Colin Barry

M&A at Arrow Electronics (BSSE, Monday, Week 4)


Commoditization at some point in the value chain usually doesn't destroy profitability; just shifts it to some other player in the value chain. Example: when RAM manufacturing gets commoditized, profits shift down value chain to computer re-sellers.

"A population can evolve, but the individuals within it do not." -- Clay
Example: IBM shifts from a mainframe manufacturer to a minicomputer manufacturer to a personal computer manufacturer. Individual business units associated with each activity die off; umbrella firm remains.

Two kinds of mergers:
Leverage my Business Model (LBM) => Buyer feeds acquired firms' resources into existing business model. Integration and dissolution.
Reinvent my Business Model (RBM) => Buyer attempts to change from stalled business model to acquired firms' successful business model. Can't just integrate resources. But might produce outsized returns.

Be wary of: "We're buying their business model, but we're actually going to get their resources." -- Steve Kaufman

B.J. Hess on whether a firm actually cares about its people: "Check the bathrooms." => Locks on stalls? Soap in dispensers?

B.J. Hess' Post-Merger Integration checklist:
(1) Find all the people who have been at firm for 10+ years, and ask them:
-- What do you value most about this company? => culture
-- Who do you turn to when you have a problem? => critical people; usually not reflected on org chart
(2) Secure the customers.