M&A between GEELY HOLDINGS AND VOLVO CARS
STUDY OF MERGERS AND ACQUISITIONS BY ANALYSING THE DEAL BETWEEN GEELY HOLDINGS AND VOLVO CARS
11/23/2013
Group: 06
TABLE OF CONTENTS TOC \o "1-4" \h \z \u 1.EXECUTIVE SUMMARY PAGEREF _Toc350291717 \h 22.INTRODUCTION PAGEREF _Toc350291718 \h 23.DESCRIPTION OF GEELY AND VOLVO AS INDIVIDUAL COMPANIES PAGEREF _Toc350291719 \h 33.1 Geely Holdings PAGEREF _Toc350291720 \h 33.2 Volvo Car Corporation PAGEREF _Toc350291721 \h 34.MOTIVATION FOR THE DEAL PAGEREF _Toc350291722 \h 35. ESSENTIAL TESTS PAGEREF _Toc350291723 \h 45.1 The attractiveness test PAGEREF _Toc350291724 \h 45.2 The Cost of Entry Test PAGEREF _Toc350291725 \h 55.3 The Better-Off Test PAGEREF _Toc350291726 \h 56. SYNERGY ANALYSIS PAGEREF _Toc350291727 \h 56.1 Management Synergy PAGEREF _Toc350291728 \h 56.2 Operating Synergy PAGEREF _Toc350291729 \h 66.3 Financial Synergy PAGEREF _Toc350291730 \h 67. AN ANALYSIS OF WHETHER TO ALLY OR ACQUIRE PAGEREF _Toc350291731 \h 6REFERENCES PAGEREF _Toc350291732 \h 7
EXECUTIVE SUMMARYOne of the most happening ways to expand and grow business in recent days is through Mergers or Acquisitions (M&A). It is the fastest way to grow in terms of market share/diversification and to enter new market that would not have been possible with any other choice of growing the business. This has been a frequently seen phenomenon in automobile industry ranging from Renault-Nissan Team up, Tata Motors-JLR merger to acquisition of Volvo by Geely. Strategic Mergers and Acquisitions focuses on the growth of the organization within the same industry or related/unrelated industry and affects the organization in terms of economies of scale, vertical integration (upstream or downstream) along the value chain of the industry, strong alliances and competitive advantage. One of the major motivations for M&A in automobile industry is to have the positive synergistic effect. This paper focuses on the study of this acquisition, because this is the first time in the automobile
11/23/2013
Group: 06
TABLE OF CONTENTS TOC \o "1-4" \h \z \u 1.EXECUTIVE SUMMARY PAGEREF _Toc350291717 \h 22.INTRODUCTION PAGEREF _Toc350291718 \h 23.DESCRIPTION OF GEELY AND VOLVO AS INDIVIDUAL COMPANIES PAGEREF _Toc350291719 \h 33.1 Geely Holdings PAGEREF _Toc350291720 \h 33.2 Volvo Car Corporation PAGEREF _Toc350291721 \h 34.MOTIVATION FOR THE DEAL PAGEREF _Toc350291722 \h 35. ESSENTIAL TESTS PAGEREF _Toc350291723 \h 45.1 The attractiveness test PAGEREF _Toc350291724 \h 45.2 The Cost of Entry Test PAGEREF _Toc350291725 \h 55.3 The Better-Off Test PAGEREF _Toc350291726 \h 56. SYNERGY ANALYSIS PAGEREF _Toc350291727 \h 56.1 Management Synergy PAGEREF _Toc350291728 \h 56.2 Operating Synergy PAGEREF _Toc350291729 \h 66.3 Financial Synergy PAGEREF _Toc350291730 \h 67. AN ANALYSIS OF WHETHER TO ALLY OR ACQUIRE PAGEREF _Toc350291731 \h 6REFERENCES PAGEREF _Toc350291732 \h 7
EXECUTIVE SUMMARYOne of the most happening ways to expand and grow business in recent days is through Mergers or Acquisitions (M&A). It is the fastest way to grow in terms of market share/diversification and to enter new market that would not have been possible with any other choice of growing the business. This has been a frequently seen phenomenon in automobile industry ranging from Renault-Nissan Team up, Tata Motors-JLR merger to acquisition of Volvo by Geely. Strategic Mergers and Acquisitions focuses on the growth of the organization within the same industry or related/unrelated industry and affects the organization in terms of economies of scale, vertical integration (upstream or downstream) along the value chain of the industry, strong alliances and competitive advantage. One of the major motivations for M&A in automobile industry is to have the positive synergistic effect. This paper focuses on the study of this acquisition, because this is the first time in the automobile
References: Caijing 2010. “What did Geely get from the acquisition of Volvo – There are three reasons according to Geely’s Chairman Li Shufu”. Renming Daily News Financial Report of Geely Auto (Year 2009) Financial Report of Volvo (Year 2009) Michael E.Porter”How Competitive forces shape strategy”