Business Wargaming for Mergers & Acquisitions

In a complex and volatile market environment, the classic instruments of strategic analysis and planning reach the limits of their capabilities. New requirements become relevant for strategy departments: How can management anticipate strategic interactions with market players more proactively and comprehensively? At the same time, how can management take weak signals into account as harbingers of transformation in the market environment and test their potential impact on the current business strategy?

Strategy development faces the requirements of increasing market dynamics in terms of the frequency, intensity and complexity of environmental changes. These increasing dynamics have an impact on business strategy and the preceding strategic analysis. At the same time, the extensive availability of data and information on markets, competitors, technologies or customer needs enables strategy departments to perform detailed analyses of developments and trends in real time and with a high level of detail. As a consequence, corporate success increasingly depends on the ability to understand or even achieve the future before competitors (cf. Hamel and Prahalad 1995). The demand for strategic foresight requires companies to build up capabilities and use tools that enable them to search for, identify and filter patterns of impact that are relevant to future success as early as possible in the strategic planning process (cf. Müller and Müller-Stewens 2009, p. 12 ff.).

The range of instruments for strategy work is so extensive that it is easy to lose orientation when selecting suitable instruments. A differentiation of strategy instruments according to their time reference and degree of interaction makes it possible to assign them to four basic groups that differ in terms of their insights for strategy development (cf. Fig. 3.1). The time reference divides into past and future-related instruments according to the data or model basis. The degree of interaction in strategic analysis differentiates between static and dynamic instruments, i.e. point-in-time versus progression-oriented perspectives of strategic analysis.

Acquisitions require a careful and disciplined approach, as only those acquisitions that are in line with the strategic goals and lead to an increase in value should be realized. The market and competitive knowledge already developed in the strategy process, the focus on the realization of synergies in the context of the integration and a conclusively derived valuation of potential acquisition targets are critical to success. Since the valuation affects central areas of strategy work and usually requires very different expertise from functional areas such as research & development or supply chain management in order to identify and quantify synergy potentials, a structured approach within the framework of a process model is recommended. Following the approach used in strategy work or in innovation development, companies are now also using the stage-gate methodology for the M&A process (see Fig. 4.1).

In this concluding chapter, the conclusions and implications for strategy development and implementation are summarized and some basic recommendations for the use of business wargaming based on the case studies are given.