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Acquisition Integration Approaches

The Acquisition Integration Approaches model of Philippe Haspeslagh and David Jemison provides insight and guidance in Mergers and Acquisitions (M&A on choosing the optimal integration approach. Each approach describes a process by which a company plans for and implements a successful integration of a newly acquired company.[1]

In Mergers and Acquisitions, the motto often traditionally was: “Make them like us.” Alternately, relatively simple criteria were used to choose an approach (e.g., the size and quality of the acquired firm).


Acquisition Integration Approaches Model - Integration Criteria[2]

Haspeslagh and Jemison in 1990 stated that in the Acquisition Integration Approaches model, the company takes for the integration should be understood by considering two criteria:

  • The need for strategic interdependence.
  • The need for organizational autonomy.


Need for strategic interdependence

The most important goal or task in an acquisition is the creation of value. This value is enabled when two companies or organizations are combined. There are four types of value creation:

  • Resource Sharing: value is created by combining companies at operational level.
  • Combination benefits: value is created by borrowing capacity, a greater market power, by leveraging cash resources or shared purchasing power (shared services).
  • General Management Skill Transfer: value is created by improved insight, coordination and control by the management).
  • Functional Skill Transfer: value is created by sharing information, knowledge or by moving people to various positions in a merged organization.


Need for Organizational Autonomy

The need and necessity for organizational autonomy can be answered using three basic questions:

  • How much autonomy should be allowed in the required situation?
  • Where or in which areas should this autonomy be allowed?
  • Is autonomy essential to preserve the strategic capabilities?

The preferential acquisition approaches are:

  • Preservation: management needs to focus on keeping the source of the acquired benefits intact.
  • Absorption: management needs to ensure that its vision for the acquisition is carried out well.
  • Holding: creation of basic values by risk-sharing, general management capability or financial transfers. There is no intention of integration.
  • Symbiosis: the joint forces but also boundary preservation and boun

Companies that are seriously considering a large scale acquisition process within a year, can start by setting up a preparatory phase in which a group of people can make the necessary preparations for this acquisition.


References

  1. Definition of Acquisition Approaches Model Marketingmixhub.com
  2. Acquisition Integration Approaches Model - Integration Criteria Van Vliet, V. (2011). Acquisition Integration Approach model. Retrieved [May 3, 2016 from ToolsHero]


Further Reading