Typically we will see more acquisitions in the quarter 1, as quarter 4 as a time for most of the acquisitions to take place, like a company miss on their revenue and reflect in the public trading stock price.
Along the history and across the different sectors/industry, make business small (such as combining two companies) and achieve the synergy impact (1+1 is equal to 2 or more), it is dominance thinking for a long period of time. The public listed company is more likely to pursue acquisition, due to the market and investor expect return on investment to be at least certain percentage year after year, despite the acquisition for the long run may not really making synergistic impact, due to disrupting innovations one after another, and neutralise certain existing market advantage and turn to become disadvantage for certain product, when compete with the new enter in the market, which bring in complete new generation of product that address and more adequately for the modern and future market.
Leveraged buyout (LBO) by existing top management to spin-off and achieve complete independent business, where the existing management believes the potential of existing business, sometimes turn into a more viable business that sustains, due to passion and believe in the business, and they know what they are doing.
Compared with acquisition purely based on financial benefits, you will notice a lot of post acquisition companies after performing the rightsizing and restructuring, put into a medium horizontal time period view, may not really perform better. For companies driven by financials, it is easy to choose financial means to determine what to do next, to layoff excessive employees, to close down no profitable business, to spin-off certain parts of the business in the profit and loss manner, everything is the financial figure they see.
It has a lot of variables for making acquisitions to work and fail, a lot of people have written before. Here we point out one, two last generation businesses when combining the force will produce a strong business that has more resources then the previous, the answer is yes. But more competitive to compete in the future? The answer is no. Different time and period, in particular current third industrial revolution transition to fourth industrial revolution (4IR) Industry 4.0, emerging technologies and next wave of big things, if the company can not catch it and miss it, regardless of how many companies you acquired, in the end of the days, you most likely will either chop-off, spin-off or sell-off business acquired in the past that can not be meet the return of investment. Because they focus on the current generation of technologies, and overlook the future, where the technologies shape the future market. Furthermore, the matter of inertia (the more successful the company in the past, the more likely it happens), we expect to see whatever business empire in the past start to fall, due to miss the market expectation, or become the target for other company acquisitions. The longer you stay in the business, the more you will notice for the 10 years from rise to star and start to decline happen most of the time.
With the more disruptive innovations introduce here and there, we expect for the various mean for make the business run small and synergy will introduce, such as smart factory (offer the beauty of produce small quantity of different product accordingly to the market consumption), IoT sensor to automated lot of industrial operations and robotic process automation (RPA), virtual customer assistant (VCA) and chatbots with AI to eliminate lot of white collar workers, self driving car or know formerly as connected and autonomous vehicles (CAVs) make the change in the transportation industry. Under the next wave and next big things, what we experience today may be disrupted with the rise of AI and how to coexist with AI robotics. Be it complete human less power plant survey and checking the meter readings, to self drive long distance business, to robot chef who replace human in the restaurant and food and beverage industry, AI chat bot that talk and can understand in natural language, to complete typically enterprise workflow process automation for routine and processing tons of documents without human. The example cited is just a few that happen at the top of the iceberg, the more you can read from other news across the globe.
E-SPIN Group in the enterprise ICT solution supply, consultancy, project management, training and maintenance for corporation and government agencies did business across the region and via the channel. Feel free to contact E-SPIN for your project requirement and inquiry.
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