Acquisition strategies in the plastic pipes industry - the case of Wavin Group - Dissertation Example

?A. Project Proposal - Acquisition strategies in the plastic pipes industry - the case of Wavin Group B. Introduction - Background The expansion of globalization has caused the increase of competition among firms in various industries worldwide. One of the most important challenges for modern organizations has been the identification of the strategies that can help towards the stabilization of the organizational performance – either in the short or the long firm. Acquisitions have been proved an effective strategic tool for the support of a firm’s position in its market. However, the success of acquisitions is not always guaranteed; there is always the risk of failures especially if the relevant plans are not well designed or in case they are not effectively executed. For this reason, it would be wise for strategic managers to use acquisitions along with other strategic options in order to secure the stabilization (at a first level) and the growth of a particular organization. An indicative example of such methodology is the strategic framework used by AXA (Consultancy Firm) when handling the re-structuring of PWPipe – a leading firm in the plastic pipes industry of USA; in the case of PWPipe the consultants of AXA decided to implement primarily a series of strategies for supporting the firm’s existing operations – this was mainly achieved through the update of the firm’s IT systems; at the next level, acquisitions were used in order to stabilize the firm’s growth (AMX International, 2011). The proposed study focuses on the use of acquisitions as strategic option by firms in the plastic pipes industry; reference is particularly made to Wavin Group, a key player in the global plastic pipes industry. The firm’s operations are expanded across 24 countries worldwide; its engagement in three different markets – building, civils and utilities – has been important for its growth (The Manufacturer, 2003). The firm has used acquisitions in order to achieve a continuous growth towards its competitors; in 2005, Wavin Group acquired Hepworth Building Products, a heating technology company with an important presence in the British market (PR Newswire, 2005, UK Business Park, 2005); in 2007 the firm acquired Pilsa Plastic – a Turkish firm, aiming to increase its influence within the global market (Builders Merchant Journal, 2007, Wavin Labko, 2008); in 2010, the expansion of the firm was continued through the acquisition of the Swedish firm KWH Pipe (European Plastic News, 2010). It is made clear that acquisitions has been extensively used by Wavin Group in order to improve its position in the global market; in accordance with ‘Michael Del Pero - vice president in FocalPoint Partners LLC - a lot of plastics M&A announcements were expected in the second half of 2010 because of the tax changes in USA’ (Esposito, 2010). However, in the case of Wavin, the tax rules cannot be considered as the only criterion for choosing acquisitions as a key strategic option – taking into consideration the firm’s relevant activities in the last decade, as explained above. In any case, the plastic pipes industry is a prominent market sector; in fact, in accordance with a relevant report, the specific industry is expected ‘to advance at the fastest pace up to 2014’ (Bombourg, 2010). The identification of the potentials of acquisitions to support the further growth of the particular industry would be particularly important indicating the potential value of the specific strategic option for firms operating in other industries – which face severe pressures due to the expansion of the globalization and the recession. C. Literature Review The use of acquisitions as a strategy for achieving a continuous growth or for facing the strong market pressures has become a common phenomenon the last three decades (Hitt et al. 2009, 183). In practice, acquisitions can be described as ‘the use of cash outflows for purchasing the net assets or property plant, and equipment of the acquired business’ (Tortiorello 2008, 251). If viewed as part of a firm’s strategies, acquisitions may not be considered as the key strategic framework for the promotion of business growth; however, in terms of the level of their use by firms worldwide, acquisitions need to be characterized as a decisive part of the strategy of modern corporations (Mathur et al 2007, 205). Of course, the use of acquisitions as a strategic tool is optional and not obligatory (Smit et al. 2010, 85) but, under certain terms, the use of the specific strategy has been proved to be the only available option for enhancing business operations (Oberg et al. 2006, 1267). The common use of acquisitions in practice has not reduced the risks related to their successful development – as a business strategy (Saorin-Iborra 2008, 285). Even under these terms, the use of common strategic models and principles – which have been tested in practice – can minimize the risks of the relevant processes (Lambkin et al 2010, 1235). Moreover, the managers involved in the specific projects have to be able to identify the organizational needs but also the market conditions – i.e. to check whether the specific strategy is feasible in current market conditions and whether specific measures should be taken for ensuring the success of the specific initiatives (von Eije et al. 2010, 260). D. Research Objectives and Research Questions The objectives of the proposed study can be summarized as follows: a) to examine the level at which acquisition initiatives have been developed within the plastic pipes industry, b) to identify and evaluate the performance of most common acquisition strategies in the particular sector, c) to check whether there are factors that cause delays to the successful completion of acquisition plans in this industry, d) to identify the measures required by firms operating in this industry in order to improve their existing acquisition strategies and e) to examine whether there are alternative