Table Of ContentY
L
F
M
A
E
T
Team-Fly®
DeansFM.qxd 1/28/2003 11:33 AM Page i
PRAISE FOR
WINNING THE MERGER ENDGAME
The strategies behind industry consolidation and corporate growth
are easy to understand in principle, but difficult to achieve in prac-
tice. This book offers valuable insights into strategic decision making
on portfolio selections and value creation, and provides the means to
look across different industries with a common yardstick.
—Dr. Santhan V. Krishnan,
Vice President of Innovation and
Chief Scientific Officer, Johnson Diversey Inc.
Endgames is a breakthrough new concept that centers top executives
and shareholders on the final strategic battlefield: Industry consolida-
tion. Companies of all industries will benefit from this ultimate new
insight.
—Dr. A. Stefan Kirsten,
Chief Financial Officer, Metro AG
A fascinating study! It will change our understanding of strategic
behavior in an era of innovation and globalization. The analytical
discussion is crisp and the data analysis is highly illuminating. This
book is must reading for anyone interested in understanding how the
future will look like. I predict that the “Endgames Curve” will quick-
ly become one of managers’ favorite strategic tools.
—Sebastian Edwards
Henry Ford II Professor of International Management
Anderson Graduate School of Management, UCLA
What’s powerful about the Endgames model is that it synthesizes a
very complex set of relationships in the life cycle of an industry into
a diagram that’s easy to understand, flexible in its application, and
useful for planning. This conceptual tool provides a unifying princi-
ple on which growth strategies can be based.
—Dr. Andrew Brod
Director of Business and Economic Research
Bryan School of Business and Economics,
The University of North Carolina at Greensboro
This page intentionally left blank.
DeansFM.qxd 1/28/2003 11:33 AM Page iii
Winning
the Merger
Endgame
A Playbook for
Profiting from Industry
Consolidation
Graeme K. Deans
Fritz Kroeger
Stefan Zeisel
McGraw-Hill
New York Chicago San Francisco Lisbon London
Madrid Mexico City Milan New Delhi San Juan
Seoul Singapore Sydney Toronto
ebook_copyright 8.5 x 11.qxd 6/27/03 9:44 AM Page 1
Copyright ©2003 by A.T. Kearney. All rights reserved. Manufactured in the United States
of America. Except as permitted under the United States Copyright Act of 1976, no part of
this publication may be reproduced or distributed in any form or by any means, or stored in
a database or retrieval system, without the prior written permission of the publisher.
007-142861-5
The material in this eBook also appears in the print version of this title: 0-07-140998-X
All trademarks are trademarks of their respective owners. Rather than put a trademark
symbol after every occurrence of a trademarked name, we use names in an editorial fash-
ion only, and to the benefit of the trademark owner, with no intention of infringement of
the trademark. Where such designations appear in this book, they have been printed with
initial caps.
McGraw-Hill eBooks are available at special quantity discounts to use as premiums and
sales promotions, or for use in corporate training programs. For more information, please
contact George Hoare, Special Sales, at [email protected] or (212) 904-
4069.
TERMSOFUSE
This is a copyrighted work and The McGraw-Hill Companies, Inc. (“McGraw-Hill”) and
its licensors reserve all rights in and to the work. Use of this work is subject to these terms.
Except as permitted under the Copyright Act of 1976 and the right to store and retrieve one
copy of the work, you may not decompile, disassemble, reverse engineer, reproduce, mod-
ify, create derivative works based upon, transmit, distribute, disseminate, sell, publish or
sublicense the work or any part of it without McGraw-Hill’s prior consent. You may use
the work for your own noncommercial and personal use; any other use of the work is strict-
ly prohibited. Your right to use the work may be terminated if you fail to comply with these
terms.
THE WORK IS PROVIDED “AS IS”. McGRAW-HILLAND ITS LICENSORS MAKE
NO GUARANTEES OR WARRANTIES AS TO THE ACCURACY, ADEQUACYOR
COMPLETENESS OF OR RESULTS TO BE OBTAINED FROM USING THE WORK,
INCLUDING ANY INFORMATION THAT CAN BE ACCESSED THROUGH THE
WORK VIA HYPERLINK OR OTHERWISE, AND EXPRESSLY DISCLAIM ANY
WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO
IMPLIED WARRANTIES OF MERCHANTABILITYOR FITNESS FOR APARTICU-
LAR PURPOSE. McGraw-Hill and its licensors do not warrant or guarantee that the func-
tions contained in the work will meet your requirements or that its operation will be unin-
terrupted or error free. Neither McGraw-Hill nor its licensors shall be liable to you or any-
one else for any inaccuracy, error or omission, regardless of cause, in the work or for any
damages resulting therefrom. McGraw-Hill has no responsibility for the content of any
information accessed through the work. Under no circumstances shall McGraw-Hill
and/or its licensors be liable for any indirect, incidental, special, punitive, consequential or
similar damages that result from the use of or inability to use the work, even if any of them
has been advised of the possibility of such damages. This limitation of liability shall apply
to any claim or cause whatsoever whether such claim or cause arises in contract, tort or
otherwise.
