Case Analysis of Lenovo M&A IBM PC department

HP entered into an agreement with Compaq Computer Corporation in September 2001. In this definitive agreement, HP is going to purchase all of Compaq’s common shares outstanding, and pay a total price of 0.6325 shares of its common stock for each share of Compaq’s common stock.

Major companies and corporations that comprise a big part of the United States economy take advantage of certain opportunities such as going public through IPO’s, acquisitions, and mergers. These three approaches provide an additional resource and many times an advantage to expand, become more profitable, or simply save a company’s existence.

Haspeslagh and Jemison (1987), argue that what determines the success of a acquisition is not the actual purchase itself, but the development of the acquisition strategy the supports. Unfortunately, many executives face the acquisitions as an end, not a means to achieve that end. According to this author, the acquisition is only one strategy business growth. There are others as internal growth, joint venture, partnership, franchise and strategic alliance. All should be evaluated by the company before implementing a business development strategy. A proper analysis of the acquisition goes beyond the study's own candidate company. It must include a contribution from the analysis of potential acquisition for the strategic development, as well as

It is recommended that IBM shares be acquired during this temporary downturn in its stock price. Historically the company has bounced back from price slumps, and at present the company has a very solid business strategy transition it is undergoing. Once its new businesses are fully operational the company is expected to see great returns. Investors like Warren Buffett are increasing their

IBM was already a big name in the market of mini, middle range and mainframe computers. The perspective and promising small computer market, greatly gaining ground due to Apple II and other few, was still a difficult task despite their multi-millionaire efforts.

1. IBM is capitalizing on the global warming-triggered revival of interest in nuclear power as an alternative to coal-fired plants 2. IBM has plan for Transferring itself to a innovation-centric globally integrated corporation that focus on new high profit high value added business and service 3. Using a very unique approach to engage their employees in an online intranet using its Jam technology 4. IBM is well known for its sale-centered business culture as it continues to hire its executives and managers from its sales force 5. 13 acquisition were completed, enabling IBM expand its software and service business 6. IBM is known to have more patent than any other American technology company 7. IBM’ s revenues increased 7% to $69.92B in 2007 8. Net income from continuing operations increased 9% to $6.46B 9. EPS has been increased steadily to $6.06 in 2006 10. ROE has a good reputation which means 33% in compare with actual rate, which almost 24%

IBM, the biggest IT company in the world, from more than 80 years is the lider in supporting the innovation in business. The company offers complex solutions, adjusted to customers requirements.

Thirty-three years ago, the founder of Lenovo founded the company with only 33,231 USD (converted from 20,000 CNY). 2 Nevertheless, Lenovo has become one of the Fortune 500 companies, and it is one of the largest PC manufacturers in the world, with a more than 20% market share, and around 43 billion revenues in 2016. 3 Over the past three decades, Lenovo has implemented numerous strategies to achieve such accomplishments. Since multinational enterprises often involve in

In 2007 Acer bought Gateway in the USA and Packard Bell in Europe and became the Number 3 world provider of computers and number 2 for notebooks, and achieved significant improvement in profitability. Acer has been striving to become the world's largest PC vendor, in the belief that the goal can help it achieve economy of scale and garner higher margin.[9] But such a reliance on the high-volume, low-value PC market made Acer exposed when buying habits

There is an urgent need for them to get used to the new working system and colleague relationships. So acquisition might lead to partially inefficient management through changes of power and status in company position (Sudarsanam, 2003). Moreover, acquisition extends the scope of management and therefore makes it more complex and more difficult to handle. Competing interest, incompatible goals, disagreement regarding resource allocation and opportunistic behavior may all lead to inter- firm conflicts (Das and Teng, 2000). These diversifications of the combined firm would also create problems of managing a wider range of resources and competencies on an overall aspect. Inter-firm conflicts reduce the participants’ incentive and willingness to cooperate as a whole team, providing fewer chances for the firm to realize its goals (Das and Teng, 2000). In order to keep the firm’s original consistency of operation and achieve efficient and continuous development while dealing with unexpected diversification caused by acquisition, managers might have to spend a large amount of money and all kinds of resources on management. This huge cost would conceivably have negative effect on the growth of acquirer and even lead to a collapse of the combined firm.

Prior to their cultural change that took place in the early 1990’s, many would have said that IBM was on a fatal downhill slide. At this point they were beginning to become obsolete. IBM at one point was among the leaders within the world for hardware/software development and information technology services, but all divisions within the organization were run independently from one another. They were not a unified enterprise. To solidify this even further, “rather than working together as a team, divisions competed against each other both internally and in the field” (DiCarlo, L., 2002).

Continuing the global integration of IBM, driving productivity gains and higher value in service delivery;

Founded in June 1911, IBM has always been a leading company in the technology industry and at the forefront of innovation. It is a manufacturer of computer hardware and software, and also provides infrastructure, hosting and consulting services. Before the 2000s, IBM was the largest PC vendor in the world. However, the hardware sales have continually declined since 2000, and IBM sold its PC group to Lenovo in 2004, as well as its x86 Server Business in 2014. In the new era of the technology industry, IBM has faced the challenge to transit from a hardware manufacturer to a service company.

As we can see on attached charts - Market was not too sure about this merger (“On paper, the deal has much to commend it, many outsiders say”. But thorny issues remain, including how to accommodate the strains between consultants and auditors, potential conflicts of interest involving important clients and even the delicate matter of choosing a new name. If the negotiators are not careful, fallout could haunt the combined firm for years to come.) From the time when merger plans were made public Shares of

In 2012, Fortune ranked IBM the No. 2 largest U.S. firm in terms of number of employees (435,000 worldwide). Globally, Forbes 2011 ranked the company 31 in terms of revenue. The company has undergone several organizational changes since its inception, acquiring companies such as Kenexa (2012) and SPSS (2009) and organizations such as PwC 's consulting business (2002), spinning off companies like Lexmark (1991), and selling off product lines like its personal computer and server businesses to Lenovo (2005, 2014).