Mergers & Acquisitions - Pitney Bowes

Pitney Bowes has acquired 70 companies in 6 years – in doing so, the company made a deliberate decision to treat each acquisition as a business process. (each company should have a disciplined approach to making acquisitions and learning from them as an organization.

Key guidelines for making acquisitions.


1. Stick to Adjacent Spaces – pursue adjacencies, logical extensions of a company’s current business mix which can provide incremental value. P&G: uses acquisitions to expand it’s product lines – it then grows acquired brands through aggressive marketing and powerful distribution capabilities. adjacent acquisitions correlate with increased shareholder value – whereas diversification into non related areas actually reduces shareholder value.

I. take advantage of tacit strengths of an org (mgt experience, custome insights, cultural orientation
II. Brand consistent = because the adjacent products often have features and functionality which are consistent with those of the product (offerings) of the acquirer

Key adjacency question from Pitnew Bowes: “Can we really add more value to the target company than any other acquirer can? Ideally, the company pursues acquisitions in which the acquired company’s mgt believes that it brings something unique to the table.

Adjacent acquisitions make for a much more compelling growth strategy than diversification does. It’s much more logical to explain the rationale behind an adjacent purchase, to key stakeholders and interested parties (including customers, employees, financial analysts, shareholders, management). Key stakeholders have to believe in an acquisitions potential for it to succeed.

2. Bet on Portfolio Performance
Manage like an investment portfolio, make multiple, smart acquisitions, instead of one or two big bets. The portfolio approach to acquisitions means that acquisitions will not only be of a manageable size but will also be sufficient in number to hedge the risk that any one will go awry.
Classics benefit of this strategy: produces more predictable financial results, over time. Which is helpful to companies which hope to attract investors b being consistent performance in a broad range of macroeconomic environments. (buy, invest, profit – model)
Diversification also helps meet investment requirements of business that are in varying stages of development.

I. Large Deals vs. Small Deals: One can learn as much from a small deal, as from a large one – however, the learning curve experience is itself a valuable asset. (the risks of learning whilst executing a smaller deal are often much lower than the risks from larger deals).

3. Get a Business Sponsor
It’s a good idea to create a corporate development group to help drive the acquisition process – however that team should never be allowed to drive the acquisitions. The leaders of business units are in the best position to gauge a potential acquisitions strategic and cultural fit, identify potential business synergies and establish the roadmap for delivering expected outcomes.

Sponsorship by business leaders is especially important to talent retention, people must be encourage to establish and maintain strong working relationships with new management teams, smooth out org culture shifts and help drive operating procedures.

Business Unit Managers - should be the sources and owners of acquisition proposals – the corporate development groups role should be to facilitate and execute the details of the transaction.

Biz Mgrs should appoint integration managers to oversee the actual execution of the acquisition – achieving revenue targets, engineering cost synergies and delivering expected ROI.

Snr Mgt should follow up with The Business Unit sponsor frequently, in order to make sure that the acquisition integration plan, remains on track

4. Be Clear on how the acquisition should be judged?
I. What does success look like? What are we looking for in terms of growth potential, market leadership, financial objectives?

Types of Acquisitions: (Bolt-on vs. platform) Important to distinguish between these two types of adjacent acquisitions – because it leads to diff criteria for evaluating potential deals.

Platform Acquisition: purchase of an existing business which allows acquire to establish a beachhead in a new market space

Bolt-on: fits neatly into an existing business or market of the acquirer
II. Less complex, lower risk, potential lower reward
III. Performance measurement: focus on probably business synergies, short term rev opportunities, cost savings, efficiencies, economies of scale, complementarytechnology, IP, features & functionality? Opportunities to cross sell / upsell products & services?
o Incremental ROI – within 1 – 3 years (short term growth)

Platform: takes the acquirer into a new (though adjacent) business space or adctivity
I. Higher degree of complexity, higher risk – higher reward
II. Performance measurement: near-term revenue opportunities an cost savings are less important
o Strategic questions become paramount – right business, right value proposition vis-à-vis are current offering, marketing intelligence, brand extensibility, faster growth potential, cultural fit?
o Long term growth

5. Don’t shop when you’re Hungry
I. Grocery shopping analogy: people purchase more than is needed and are less price sensitive about it, when their hungry, or shopping on an empty stomach
o This often results in buyers remorse
II. Expand from a position of strength, not from weakness (HP + Compaq)??
III. Avoid this habit by displaying analytical and emotional discipline

Due Diligence: The more you do, the more you know. (All companies in the midst of an acquisition must perform a due diligence review to identify and eliminate major sources of potential risk before the transaction is closed.
I. Start small, keep doing deals, learn as much and as fast as you can
II. Don’t expect to get by with a light checklist – dig deep, ask key questions and make sure you do your research
III. Build a due diligence team and use that same team to perform each due diligence review
IV. Use your due diligence data to guide the integration effort – after the acquisition has been completed

Pitney Bowes has a bottom’s up approach – acquisition ideas emanate from business units. This requires balanced disciplined thinking and consistent governance procedures.