DOI: 10.1036/0071428615
DeansFM.qxd 1/28/2003 11:33 AM Page v
To my three ladies: Almuth, Carolin, and Isabel
(cid:1) (cid:1) (cid:1)
For my wife, Julia, and my children, Benjamin and
Penelope, with all my love
This page intentionally left blank.
DeansFM.qxd 1/28/2003 11:33 AM Page vii
For more information about this title, click here.
Contents
Foreword ix
Preface xiii
Part One. Introduction
1. The Consolidation Landscape 1
A review of the biggest decade for mergers and acquisitions
reveals the underlying characteristics of the good and bad
deals—and the lessons they offer.
2.Finding Order in Chaos: Rules and Logic
of the Endgame 12
There is a pattern to industry consolidation—an S curve—
that all major industries follow. This chapter sets the foun-
dation of the curve and its four stages.
Part Two. The Four Stages of the Endgame
3.The Opening Stage 22
All industries begin in Stage 1: there is little to no market
concentration and companies race to stake their territorial
claims.
4.The Scale Stage 42
Size begins to matter in Stage 2. Growth, through both
internal and external strategies, becomes paramount as
vii
Copyright 2003 by A.T. Kearney. Click Here for Terms of Use.
DeansFM.qxd 1/28/2003 11:33 AM Page viii
viii Contents
companies establish market dominance.
5.The Focus Stage 64
In Stage 3, the major players have emerged and formed
their empires, but with acquisition options increasingly lim-
ited, growth strategies must take a new twist.
6.The Balance and Alliance Stage 80
Only a few players will ultimately dominate their industries
in Stage 4 as concentration rates reach as high as 90%.
Industry titans reign, but the threat of being toppled is con-
stant.
Part Three. New Imperatives and
Future Outcomes
7.CEO Strategies for Endgames 96
Mastering the Endgames curve requires insight and know-
how from the CEO and the Board. Moving from one stage to
another is particularly treacherous, and the senior manage-
ment team must anticipate the dangers.
8.The Stock Market Connection 117
Stock prices give companies acquisition currency; acquisi-
tions, in turn, drive stock prices. The connection to industry
consolidation is clear—as is the need to take advantage of it.
9.The Endgames Vision of 2010 132
New industry giants, a skyrocketing stock market, the first
US$1 trillion merger: these could be just some of the sights
along the road to 2010. Plan your route accordingly.
Appendix: Endgames Methodology and M&A
Transactions 1988 to 2001 155
The Endgames methodology is explained in detail and a
database of more than 1,800 of the largest mergers and
acquisitions from 1988 to 2001 is included.
Index 231
DeansFM.qxd 1/28/2003 11:33 AM Page ix
Foreword
V iewed up close, business—like war, football, or childhood—
is chaos. But step back a bit and patterns emerge across
space and time. Identifying those patterns, sorting the sig-
nificant from the random, is an excruciating process of number-
crunching, experience, and intuition. The task is especially difficult in
a global economy, with tens of thousands of large companies employ-
ing hundreds of millions of workers and serving billions of customers
over decades.
But in the book you now hold in your hands, the three authors—
veteran executives with global experience with A.T. Kearney, the man-
agement consulting subsidiary of EDS—have done the trick. Yes, they
draw order from chaos, but they also provide practical, profitable
advice for managers and shareholders. And they are bracingly confi-
dent—with good reason—about their conclusions and projections.
What Graeme Deans, Fritz Kroeger, and Stefan Zeisel have written
is nothing less than a natural history of mergers and acquisitions. They
explore not merely why such consolidations happen and succeed (or,
more often, fail)—with copious real-life examples from around the
world—but, more important, they show how they happen, their life
ix
Copyright 2003 by A.T. Kearney. Click Here for Terms of Use.
