The Value Chain Integration and the Competition Strategy in High-Tech Merger and Acquisition:A Case Study of Innolux Acquisition of Chi Mei Optoelectronics
Date Issued
2011
Date
2011
Author(s)
Weng, Hong-Yu
Abstract
Over the last decades, there has been a substantial increase in the number of Mergers and Acquisitions concluded in high-technology industries. (ICON Corporate Finance, 2011) Besides being motivated by the conventional pursuit of economies of scale, gains in market share, or geographical expansion, it is now carried out also to obtain highly developed technical know-how, research & development skills, experienced personnel, and specific new technologies in the fast-paced industries. (Casssiman & Colombo, 2006) Furthermore, high-tech companies have found mergers and acquisitions to be one of the most effective strategies to expand their product lines and achieve growth in their top and bottom line results. In many ways, the global financial turmoil induced recession had increased merger and acquisition opportunities for financially healthy high technology companies; especially bigger size ones, as the companies normally have stronger balance sheets and would continue to strive for growth. The economy environment would then be one in which the smaller growth companies need additional resources and larger companies continue to focus on gaining market share and broadening their product line ups. Combined with the continuing shift in technology trends, companies must be aggressive and innovative to stay ahead of the competition. This often results in looking to merger & acquisition as primary strategy in expansion for big sized high technology companies. Undoubtedly with the strong cash flow position of large high technology companies, merger & acquisition will continue to be a driving force in expanding local and global opportunities.
Post merger & acquisition integration of two organizations and their employees most of the time is an afterthought (Phil Morettini 2006); and often results in a path to failure. Moreover, there are many other ways an acquisition can turn out badly. Listing few of them among others: dueling managements, channel conflict, product integration, integration of MIS (marketing information System), and overlapping brands etc. Exit strategy for the targeted company staffs often times a disaster to strike. If the acquired company views the deal primarily as an opportunity to cash out, there will be a major departure of key staffs, those people who you need for the acquisition to make sense. Or worse yet, they stay and become working zombies until their obligation runs out; and vice versa.
In this study, we take a rather closer look of the acquisition of Chi Mei Optoelectronics Corporation by Innolux Display Corporation to create Chimei Innolux Corporation. The two companies were said to be complementary each other, as Chi Mei possesses an advantage in production line capacity, product mix, open cell business, and customer portfolio while Innolux is strong in sub-system manufacturing, supply chain integration, and excellence in cost optimization. The merger of the two panel makers was optimistically said to create another world class player in the flat display industry and to end up benefiting their downstream customers! Bon voyage a journey of the Chimei Innolux M&A a year from its legal closing.
Subjects
High-Technology
Merger & Acquisition
LCD Display
Competition Strategy
Value Chain Integration
SDGs
Type
thesis
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