Thursday, December 31, 2009

Happy New Year !

Sending my best wishes to my loyal blog readers and their loved ones for a wonderful new year full of love, laughter, wealth, health and peace. I will keep sharing more and more with you in 2010 with new projects and blogs underway. Happy reading everyone!!

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Saturday, December 19, 2009

Could HP or Konica Outbid Canon in its Pursuit of Oce?

Some of Oce’s shareholders think the firm should be valued at between EUR 10.50 to EUR 11 per share. They claim that Océ is a high-end business, it was argued, and could be highly profitable with the skills and technology Canon would provide. Buying the Dutch business would offer Canon opportunities to drive down cost and reap enormous commercial synergies. However, at around 5.3x sales, Canon’s bid was said to be on a similar level to the acquisition of bankrupt US office equipment and support company Danka Business Systems by Konica Minolta in 2008.

I could anticipated a possible repeat of the scenario encountered by Cisco Systems in its pursuit of Norwegian group Tandberg could arise, where opposition from shareholders forced the Californian tech giant to raise its offer by 10%.
In my opinion however, Océ’s options appear limited outside of Canon. A recent product alliance between Canon andHewlett Packard  rules the latter out of a rival bid.  Similarly, the prospect of Konica Minolta interloping can also be discounted after it signed a product development agreement with Océ in 2008. As part of the contract Océ and Konica agreed not to take any shareholdings in each other for five years.

Shares in Océ were up 0.24% at EUR 8.43 on Friday afternoon, valuing the company at EUR 736m.

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Monday, December 14, 2009

Canon and Oce say good progress being made on Canon's public offer

This is what Oce announced today – It basically says an white knight has until February 8th earliest to claim the firm. In my opinion, this could only be Konica/Minolta or Samsung.

Canon and Oce announced today good progress is being made on Canon’s public cash offer for Oce.  Reference is made to the joint press release by Canon and Océ dated 16 November 2009 in respect of the intended purchase of Oce.

Canon and Océ confirm that good progress is being made on the preparations of the Offer. Canon and Océ filed notifications with the competition authorities of the European Union, the United States, Switzerland and Taiwan. The Océ Merger Committee, the Océ European Works Council and the relevant Océ works councils have been and are being provided with information regarding the Offer in accordance with the applicable rules and regulations.

Canon expects to submit a request for approval of the offer memorandum in respect of the Offer to the Netherlands Authority for the Financial Markets (Stichting Autoriteit Financiele Markten or "AFM") before 8 February 2010, which is the date by which under Dutch law a request for approval must be submitted to the AFM. Senior management of both companies is working side by side to ensure the process runs as smoothly as possible.

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Sunday, December 13, 2009

What Should Xerox Do? Don’t Integrate ACS, Partner with Them

Given its reliance on hardware, my old firm Xerox got squeezed by the recession as companies stretched equipment further and put off purchases of new printers and copiers. The company's bold expansion into services, through the $6.4 billion acquisition of Affiliated Computer Services announced on Sept. 28, represents an attempt to transform the company again into services.
Buying ACS will triple Xerox Global Services revenues, to $10 billion, and help it benefit from companies' desire to do more with fewer workers, even as business comes back. ACS, which handles paper-oriented tasks such as billing and claims processing for governments and private companies, also gives Xerox a bigger toehold in health-care and government services, two areas primed to benefit from federal economic stimulus spending.

Xerox Chief Executive Ursula Burns says the company needed to make a large services acquisition to accelerate its transformation from a product company into a service provider. "The way we were going was going to take 10 years," she said in an interview. "The path we were on wouldn't have given us scale fast enough." This is a bold move by any means an deven bolder for Xerox whit limited track record of successful integration of acquisitions. Last year Xerox bought Global Imaging Systems a national network of dealers to further expand distribution capacity of copiers and printers into middle market clients in the US.

What counts in making a happy marriage is not so much how compatible two people are, wrote Leo Tolstoy, but how they deal with incompatibility That philosophy underlies a novel approach to M&A that Ursula should adopt. The most critical success factor in determining the success of this bold move has to do with how ACS will work with the big house, ie Xerox North America. They should run ACS with full operational autonomy and preserve their identity. Instead of rushing to integrate businesses they’ve bought, they should allow their acquisition to continue operating independently, almost as if there had been no change of ownership. Each organization should focus on what it does best even as it learns to use the resources and capabilities of the other to achieve its goals.

Here is what Xerox should do:

1. Homegrown XGS should be folded into ACS first. Even Ursula acknowledges that “the way we were going was going to take 10 years” and this is exactly why left Xerox Global Services. Xerox buys ACS because they know how to build services business beter, faster and more profitably. ACS should keep all its senior executives particularly the CEO.

2. ACS should be run separately with full operational autonomy maintaining its own identity and organization. Xerox should simply lay down its values and create a fresh sense of purpose at ACS to be able to beter compete against HP and IBM. In a nushell, Xerox should treat ACS as it would partner in a strategic alliance. By doing so, Xerox can manage ACS’ organizational drivers and culture in a nonthreatening way, reduce the conflict and disrutpion of integration, and create an environment in which Xerox North America and ACS can collaborate, share knowledge and best practices.

3. Xerox should turn into a holding company with three separate companies:

a. Services Business: ACS & XGS to be combined as a $10B powerhouse.

b. Office Business: Office & Global Imaging Systems combined in North America to be spun-off soon. Canon, Konica/Minolta would be highest bidders.

c. Production Business: High-end digital publishing and printing business for commercial printers, quick printers, book publishers, etc. Although there does not appear to offer strong synergies with the services business initially, this is perhaps the single most valuable franchise Xerox has thanks to billions of pages moving away from presses into customized, personalized digital publishing.

