Learn how several automotive suppliers leverage system upgrades and related non-technical activities to prepare for M&A activities, increasing value to their customers and investors. It's all about playing baseball "MoneyBall" to improve their competitive position.

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“Moneyball” – Auto Industries Strategy For M&A
September 4th, 2014
Robert Omilian

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Introductions
Robert Omilian Director Automotive Industry Solutions
•10+ years of Corporate Finance – Controller Chassis Operations (Ford Motor Co.); Controller After Market (Visteon); Manager New Product Programs ( Ford, Visteon)
•5+ Years Manufacturing Operations – Quality, Business Process Change Management (Ford Motor Co.)
•7+ Years Director IT Applications ( Financial, ERP, Quality, PLM, MES Shop Floor, Application Design)
•MBA Ross School Of Business – University of Michigan
•Published Author
•Favorite Sport - Baseball
•Phone: 734-664-9042
•Robert.omilian@emtecinc.com
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Agenda
The Vision of “Moneyball”
Recent M&A Trends
Top Causes for Failed M&A Deals
IT’s Major Role in Applying “Moneyball” Principles to M&A
“Moneyball” Principles in Action within Auto Suppliers
Impact upon Applications and IT Organizations
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The Vision of “Moneyball”

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What is “Moneyball?”
•The Oakland Athletics Baseball Team introduced this strategy in Baseball for developing competitive teams with a small budget. The strategy identifies high value added players who are undervalued by the market (high yield for low investment)
•Use of Analytics to identify opportunities in the marketplace which add value at a low cost
•Origins in NCAA Football
•An Investment Strategy using principles of “Sabermetrics”
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What is “Moneyball?”
•Oakland A’s Management identified new metrics which identify often overlooked ways to add value to an organization
–On Base Percentage
–Slugging Percentage
–Fly Ball Hitters vs. Ground Ball Hitters
And rely less upon Standard Metrics
-- Stolen Bases
-- Runs Batted In
-- Batting Average
• Players who are successful according to Standard Metrics cost more
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Mergers, Acquisitions, Divestitures

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Current M&A Market Drivers
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Low Interest Rates
High Stock Market Value
Private Equity Inventory
Cash on Hand
Strong Balance Sheets

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M&A Trends – North America
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0
100
200
300
400
500
600
700
800
900
1000
2007
2008
2009
2010
2011
2012
2013
2014
M & A Activity
Spend ( Billions)
$ (Billions)

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Benefits of M&A -- Synergies
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Increased Market Share
Expanded Capabilities & Value Chain Integration
Economies of Scale
Diversification
Improved Market Position
Increased Assets

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Types of Initiatives During M&A Activities
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Product Rationalization
Market Expansion

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Top Causes for M&A Failures – Results of Studies from Deloitte and Booze & Co.
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•Poor Planning and Execution of Merger Processes
•Poor “IT” Integration of Applications and Resources
•Lack of Attention to a Pre-Merger Strategy
•Inadequate “IT” Due Diligence
•No Post Merger “IT” vision
•Conflict between “IT” and Business
•Not enough people with Cross Functional Knowledge Conclusion: IT Plays a Major Role in the Success or Failure of M&A

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Three Major “IT” Responsibilities during M&A
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•Keeps the Lights On
•Merge “IT” Departments
•Provide IT Support for integrating all Business Units, identifying and implementing synergies, and establishing an End State Architecture Challenge: Successfully accomplish these responsibilities, avoid causes for failure, and reduce the IT Budget at the same time.

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Moneyball Principles Applied by Automotive Suppliers During M&A

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Visteon: A Case Study of Moneyball and M&A
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Recent M&A Activities Buy:
•Auto Electronic Business from Johnson Controls ($265 million)
•Acquire Majority control of Yanfeng’s JV electronic unit ($300 million) Sell:
•Interior Units in three separate transactions
•50% of China J.V. Yangfeng to Huayu Autech ($1.2 billion)
•Lighting Business to Varroc Group ($72 million) Re-Organization:
•Climate Group to Halla ($387 million)
•Bankruptcy

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Visteon: A Case Study of Moneyball and M&A
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Bankruptcy Reorganization Approach
•Hired Large Consulting/Bankruptcy Firms to manage transition
•Lengthy Process
•High Cost
•Low Added Value from Large Firms
•Internal Visteon Resources performed added value activities to fill in the gaps Conclusion: A New Approach Required for Future Transactions

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Visteon: A Case Study of Moneyball and M&A
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Moneyball comes to Visteon – Lighting Business Sale to Varroc Group
•Business Units and IT take time to establish future vision and perform Value Analysis of business processes
•Leap frog “old school” – Use “cloud” infrastructure and SaaS solutions
•Change business processes – avoid Application Customization
•Fill IT Staff with strong cross functional business expertise
•Integration less risky than consolidation – Place strong emphasis upon system integration and middleware tools Conclusion: Key Success Factors Do Not Require High Spending

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Visteon: A Case Study of Moneyball and M&A
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Moneyball comes to Visteon – Lighting Business Sale to Varroc Group
•Spend time and resources on Data Conversion, Data Cleansing and Common Formats
•Fill Application Gaps with smaller niche tools
•Emphasize internal communication and training
•Utilize Program Management Office to establish
̶Streamlined business processes
̶Documented procedures
̶Strong governance to Change Management Conclusion: Key Success Factors Do Not Require High Spending

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•Full conversions of ERP systems not necessary
•Rely upon smaller Integration Applications to bridge gaps between different ERP Systems
•Incorporate Cash Management Tools
•More added value in changing business practices to be common across business units vs. costly customizations of applications
•Overcome “Old School” tendencies – consider Cloud infrastructure and applications
•Fill IT staff with cross functional personnel who have strong business knowledge and effective communication skills
•Evaluate and leverage Smaller Cloud Based SaaS Applications
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Implications for IT Applications and Staff

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Q & A

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THANK YOU FOR YOUR TIME
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