An Essential Strategy For Sustainable Growth: August 2009

M&A

An essential strategy for sustainable growth   August 2009

Content Mergers and Acquisitions (M&A) Case studies M&A strategy for FSOFT?

Mergers and Acquisitions (M&A) Introduction

M&A Introduction Merger

Acquisition

A merger is when you integrate your business with another and share control of the combined businesses with the other owner(s).

An acquisition (buyout) is when you buy another business and end up controlling it.

Motivation & Benefit?

Qualified staff or Additional skills or Knowledge or Other biz intelligence: for larger biz Funds or Valuable assets: better to buy than to build from scratch Wider customer base and increasing market share Products, services & businesses diversification Synergy: reducing overlapped costs, overheads thru shared budgets Reducing competition Organic growth: the existing business plan for growth, needs to be accelerated

M&A Motivation: Acquisition Seller

Buyer

 Ready for an exit

 Revenue

 Inability to compete

 Cost reduction

independently 

Cost savings

 Access to greater resources

 Synergies  Reduce competitors  New market  New products and services

M&A Motivation: Merger  Restructure the industry value chain  Synergies  Cost reduction (operation/marketing/R&D, etc)  Economies of scale & scope (HP/Compaq)

Types of M&A Merger

Acquisition

 Horizontal mergers:

 Friendly

•

Similar business

 Vertical mergers: •

Different stages of Operations

 Conglomerate mergers: •

Unrelated business activities

 Hostile

M&A movements  1st movement – 1893 to 1904: •

horizontal merger.

 2nd movement – 1920s: •

vertical merger.

 3rd movement – 1960s: •

the conglomerate merger.

 4th movement – 1980s: •

financial innovation, junk bonds

 5th movement – 1993 to now: •

the strategic megamegers

M&A case studies

M&A Process

Antitrust policies  Sherman act of 1890: • Sec 1: Prohibit to create a monopoly or undue market control. • Sec 2: Against dominant players  Clayton act of 1914: regulate biz behavior • Sec 7: Against “adverse competition”  Hart-Scott-Rodino act of 1976: • To strengthen the powers of DOJ& FTC

Risks & Difficulties The target business does not do as well as expected

Business cultures are not compatible

Key people leave

Wasteful

Case studies

Softbank Corp.

28 B$USD in sales as of 2008 with 19K employees ww ------------------------------------------------

2001: 2006: 2006: 2008:

“Acquired” Yahoo!BB -> major player in ADSL market Bought Vodafone Japan Purchased 23% of Betfair Partnership with Apple for iPhone in Japan

"Endeavoring to benefit society and the economy and maximize enterprise value by fostering the sharing of wisdom and knowledge gained through the IT revolution."   Masayoshi Son Chairman & CEO SOFTBANK CORP.

HP-Compaq

118 B$USD in sales as of 2008 with 321K employees ww ------------------------------------------------

1963: HP joint venture with Yokogawa Electronics 1997: Compaq bought Tandem Computers 1998: Compaq acquired DEC 2002: HP-Compaq merger to become a major player (desktops, laptops, servers, printers, etc) 2008: Acquired EDS

M&A strategy for FSOFT Open discussion

SWOT analysis for FSOFT Strength

-------------------------------------+ No.1 of ITO service in Vietnam (scale & scope) + Wide customer base, specially in Japan + Strong financial status

Weakness

-------------------------------------- Low-end services - Lack of cross-border/culture management exp - (…)

Opportunity

-------------------------------------+ ITO advent trends & China + 1 (Vietnam) + Emerging ITO destination thanks to inexpensive IT workforce

Threat

-------------------------------------+ (…)