The center should separately manage each business actively looking for synergies, selectively coordinating few activities and sharing best practices as well as coordinating through horizontal platforms such as strategic planning, budgeting, finance, human resources, lean six sigma, and information technology.

Any other approach would jeopardize Xerox shareholders’ investments because the firms is making an acquisition that is too bold too late to catch up with HP and traditional Xerox executives share a DNA of imposing their way of doing things with a command-and-control style.

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Saturday, December 12, 2009

Microsoft, Cisco, Google M&A Strategy Points Overseas But Are They Ready?

I have been saying for years that US corporate growth in technology and many other sectors will increasingly come from overseas, namely China, India, Brazil and Middle East including Turkey. And yet most leaders heading up Fortune 500 US corporations tend to still think and operate ourely out of anglo-saxon mind-set and culture which will prove costly in my mind. Forexample, Microsoft, Cisco and Google expect to spend more time than ever before looking beyond US borders for acquisitions, company executives said this week. Even these beter managed companies may not be ready to make deals in China or India or Turkey. Some of them rely on investment bankers that typically make things more complicated and expensive to deal with.

Microsoft's managing director of corporate development Marc Brown, Cisco's corporate development VP Charles Carmel, and Google's corporate development VP David Lawee convened at a panel hosted this week by Silicon Valley's Churchill Club, a business and technology forum. All three executives said international acquisitions will be an increasingly large part of their companies' overall M&A activity in the months and years ahead.

With the acquisitions of videoconferencing company Tandberg in Norway and the set-top box business of Hong Kong-based DVN Holdings, Cisco is demonstrating an appetite for international growth it expects will continue, Carmel said. “Looking forward, the percentage of M&A outside the US certainly will be higher,” he added. In a brief interview following the panel, Carmel named China and India as particularly promising geographies for Cisco.

China remains a strong area of focus for Microsoft, Brown said in a one-on-one interview, adding the company is more partner-friendly than ever before. Going forward, Microsoft wants to have a strong presence in Brazil, Russia, India and China, he said. Microsoft “spends a lot of time thinking about search,” Brown said during the panel discussion when asked about the company’s current priorities. This interest resulted in a 10-year search partnership with Yahoo, which was finalized this week. “Much of what we wanted out of the larger transaction, we will get out of this partnership,” he said.

Google “inevitably” will do more globally, said Google head of M&A David Lawee, noting the company has 60 international engineering offices. "We have a footprint already around the world, and the capacity to add to those centers via acquisition in a relatively seamless way." The company likely will be especially aggressive in pursuing smaller buys, he said, noting that small acquisitions like Android, Keyhole and Urchin have "had a huge impact" on Google's success. Google will continue to make buys at a pace of about one per month.

When asked about the role of venture backers and financial advisors in deals, the executives all acknowledged VCs and bankers can help to make the acquisition process more efficient, since they have more deal-making experience than most entrepreneurs. However, all three agreed advisors should ideally “open the door and get out of the way.” Google is especially wary of dealing with investment bankers representing potential targets. “Every circumstance where there has been a banker, we probably have bid less than we would otherwise,” Lawee said.

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The Politics of Energy and World Outlook 2010

We have recently hosted my friend Fatih Birol, Chief economist, International Energy Agency to share his latest World Energy Outlook report with the media. As always, his work was eye-opening in terms of the Politics of Energy in our region and the rest of the world.

According to Fatih, the financial crisis has halted the rise in global fossil-energy use, but its long-term upward path will resume soon on current policies. Tackling climate change & enhancing energy security will require a massive decarbonisation of the energy system; We are now on course for a 6°C temperature rise & rising energy costs and limiting temperature rise to 2°C will require big emission reductions in all regions. The challenge is enormous – but it can and must be met - Improved energy efficiency & renewable technology deployment are critical and each year of delay adds $500 billion to mitigation costs.

Here are some of my key take aways from his presentation:

· Fossil fuels account for 77% of the increase in world primary energy demand in 2007-2030, with oil demand rising from 85 mb/d in 2008 to 105 mb/d in 2030

· Global upstream spending will fall by over $90 billion, or 19%, in 2009 – the first fall in a decade

· Sustained investment is needed mainly to combat the decline in output at existing fields, which will drop by almost two-thirds by 2030. In other words, the equivalent of 2 Saudi Arabias would be needed.

· Additional capacity of around 2 700 bcm, or 4 times current Russian capacity, is needed by 2030 – half to offset decline at existing fields & half to meet the increase in demand

· A glut of gas is developing reaching 200 bcm by 2015 – due to weaker than expected demand & plentiful US unconventional supply, with far-reaching implications for gas pricing

· Although indigenous resources are limited & output is declining, Europe isgeographically well placed to secure gas supplies from a variety of external sources

· China overtaking the United States by around 2025 to become the world's biggest spender in oil & gas imports

· An additional $10.5 trillion of investment is needed in total, with measures to boost energy efficiency accounting for most of the abatement through to 2030

· Demand for fossil fuels peaks by 2020, and by 2030 zero-carbon fuels make up a third of the world's primary sources of energy demand

· China, the United States, the European Union & India account for almost 70% of the green house emission amount needed for only 2 degrees C temperature increase

· Renewables, nuclear and plants fitted with carbon capture & storage account for 80% of electricity generation in EU in 2030, up from 44% today

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