Understanding Customer-related Issues in Mergers & Acquisitions An exploratory case study
Abstract: Value creation for the entity is one of the main reasons for companies to engage in Mergers & Acquisitions (M&A). Although customers play a crucial role in creating value for a company by generating revenue, these stakeholders are rarely discussed in M&A research. Considering the high failure rate of M&A, this paper aims to contribute to academic literature on M&A success factors by researching customer-related aspects. The purpose of this master thesis is to understand what issues the customers of acquired company face after the acquisition deal, how they react and how the acquiring company addresses the customer dimension to reduce the negative customer-side effects and achieve a successful acquisition outcome, i.e. - value creation. The thesis applies an explorative case study approach to analyse the customer-related aspects and acquirer's response. The present study examines the acquisition of Tentec - a UK-based provider of bolt tightening equipment by a Swedish industrial group Atlas Copco. This particular case was chosen as a superb real life case because it covers multiple previously largely neglected subjects on customer- issues in academic M&A research. The results suggest the main issue encountered by Tentec customers after the acquisition is a high degree of uncertainty towards the nature and the continuity of business relationship with Tentec. The findings indicate that the sense of uncertainty persists in the long-run even if reduced successfully by the acquirer immediately after the acquisition. The results show that other important aspects considered by customers are cultural and human issues such as acquirer's country of origin and personnel changes in the acquired company. Furthermore, the present study portrays multiple approaches applied by Atlas Copco to address customer dimension in way that would reduce potentially negative customer-side effects. Firstly, Atlas Copco estimates potential customer loss already in due diligence phase and incorporates it in acquisition price. Secondly, being aware of high level of uncertainty faced by customers, the acquirer attempts to reduce it by delivering fast and consistent message about business outlook immediately after acquisition, followed by direct customer visits later in PMI stage. Finally, Atlas Copco seeks to create additional value from the acquisition by attempting to explore cross-selling to newly acquired customers.
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