acquisitions mergers jv

8/8/2019 Acquisitions Mergers Jv

http://slidepdf.com/reader/full/acquisitions-mergers-jv 1/4

2.Organization

: CEMEX S.A.B de C.V

Industry : Cement

Countries : Mexico, Australia

Abstract:

CEMEX SAB de CV (CEMEX) is a Mexico based cement company. As of 2009, it is one of the top ten cement manufacturers in the world. The operations of CEMEX grew rapidly sincethe mid-1980s as the company chose both inorganic and organic route for expansion. Over the years, CEMEX had developed post merger integration expertise and was able to generateenough cash flows from the acquired company to pay most of the debts it incurred for theacquisition. However, in mid-2007, CEMEX's acquisition of Australia based Rinker grouplanded the company in a financial debt trap. CEMEX paid US$ 14.2 billion to acquire Rinker and estimated that it would be able to generate enough cash flows from Rinker's operations to

pay off the additional debt obligations that it incurred due to the acquisition

Acquiring Rinker strengthened the operations of CEMEX in the US. However, since late2007, the real estate market in the US faced a slowdown. The prices in real estate marketsstarted falling, unemployment increased and several financial institutions went bankrupt.These events led to poor demand for building materials and tighter credit availability from

banks. CEMEX could not generate enough cash flows in 2008 and 2009 because of fall insales. At the same time, it had to refinance its short term debt at several instances leading toincrease in cost of financing. Rating agencies downgraded CEMEX's credit rating leading toincrease in cost of capital. CEMEX had to sell some of its assets, some acquired throughRinker's acquisition to raise funds and pay off debts. Though selling certain operationsresulted in lower cash flows than estimated, CEMEX remained bullish on the long term

prospects of the US economy and was confident that it would bounce back strongly.

Issues:

» Examine the rationale for CEMEX's acquisition of Rinker.

» Understand the advantages of strong post merger integration expertise.

» Appreciate the importance of timing of an acquisition.

» Analyze the disadvantages of excessive debt financing.

» Study the importance of geographical diversification

3.

Adidas-reebok

The case discusses the proposed merger of



Reebok International Limited with Adidas-Salomon AG.

It describes the recent trends and studies the

ongoing merger in the sporting goods industry.

The case presents the rationale behind thedecision to merge.

Finally, the case ends with a debate on whether the merger would be successful.

Issues:

» The recent trends and structure facing the sporting goods industry» The reasons for the ongoing mergers and acquisitions in the industry and its future» The rationale behind the Adidas and Reebok merger » Whether the merger will be successful in the long-term

Both the companies claimed that their missions were complementary. As Fireman remarked,

"Adidas is a perfect partner for Reebok.

Reebok's mission is to enroll global youth inclining towards the music-and-lifestyle imagethat it promotes through sports, music and technology.

This complements Adidas's mission to be the leading sports brand in the world, with a focus

on performance and international presence"...

Integration Issues

Adidas said the companies would grow as a combined entity but would retain separatemanagement. The companies also ruled out any workforce reductions.

The new entity would continue to have separateheadquarters and their individual sales forces.The companies would also keep most of thedistribution centers independent and would haveseparate advertising programs for their brands.Hainer said, "The brands will be kept separate

because each brand has a lot of value and itwould be stupid to bring them together.

The companies would continue selling productsunder respective brand names and labels."

Adidas declared that the deal would involveinvestment in both Adidas and Reebok. These

investments would guide the companies towardseffective consolidation.

The Track Ahead



Analysts had varied opinions about the deal. Some analysts felt that Adidas could beat Niketo become the industry leader. Al Ries said that, "The biggest benefit is that it removes a

competitor. Now, all they need to do is to focus all their efforts on competing with Nike."However, a few analysts opined that it was impossible to dislodge mahindraNike from its No.

1 position.

Nike was a preferred brand because of its fashion status, colors, and combinations. AlthoughAdidas was perceived to have good quality products that offered comfort and Reebok was

perceived as a 'cool' brand, Nike was perceived as having both 'hipness' and quality...

4. Mahindra reva

BANGALORE: Mahindra & Mahindra has bought a majority stake in electric car company Reva,

making a big bet on an alternative fuel technology that is yet to prove its viability despite widespread

focus and the millions spent by global automobile firms.

M&M, the country¶s largest utility vehicle company, acquired 55.2% in Reva, adding passenger cars to

the auto major¶s electric vehicle portfolio that includes Bijlee, a three-wheel vehicle, and Maxximo, anelectric-powered mini-truck due for launch later this year.

Reva¶s promoters, the Maini family, will hold 31% in Mahindra Reva Electric Vehicle Company while

Lon Bell, the co-founder, will hold 11% . Employees with stock options will hold the rest. ³We expect

that there will be 1.5 million electric cars sold globally. I see no reason why Reva cars will not be

50,000 of that 1.5 million in the next 7 to 10 years; this deal is a part of the larger strategy within the

Mahindra group of focusing on sustained mobility,´ said Pawan Goenka, president (automotive & farm

equipment sectors), Mahindra & Mahindra, who will take over as chairman.

The electric vehicle category is considered by experts to hold a lot of potential given the global

clamour to reduce pollution and promote clean air technology. But it has some strong critics.

³We lack confidence,´ Tomohiko Kawanabe, president of Honda R&D, recently told Automobile

magazine. ³It¶s questionable whether consumers will accept the annoyances of limited driving range

and having to spend time charging them,´ he added.

Reva¶s cars have also not been much of a success since launch in 1994. Only about 3,500 cars are

on the road. The biggest drawback is the battery capacity, its range and the need for repeated

charging. The batteries are also expensive, increasing the cost for carmakers.

Betting on alter native fuel

But that is not stopping companies such as Nissan, Volkswagen and General Motors from investing inthe technology and developing cars.

³The deal is definitely good for both. Mahindra and Mahindra will get hold of a better platform on the

technological aspects for EV vehicles since they also had plans to roll out their mini-trucks Maximo on

an EV platform. Reva on the other hand will benefit from Mahindra¶s strength in network, sales and

marketing,´ said Vaishali Jajoo, senior analyst at Angel Broking.

Mahindra is betting that alternative fuel development can give it the cutting edge to compete in a

acquisitions mergers jv

Documents