plans available to this industry’s firms that wish to increase their competitiveness. At the next level, the study is expected to offer clear answers to the following questions: a) are acquisition strategies used by firms operating in the plastic pipes industry as a tool for increase organizational performance, b) are the firms of this industry well prepared for engaging in such plans, c) which are the major challenges that firms of the particular industry have to meet when developing an acquisition strategy – referring either to short-term and long-term challenges and d) does the acquisition strategies used across the plastic pipes industry present similarities with similar strategies developed in other industrial sectors? – Explanations should be given on the differentiations – if any – identified and their causes. E. Research Design – Collection of data The research developed for this study will be divided into three parts: a) at the first level, existing literature will be reviewed and evaluated at the level that valuable information are provided for the issues under discussion. The literature engaged in the study will refer both to the plastic pipes industry in general and to the Wavin Group – the case study on which this study focuses. The literature review will mostly include academic studies – referring to books, journals and periodicals; however, online databases and websites will be also reviewed in order to search for material necessary for the completion of this study – for instance, reports and articles referring to the issues discussed in this study. Also, statistics and graphs will be also used for showing the historical and the current trends of acquisition strategies as a strategic tool for supporting organizational performance. B) In the second part of the research (qualitative research part) the acquisition strategies of Wavin Group will be presented and evaluated; this part – case study analysis – will be developed using material retrieved through the firm’s database but also through academic and non-academic organizations and databases. The qualitative research part of the study – case study analysis, focusing on the Wavin Group – will offer important information on the status and the performance of acquisition strategies in practice. The findings of the qualitative research – information available for Wavin Group, as explained above – will be critically discussed using the findings of the literature but also the findings of the empirical research, as analyzed below. C) Quantitative research will be also used as a research tool for the proposed study. A survey will be conducted among the 5 major competitors in the plastic pipes industry. The firms will be chosen in accordance with their position in the global market. There will be no geographical restrictions in regard to the firms, the employees of which will be asked to participate in the survey. At the same time, no restrictions will exist as of the age/ gender or the position of employees within their organization. The survey will be based on a questionnaire, which will be distributed to the potential participants through the e-mail – and will be returned in the same way; a limit of 7 days will be set to the participants for the return of the completed questionnaire. The participants will be informed in advance regarding the scope of the survey and their rights – relevant explanations will be included at the end of the questionnaire. A sample of 150 participants has been set as a target regarding the quantitative research part of the study; if such number will not be reached, then, a supplementary survey will be conducted addressing 10 firms operating in the plastic pipes industry; these 10 firms will be chosen in accordance with their financial performance/ position in the global market. The aim of the researcher is to reach a sample of 150 participants in order to have a high range of views/ approaches on the issues under discussion. F. Analysis of data As noted above, the research developed for this study will be divided into three parts; the findings retrieved through each part will be analyzed using appropriate analysis methods. The methodology used for the collection of data has been described in the previous section – referring to each research method separately. The analysis of data collected can be described as follows: a) in the case of literature, the material chosen will be analyzed using a critical discussion of the issues involved – always taking into consideration their relevance for the study; separate sections will be used in the Literature Review part of the study in order to make the findings of this research part clearer, b) for the case study analysis, a similar approach will be used: the findings retrieved in regard to the acquisition policies of the specific company will be categorized and discussed using the findings of the literature; emphasis will be given to the research questions; moreover, only those points that best respond to the research objectives will be highlighted. Finally, the data collected through the survey will be summarized and discussed by referring to the research questions; no statistical analysis of the data will be used. However, a graphical representation of the data collected will be necessary – using Microsoft Word or Microsoft Excel – in order to show the differences/ similarities in the responses of participants. At this point, the categorization of data would be valuable in order to show their relevance with the research questions; in this way also, additional information could be retrieved in regard to the research issues – for instance, the employees of a particular age/ gender may be more positive towards the use of acquisition as a strategic tool compared to the employees of a different age/ gender framework. G. Time scale The study will be developed in 7 phases – see also the Gantt chart below. The completion of the study is expected to take a month – with the potential need of 3-4 more days, in case of unexpected delays that cannot be