Description
ibm-lotus
Acquisition of Lotus Development Corporation by IBM. CASE STUDY- Mergers and Acquisitions Main points ? Hostile bid- tender offer of $60 per share ? Acquirer’s share dropping ? Target’s share soaring. ? White acquisition Corporation- Special purpose vehicle (shell company) is formed. ? Poison pill? White knights-HP, at&t. ? Concentric merger in the same industry. ? 3.3 per cent shares were with the directors. ? Company not performing well. ? Agency problems. ? Investors/ general public expected a takeover (rise in lotus price) ? HR issues were anticipated ? Bye laws- direct appeal to shareholders- lotus. ? Competition – Microsoft ? No white knight SWOT-IBM Strengths? Strong financial position ? Very big corporation ? Good market standing ? Market leader in many products WeaknessesLack of market reach in networking software CONTD… Opportunities Acquisition of lotus to fill out its gaps Lotus did not have potentially strong white knights Agency problems in lotus Lotus had only 3.3% shares vested with officers and directors. Bye laws of lotus allowed shareholders to oust the existing management and have a major say in approving the acquisition. CONTD…
ThreatsKey people of Lotus leaving the company Threat from partners of Lotus – HP and At&t Poison pill being activated by Lotus Microsoft was way ahead of IBM in the software applications and platforms (competition ) Positioning CASH COW SWOT - LOTUS StrengthsGood in software development 65% market share in spreadsheets Lotus 123 first spreadsheet so first mover advantage Good in networking technology Lotus notes was a very powerful product- sales Being in the software industry, it had low investments in physical assets. Partners with HP and AT&T Weaknesses Agency problems Loss making- so vulnerable weak financial position Relatively small player Inability to develop software at the pace required by the market Lack of management power Low shareholding by management- so easy takeover target Lack of white knights at the time of need Shares were trading 66% below the high of the previous year Low R&D compared with MS CONTD… Opportunities Differentiated product where there were only few competitors Market for notes- a mainstay of lotus was expected to grow by 10 times in a decade Opportunity to cash out by selling off Restructuring of the company CONTD…
Threats Threat of the takeover Relatively small size made it an easy target Competition from the powerful MS made its life difficult. Low employee morale due to restructuring Lot of power with the minority shareholders Lack of shareholders who had high percentage stakes. Pressure on the sale price of product due to the competition of new product launches from competitors. Lack of bargaining power with customers Small size so lacked financial prowess to defeat the overtures of IBM Value depleting acquisitions of the past. POSITIONING QUESTION MARK AFTER THE ACQUISITION WHAT? Pros Better position to compete with MS. Product extension-NOTES Wide range of products Could get hold of the Networking and groupware platforms in which it was lacking Market extension- got hold of Lotus’s customers Readymade R&D dept for OS Readymade workforce Potential problems for IBM. Affected the balance sheet Reduction in value of shares of IBM May result in loss of focus for lotus from the IBM point of view. Cultural issues between employees Employee morale down Ego clashes between management of both
doc_222012200.docx
ibm-lotus
Acquisition of Lotus Development Corporation by IBM. CASE STUDY- Mergers and Acquisitions Main points ? Hostile bid- tender offer of $60 per share ? Acquirer’s share dropping ? Target’s share soaring. ? White acquisition Corporation- Special purpose vehicle (shell company) is formed. ? Poison pill? White knights-HP, at&t. ? Concentric merger in the same industry. ? 3.3 per cent shares were with the directors. ? Company not performing well. ? Agency problems. ? Investors/ general public expected a takeover (rise in lotus price) ? HR issues were anticipated ? Bye laws- direct appeal to shareholders- lotus. ? Competition – Microsoft ? No white knight SWOT-IBM Strengths? Strong financial position ? Very big corporation ? Good market standing ? Market leader in many products WeaknessesLack of market reach in networking software CONTD… Opportunities Acquisition of lotus to fill out its gaps Lotus did not have potentially strong white knights Agency problems in lotus Lotus had only 3.3% shares vested with officers and directors. Bye laws of lotus allowed shareholders to oust the existing management and have a major say in approving the acquisition. CONTD…
ThreatsKey people of Lotus leaving the company Threat from partners of Lotus – HP and At&t Poison pill being activated by Lotus Microsoft was way ahead of IBM in the software applications and platforms (competition ) Positioning CASH COW SWOT - LOTUS StrengthsGood in software development 65% market share in spreadsheets Lotus 123 first spreadsheet so first mover advantage Good in networking technology Lotus notes was a very powerful product- sales Being in the software industry, it had low investments in physical assets. Partners with HP and AT&T Weaknesses Agency problems Loss making- so vulnerable weak financial position Relatively small player Inability to develop software at the pace required by the market Lack of management power Low shareholding by management- so easy takeover target Lack of white knights at the time of need Shares were trading 66% below the high of the previous year Low R&D compared with MS CONTD… Opportunities Differentiated product where there were only few competitors Market for notes- a mainstay of lotus was expected to grow by 10 times in a decade Opportunity to cash out by selling off Restructuring of the company CONTD…
Threats Threat of the takeover Relatively small size made it an easy target Competition from the powerful MS made its life difficult. Low employee morale due to restructuring Lot of power with the minority shareholders Lack of shareholders who had high percentage stakes. Pressure on the sale price of product due to the competition of new product launches from competitors. Lack of bargaining power with customers Small size so lacked financial prowess to defeat the overtures of IBM Value depleting acquisitions of the past. POSITIONING QUESTION MARK AFTER THE ACQUISITION WHAT? Pros Better position to compete with MS. Product extension-NOTES Wide range of products Could get hold of the Networking and groupware platforms in which it was lacking Market extension- got hold of Lotus’s customers Readymade R&D dept for OS Readymade workforce Potential problems for IBM. Affected the balance sheet Reduction in value of shares of IBM May result in loss of focus for lotus from the IBM point of view. Cultural issues between employees Employee morale down Ego clashes between management of both
doc_222012200.docx