your firm
• Your firms growth strategy includes MA
• You would like to learn what Intelligence
  processes are applied in relationship-building.

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What we have learned about MA

• Large consulting firms
• Casual scanning is norm
• Too-late deals
• Are not any more productive than home-grown
  talent in the initial MA stages
• Force their acquisition model on you (very large)
• Firms radar screen had better resolution
• Smaller deals were impressed and intimidated with
  consulting companies
• In-house Intelligence departments Intelligence
  consultants are more efficient and effective on
  the front-end.

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Why MA as anIntelligence activity?

• Harvard Business Review reports in 1998 there
  were 5,000 acquisitions in the US totaling .5T
• KPMG Peat Marwick says in 1999 2T was spent on
  acquisitions world-wide
• Cisco Systems grew in 1999 to 12B Rev. via 42
  acquisitions, expected to make 25 in 2000
• IPOs are at an all time high
• Strong stock market produces buying leverage
  faster than lower interest rates

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Steps in the MA process

• Relationship criteria
• Scan, Search, and Identify Targets
• Evaluation and Analysis
• Due Diligence - in situ
• Recommendation
• Negotiation
• Consummation
• Integration

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Steps in the MA process

• Relationship Criteria
• Scan, Search, and Identify Targets
• Evaluation and Analyzation
• Due Diligence (in situ)
• Recommendation
• Negotiation
• Consummation
• Integration

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Level of functional involvement
Stage
ID Evaluate Due

Consum- Criteria Targets Analyze
Diligence Recommend Negotiation mation
Integration
High
Level of CI Involvement
Low
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MA process activities
Stage
External Internal
Intelligence Processes

• Compilation
• CI
• Trades
• Sales
• Marketing
• Consultants

• Criteria
• Matching
• Preliminary
• Analysis
• Products
• Financial
• Strategy

in situ Audit and Examination
Delphi Technique
Management Guides
Candidacy
Purchase
Company Report (checklist)
Candidate List
Company Overview (SWOT)
Support, Reference

• Criteria
• Set
• Candidacy
• Purchase

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Delphi technique

• Reiterative process with executives
• 1. Initial criteria is brain-stormed
• Criteria compiled for ranking
• 2. Executives rank criteria by importance
• Criteria sorted by ranking for cut-off
• Completed relationship criteria
• Final approval

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Criteria for acquisition candidacy

• Return on Investment (ROI)
• Break-even (B/E)
• Compounded Annual Growth Rate (CAGR)
• Gross Profit Margin (GPM)
• Fill manufacturing
• Products and services
• Intellectual property
• People and knowledge acquisition
• Investment scale and scope

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Criteria for acquisition candidacy
Fit Acceptable Criteria Definition
Criteria Exceptions Break-even Break-even
should B/E lt 36 mos. Leveraged buy-out. occur
before EOY3. Must be profitable Y1. Compounded
CAGR must be greater CAGR gt Ind, There might
not be Annual than industry forecast. CAGR gt
forecasts available Growth CAGR must be
greater Our forecast for certain
Rate than our forecast. market
segments. Investment Total investment should I
lt 30M Greater investment Scale be less than
30M. would be considered with
additional, outside partners.
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Compilation from all sources

• Allow for multiple input sources
• Executives
• Sales and sales support personnel
• Suppliers
• Customers
• Surveillance
• Trade publications
• Specialty newsletters
• Venture capital activity

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Candidate list

• Company name, address, phone, contact(s)
• Year founded
• Product-markets
• Differentia vs. competitors
• Funding history
• Revenues
• Employees
• Sales structure
• Existing relationship with our firm
• Notes and source of info

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Company overview

• Description of Company
• Recent sales, GPM, NIAT, employees, sales/emp,
  market cap, stock price, cash, founded, IPO date,
  revenue history
• Summary of situation and appeal
• Founders, investors
• Management
• Products
• Customers
• Intellectual property
• Acquisition criteria fit summary
• Begin SWOT analysis

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In-situ audit and examination

• Due diligence
• Checklist
• Topical
• Specific questions for interviews
• Preliminary Audit
• Presentations
• Interviews
• Extended SWOT analysis
• Company Report (20 - 50 pages)
• Recommendation

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Extended SWOT Analysis

• Market share gain
• Market entry
• Intellectual property
• Financial
• Management team
• Owners, founders
• Products/services
• Manufacturing
• Strategic fit

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Extended SWOT Analysis
Criteria Strengths Weaknesses
Opportunities Threats Gain - ext. current - no
prod. history - Prod1 CAGRgt250 - major
competitors Mkt Share prod. line - may have
over - Prod2 CAGRgt54 - entry into designed
prods - Prod3 emerging Mkt 6 Intellectual -
4 patents - unclear if SW - some leveraging - 2
possible Property - 3 pending patents okay
with our RD infringement - 9 2B submtd - need
license for suits - clear tech 1/2 of
roadmap roadmap Product - prods extend - EDP
is not our - can take Prod1 - time to
mkt Leverage our Mkts primary focus into
our Gamma - no resources 1 2 - Prod2
requires with extra FABs to leverage
cust support we dont have
Criteria Strengths Weaknesses
Opportunities Threats Gain - ext. current - no
prod. history - Prod1 CAGRgt250 - major
competitors Mkt Share prod. line - may have
over - Prod2 CAGRgt54 - entry into designed
prods - Prod3 emerging Mkt 6 Intellectual - 4
patents - unclear if SW - some leveraging - 2
possible Property - 3 pending patents okay
with our RD infringement - 9 2B Submt - need
license for suits - clear tech 1/2 of
roadmap roadmap Product - prods extend - EDP
is not our - can take Prod1 - time to
mkt Leverage our Mkts primary focus into
our Gamma - no resources 1 2 - Prod2
requires with extra FABs to leverage
cust support we dont have
Criteria Strengths Weaknesses
Opportunities Threats Gain - ext. current - no
prod. history - Prod1 CAGRgt250 - major
competitors Mkt Share prod. line - may have
over - Prod2 CAGRgt54 - entry into designed
prods - Prod3 emerging Mkt 6 Intellectual - 4
patents - unclear if SW - some leveraging - 2
possible Property - 3 pending patents okay
with our RD infringement - 9 2B Submt - need
license for suits - clear tech 1/2 of
roadmap roadmap Product - prods extend - EDP
is not our - can take Prod1 - time to
mkt Leverage our Mkts primary focus into
our Gamma - no resources 1 2 - Prod2
requires with extra FABs to leverage
cust support we dont have
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Negotiation, consummation,integration

• Pass project to MA specialists, stay involved
• Personal intelligence
• Negotiation strategy formulation
• Negotiation support
• Testing of assumptions
• Monitoring of directional changes
• Transitional support
• On to the next project...

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Benefits from Intelligence involvement in MA

• To the firm
• Provides an in-house front end process
• Provides continuous scanning resource
• Reduces costs
• Due diligence vs. intelligence
• To the Intelligence department
• Extension of service into high-impact activities
• Very visible value-adding service
• Cross-pollination learning
• Adrenaline rush

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Summary

• Understand Intelligences contribution to
  business relationship development
• Understand the MA process and Intelligences
  role as a front-end processor
• Possess a tested methodology for business
  relationship development
• Access to templates and examples
• Questions?

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For Further Information

• Society of Competitive Intelligence Professionals
• www.SCIP.org
• Recon Best Practices Knowledgebase
• www.AuroraWDC.com/essays