avoided, for instance delay in the return of questionnaires by the participants. During the first phase, which will last about 5 days, all the material required for the development of the study will be gathered – referring to the academic studies and the non-academic material (reports, article and statistics) on which the study will be based. In this phase also, the questionnaires will be developed and sent to the participants. In the second phase – 7 days –the material gathered, as explained above, will be categorized and the literature review part of the study will be developed. In the third phase – 7 days – the qualitative research part of the study will be completed; the academic and non-academic material related to Wavin Group will be reviewed and the relevant chapter of the study will be developed. At the next level, which will take 5 days, the completed questionnaires – received in the meantime – will be studied and the results will be categorized and analyzed, using also the findings of the literature and the qualitative research. About 6 more days will be required for reviewing the study and making the cross-referencing – where necessary. Gantt chart – Phases of the study Days/ Tasks Gathering of material/ questionnaires will be sent to the participants Development of the literature review section Case-study Analysis Review and analysis of findings of survey Review of the study H. Reference List M. Carmen Saorin-Iborra, Time pressure in acquisition negotiations: Its determinants and effects on parties’ negotiation behaviour choice, International Business Review, Volume 17, Issue 3 (2008), pp. 285-309 Henk von Eije, Helene Wiegerinck, Shareholders’ reactions to announcements of acquisitions of private firms: Do target and bidder markets make a difference? International Business Review, Volume 19, Issue 4(2010), pp. 360-377 Michael A. Hitt, R. Duane Ireland, Robert E. Hoskisson (2009) Strategic management: competitiveness and globalization : concepts & cases. Cengage Learning Mary C. Lambkin, Laurent Muzellec, Leveraging brand equity in business-to-business mergers and acquisitions, Industrial Marketing Management, Volume 39, Issue 8(2010), pp.1234-1239 Shiv Sahai Mathur, Alfred Kenyon (2007) Creating valuable business strategies. Butterworth-Heinemann Christina Oberg, Johan Holtstrom, Are mergers and acquisitions contagious? Journal of Business Research, Volume 59, Issue 12 (2006), pp. 1267-1275 Han T.J. Smit, Thras Moraitis, Serial Acquisition Options, Long Range Planning, Volume 43, Issue 1 (2010), pp. 85-103 Tortoriello, R. (2008) Quantitative Strategies for Achieving Alpha, McGraw-Hill Professional H1. Bibliography Sayan Chatterjee, The Keys to Successful Acquisition Programmes, Long Range Planning, Volume 42, Issue 2 (2009), pp. 137-163 Robert E. Hoskisson, Michael A. Hitt, R. Duane Ireland (2008) Competing for Advantage. Cengage Learning Peter A. Hunt (2009) Structuring mergers & acquisitions: a guide to creating shareholder value. Aspen Publishers Online Olimpia Meglio, Annette Risberg, Mergers and acquisitions—Time for a methodological rejuvenation of the field? Scandinavian Journal of Management, Volume 26, Issue 1(2010), pp. Pages 87-95 Klaus E. Meyer, Yen Thi Thu Tran. Market Penetration and Acquisition Strategies for Emerging Economies. Long Range Planning, Volume 39, Issue 2 (2006), pp. 177-197 Yu-Shu Peng, Chung-Ping Fang, Acquisition experience, board characteristics, and acquisition behavior, Journal of Business Research, Volume 63, Issue 5(2010), pp. 502-509 H2. Online Sources AMX International – Case studies, 2011, The case of PWPipe, available at http://www.amxinc.com/index.cfm?Section=40&Page=23&node=mnu_1 [Last accessed on 7 January 2011] Builders Merchant Journal, 27 November 2007, Wavin schedule EGM and new acquisition, available at http://www.buildersmerchantsjournal.net/news/news.asp?id=4870&title=Wavin+schedule+EGM+and+new+acquisition [Last accessed on 7 January 2011] HouseBuilder’s Update, 18 May 2007, Who Owns What: Update, available at http://www.housebuildersupdate.co.uk/2007/05/who-owns-what-update.html [Last accessed on 7 January 2011] Matrix Capital Markets Group – Case studies, 2011, available at http://www.matrixcapitalmarkets.com/case_studies.php?filter=Industrial+Products [Last accessed on 7 January 2011] Nicolas Bombourg, Water distribution and treatment Industry: Water & Wastewater Pipe Market, June 24 2010, available at http://www.prnewswire.com/news-releases/reportlinker-adds-water--wastewater-pipe-market-97118884.html [Last accessed on 7 January 2011] Esposito, Frank, Motivation for M&As Looms, July 13, 2010, available at http://plasticsnews.com/headlines2.html?id=19129 [Last accessed on 7 January 2011] European Plastic News, 8 November 2010, Wavin grows in Sweden with latest acquisition, available at http://plasticsnews.com/headlines2.html?id=20257&channel=240 [Last accessed on 7 January 2011] P&M Corporate Finance, June 2010, Plastics & Packaging Monitor, available at http://www.pmcf.com/pmcf/about/publications/plastics-and-packaging/Documents/Monitor-June-2010.pdf [Last accessed on 7 January 2011] PR Newswire, March 31, 2005, Wavin Group Completes Acquisition of Hepworth Building Products From Vaillant Group, available at http://www.prnewswire.co.uk/cgi/news/release?id=143000 [Last accessed on 7 January 2011] The Manufacturer, October 2003, Wavin, In the pipeline, available at http://www.themanufacturer.com/uk/profile/3593/Wavin [Last accessed on 7 January 2011] Treat, Russell & Artis Bartle, New Regulations Drive Expanded SCADA Curriculum, September 2009, Vol. 236 No. 9, available at http://www.pipelineandgasjournal.com/new-regulations-drive-expanded-scada-curriculum [Last accessed on 7 January 2011] UK Business Park, Mergers & Acquisitions 2005, available at http://www.ukbusinesspark.co.uk/bpmerg05.htm [Last accessed on 7 January 2011] Wavin Labko, 10 January 2008, Wavin completes acquisition of Pilsa, available at http://www.wavin-labko.fi/en/news/wavin_group_press_releases/?x66276=56617 [Last accessed on 7 January 2011] Read More