Merger and Acquisitions Daimler Chrysler

International Review of Financial Analysis 9:1 (2000) 77–102

Value creation and challenges of an international transaction The DaimlerChrysler merger
˘ Matej Blasko, Jeffry M. Netter*, Joseph F. Sinkey, Jr.
Terry College of Business, University of Georgia, Athens, GA 30602-6253, USA

Abstract Globalization is a buzzword in international finance and economics. On May 6, 1998, in London, Daimler-Benz of Germany signed a merger agreement with Chrysler Corporation of the United States. Using the DaimlerChrysler merger as a case study, this paper focuses on value creation and analysis of various issues in an international transaction. The market responded very favorably to this merger, and we review the potential sources of value creation in the merger as well as outline the steps undertaken to consummate the merger. We also consider an interesting question: Can a company truly be “global”? Differences in corporate culture, compensation policies, ownership structure, and the legal environment pose significant challenges to all mergers but especially international business combinations. Important postmerger events, such as the Standard & Poor’s decision not to include DaimlerChrysler in the S&P500 Index and the clash of corporate cultures and compensation schemes, have presented major roadblocks to it becoming a truly global company. © 2000 Elsevier Science Inc. All rights reserved.
JEL classifications: F23, G34 Keywords: Mergers; Acquisitions; International finance; Business combinations; Value creation; Globalization

1. Introduction The two companies are a perfect fit of two leaders in their respective markets. Both companies have dedicated and skilled workforces and successful products, but in different markets and different parts of the world. By combining and

* Corresponding author. Tel.: [phone]. E-mail address: [e-mail] (J.M. Netter) 1057-5219/00/$ – see front matter © 2000 Elsevier Science Inc. All rights reserved. PII:

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