Case Scenario 2 Upstart Graphics: Merger and Acquisition Issues

This case illustrates how a disciplined acquisition process can be applied to resolve growth issues in the context of an aggressive entrepreneurial business. The focus is on an actual business, whose name has been changed, which chooses to pursue growth through acquisition after examining a range of reasonable options. The first two stages of the process relate to the development of business and acquisition plans. Additional stages relate to the search, screening, first contact, negotiation, integration planning, closing of an acquisition deal, and post-merger integration and evaluation. This case should illustrate to the reader how to (i) employ a disciplined planning based approach to managing the acquisition process; (ii) respond appropriately to challenges common to each phase of the acquisition process and measure value created (or destroyed) as result of the acquisition process. David Duncans visionary skills proved to exceed his execution skills. The potential synergy that had been envisioned by David was not fully realized. The integration was far more complicated than originally thought due to the loss of key employees, and the lack of cooperation between the two companies software development teams. Product quality deteriorated and major customers were lost. Two years after acquisition closing, David was forced to step down by the same board that had supported him throughout the acquisition process.

Examine the key assumptions, both explicit and implicit, with regard to the market, financial performance, acquisition tactics, valuation and integration that UG has made in its business plan to justify an acquisition. (20 marks)

Explain in 1000 words.