Merger of Daimler and Chrysler
The Merger of Daimler and Chrysler Content 1 INTRODUCTION 3 1. ... 1 Textbook definition of merger 4 2.2 The history of merger 4 2.3 Reasons for a merger 6 2. ... 5 Overall strategy for success 8 3 PRACTICAL SETTING OF THE MERGER 9 3. ... 2 Advantages for Daimler 10 3.3 Advantages for Chrysler 10 3. ... 1 Objective of analysis The worlds oldest automaker, Daimler-Benz, and the United States third largest automaker made a fusion in November of 1998. Where now a days Daimler owns 57% of the venture, when Chrysler 43%. ... Mostly the challenge was to get suppliers to look at Chrysler brands the same way as Mercedes and get stock prices and sales as Chrysler for Mercedes, being one of the best known automotive name in the world. ... Giving great opportunities for both of them but the main task relied that Chrysler products do not have a high quality image. ... Thats one thing Chrysler hopes will rub off from Mercedes along the years of the merge. ... Having in those times Mercedes which sold just 38% of Chryslers volume, the Chrysler minivan, the worldwide volume of which is only slightly less than Mercedes total passenger car sales. ... Chrysler averages just 75 hours per car - 65% less time than Daimler. ... In a first step (chapter 2), merger in general, will be discussed. ... In a second step (chapter 3), the practical setting of the merger will be examined. The situation of the key players – Daimler and Chrysler – will be analysed. ... 1 Textbook definition of merger: A merger is a corporate combination of two or more independent business corporations into a single enterprise, usually the absorption of one or more firms by a dominant one. A merger may be accomplished by one firm purchasing the other’s assets with cash or its securities or by purchasing the other’s shares or stock or by issuing its stock to the other firms stockholders in exchange . ... 2 The History of merger Mergers and acquisitions have always had a Wizard of Oz aspect to them. ... Government regulation began to force companies to disclose more information to shareholders, giving the public a basis for evaluating merger possibilities. But, even during the merger boom of the late 1970s and early 1980s, the public was at a disadvantage. ... Theyd buy big blocks of stock and profit if a merger went through. Assembling those blocks even sometimes contributed to a merger because their owners could pressure a company into selling. ... As a result, the merger business is finally entering early adulthood. ... 3 Reasons for a merger Mergers of companies’ enable a strategy of external growth and that is a contrast to internal growth through own research and development work. After a merger the company is immediately and fully with a new product or on a new market present. ... Not at last merger may cause less costs compared to self-development. ... More reasons: • economies of scale: fix costs degression • economies of scope: economies of vertical integration • risk spreading: counterbalance of fluctuations • personal management goals • free cash flow • political reasons • research and development • Gain control as in direct market • Eliminates a competitor in the market • Overcome entry barriers and regulatory issues (licenses and permits) • Acquire experience and skills not available in house • Acquire infrastructure to deliver product rather than use partner’s Disadvantages: • Usually large financial commitment • Post merger integration issues • Incompatible corporate cultures • Increased country risk exposure • Hidden liabilities and damages 2.4 Seven Reasons Mergers Fail The adverse reaction to a number of mergers this past year prompted a reexamination of what causes a merger to fail (either before or after consummation) by New York-based law firm Wachtell, Lipton, Rosen & Katz. ... This will come into sharp focus next year as companies are forced by the new merger accounting rules to revalue and write off goodwill booked in prior-year acquisitions. ... A well-conceived plan for business integration, without disruptive culture clash, is the single most important element of a successful merger. ... A well-thoughtout capital structure is critical for a successful merger. • Boardroom Schisms - When mergers are structured with 50/50 board representation or substantial representation from the acquiree, care must be taken to determine the compatibility of the directors following the merger. A failure to focus on this aspect of the merger can create or exacerbate a culture clash and retard or prevent integration. All to often, the continuing directors fail to meet and exchange views until after the merger is consummated. • Regulatory Delay - The announcement of a merger is a dislocating event for the employees and other constituents of one or both companies. ... This loss is a key consideration in evaluating whether a particular merger should be undertaken. It is necessary to include in this evaluation the relationship between the desire to limit antitrust divestitures and the costs attributable to the delay in consummating the merger. ... • Continuous measurement and evaluation, Based on previously established milestones and deliverables • Flexible business plan and good crisis management • Quickly address competitive changes in the marketplace • Adjust to political and economic changes • 100% long term commitment • Establishes loyalty to product within market place • Patience and perseverance, Set realistic expectations • Understand and work within other’s cultures and ways 3 Practical setting of the merger 3.