M&A Capabilities Fit Questions

  • What is unique about the target company´s capabilities system? How does this company create value for customers?
  • How does the acquired company´s capabilities system differ from our own?
  • If we are buying the company for its product and service portfolio (a leverage deal), are we sure that those products and services will thrive within our current capabilities system?
  • If we are acquiring the target company for its capabilities (an enhancement deal), will we be able to preserve and integrate them?
  • How will this newly merged entity deploy and execute its evolving capabilities system? What are the risks of incoherence?
  • Which facilities, processes, suppliers, and employees are critical to bring on board, for the sake of the combined capabilities system? Are any of them (or any key customers) vulnerable to poaching by competitors?

These types of questions call for qualitative assessments, going beyond financial and legal considerations to focus attention on technological, organizational, and cultural issues. This may seem like unfamiliar practice in M&A, but it pays off in better decisions being made about deals, and in far more effective integration.

Source: The Capabilities Premium in M&A by Gerald Adolph, Cesare Mainardi, and J. Neely | strategy+business

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