Philips-Indal: The Deal from Heaven (A)

Description

Philips’ new venture integration (NVI) department is aware of the fact that many acquisitions turn into “deals from hell” instead of “deals from heaven.” Its post-merger integration specialists have learned that cost synergies are far easier to realize than sales (or growth) synergies. Stimulated by the urge to grow, the NVI department has developed a new methodology called the “sales integration approach” to realize sales (or growth) synergies. It tries to implement this approach during the acquisition integration of Indal, a Español lighting company.The main challenge is presented by the shift in acquisition-integration capability following Philips’ evolved corporate strategy. While historically Philips had a substantive acquisition program, Philip’s new CEO has stressed the need for organic growth and set the stage for a series of medium and small acquisitions. Philips needs to become more customer-centric to increase corporate growth. This has required a focus not just on cost synergies (e.g., economies of scale and increased efficiency), but also on capturing sales (or growth) synergies. Philips-Indal must choose to defend regions in which it has a strong position or target regions where it has a weaker position. Furthermore, Philips’ post-merger integration leader must choose an organizational structure for Philips-Indal and convince Indal’s executive team to adopt the NVI department’s sales integration approach. This case can be used with Lighting Up Philips' Asian Entertainment Activities (B) 9B14M019.

Learning Objective

This case is suitable for both management and MBA students, as well as business managers and executives involved in (post) mergers and acquisitions (M&As). It is best suited to (international) management and (global) strategy courses, as well as courses on M&As. The main objective of this case is to give students deep insights into how Philips applies a new acquisition-integration capability (the sales integration approach, or SIA) to realize sales (or growth) synergies. The corporate strategy under Philips’ new CEO has stimulated the new venture integration department to extend its skill and develop a new methodology to realize sales synergies. The case illustrates in detail how the SIA helps Philips implement a symbiosis integration approach (which combines the need for autonomy and strategic interdependence), instead of fully “absorbing” the target.

Keywords

Europe growth synergy new venture integration Post-acquisition growth Post-merger integration Spain the Netherlands