All about economics on the web

The acquisition integration approach model provides guidance and insight in mergers and acquisitions on choosing the best integration. This model was developed by Philippe Haspeslagh and David Jemison.

Haspeslagh and Jemison in 1990 stated that the approach, the company takes for the integration should be understood by considering two criterias:

1. The need for strategic interdependence.
2. The need for organisational autonomy.

Strategic Interdependence

The main goal or task of any acquisition is to create the value. This value is enabled when the two companies or organisations are joined. There are four types of value creation:

1. Resource Sharing: here the value is created by combining the companies at the operating level.
2. Combinational Benefits: here the value is created by borrowing the capacity, greater market power, cash resources or added purchasing.
3. General Management Skill Transfer: here value is created through coordination and control or improved insight.
4. Functional Skill Transfer: here the value is created by sharing information, knowledge or by moving people to different places.

Organizational Autonomy

The need for the organisational autonomy can be answered using three questions:

1. How much autonomy should be allowed?
2. Where or in which areas should the autonomy be allowed?
3. Is autonomy essential to preserve the strategic capability?

The preferred acquisition approaches are:

1. Preservation: here the management focuses to keep the source of acquired benefit intact.
2. Absorption: the focus of the management is that its vision for acquisition is carried out properly.
3. Holding: here the values are created by risk-sharing, general management capability or financial transfers. There is no need of integration.
4. Symbiosis: the boundaries preservation and boundaries permeability should be maintained by the management.

Companies that perform the acquisition process at large scale in a year may designate a group of persons to work on acquisition.

Written by: Matt

We also suggest this relevant article if you have time: Ten Management Roles by Henry Mintzberg

Some other similar articles

• M&A Approaches

Tagged as acquisition integration approach model, acquisitions, combinational benefits, David Jemison, Haspeslagh Jemison, mergers, organisational autonomy, Philippe Haspeslagh, resource sharing + Categorized as Economy articles, Ladership & Management