STRATEGIC MANAGEMENT

CASE STUDY ANALYSIS

Varshitha Vijayakumar
MBA 2nd Year
21e4112
 EXECUTIVE
SUMMARY

This report is about my understanding of two case studies presented. I have discussed the cases
relating to acquisition and merger.
The main purpose of the case is to learn by analysing real time examples and to apply the knowledge
acquired during the studies in the real-world scenario in order to tackle the problems using the
knowledge and skills learned during the process. I was able to correlate various aspects of learnt
within the capacity of a classroom to that of a company. This report covers the major aspects of the
human resource department of the company. I have taken the cases of
i. Disney’s Acquisition of Pixar
ii. Merger of Daimler-Chrysler
Through these cases the efficiency of these two models, how successful or unsuccessful they were in
their approaches are all studied.

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 TOPIC INTRODUCTION

ACQUISITIONS
An acquisition is a business transaction in which one firm buy all or part of another
company's stock or assets. The acquisition commonly happens to gain control of and expand
on the target company's strengths while also capturing energies. This can also be accountable
for an acquisition definition.

There are three kinds of business pairings:

 acquisition(s); both firms survive;

 mergers; only one business survives; and
 conglomeration/amalgamation; neither business survives.

The acquiring firm purchases the target business's shares or assets, giving it the authority to
decide the capital assets without seeking approval from its shareholders.

PROs of Acquisitions

 Economies of scale: Large companies can buy material in bulk to streamline

expenses as well as increase efficiency through specialization.
 Increased market share: If an acquisition combines two companies in the same
industry, then the new company gains the combination of each firm’s market
share.
 Vertical integration: Vertical integration occurs when a business buys another in
its own supply chain.
 Synergy: When two firms merge, they can often reduce overhead by
eliminating redundant functions. This expense reduction directly improves
profitability.

CONs of Acquisitions

 Integration issues: If the cultural or operational climate isn’t compatible between

the two firms, there may be problems integrating the two.
 Overestimating synergies: It takes time to combine two companies and integrate them
into one cohesive firm. A transition time must occur before synergies are fully
realized.

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  Cost of operations: The selling firm and its shareholders will naturally want the
highest price they can get, and other parties involved in the transaction may be
willing to pay more just to get the deal completed.

MERGERS

When two existing companies decide to unite into a single new company, this is called a
merger. After the merger agreement is complete, existing shareholders of both original
companies gain shares of the new company that’s been created. Some mergers will help both
companies expand their reach, while others will expand activities into new segments and
markets. Major reasons why companies take part in mergers, are as follows:

 Gain market share

 Unite similar products
 Reduce manufacturing costs
 Increase in revenues

PROs of Mergers

 Increase in market share: The new company gains a large market share as result
of merging of two companies; as a result, it gets ahead in the market competition.
 Reduction in operation costs: Economies of sale is achieved in mergers, such as
bulk buying of raw materials, which result in cost reductions.
 Avoids replication: Some companies producing similar products may merge to
avoid duplication and eliminate competition.
 Expansion into new geographic areas: A company that wants to expand its business
in a certain geographical area may merge with another company that wants to do the
same thing.
 Prevents closure of an unprofitable business: Many jobs can be saved by mergers, as
result an unprofitable unit can be saved as well.

CONs of Mergers

 Raise in prices: A merger results in a larger market share. The new company
can increase the prices of its products and services.

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  Gaps in Communication: The cultures of the companies that have agreed to merge
may be different. It may affect the performance of the employees.
 Unemployment: In an aggressive merger, a company may opt to eliminate the
underperforming assets of the other company. It may result in employees losing
their jobs.
 Prevents economies of scale: It may be difficult to gain synergies in cases where
there is little in common. A bigger company may not be able to motivate employees
and achieve the same degree of control. The new company may not be able to
achieve economies of scale.

HOW ARE ACQUISITIONS DIFFERENT FROM MERGERS?

Although mergers and acquisitions are understood synonymously, it is to be noted that, there
is a vast line of difference between the two. Furthermore, it can be explained as,

 Mergers create a single legal entity by combining two previously existing,

separate businesses.

 Acquisitions do not result in a new company being formed. Instead, an

acquiring company purchases and absorbs the second company.

 While mergers are fully voluntary, acquisitions might not be. The acquired company
is often liquidated.

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 CASE STUDY- A
DISNEY’S ACQUISITION OF PIXAR

INTRODUCTION

Disney announced on January 24, 2006 that it would acquire Pixar for US$ 7. .4 billion in
stock. Disney and Pixar have been partners for producing and distributing animation films.
Pixar had announced in January 2004 that it would partner with another distribution
company, owing to differences with Disney's then CEO Michael Eisner (Eisner).

Robert Iger (the successor CEO) succeeded in acquiring Pixar after reviving talks with the
company. The deal expected to be finalized by May 2006 would make Steve Jobs (Jobs),
CEO of Apple Computer Inc.4 (Apple), the major shareholder in Disney with an equity stake
of approximately 7%; he had joined Disney's Board of Directors. Disney and Pixar had
separate headquarters in Burbank and Emeryville after the merger.

Disney's press release said, "This acquisition combines Pixar's preeminent creative and
technological resources with Disney's unparalleled portfolio of world-class family
entertainment, characters, theme parks and other franchises, resulting in vast potential for
new landmark creative output and technological innovation that can fuel future growth across
Disney's businesses.” Analysts said that the deal was more important to Disney than to Pixar.

Disney's animation films like Home on the Range and Brother Bear did not perform as well
as expected. The deal was priced a bit higher than expected, said some analysts. Disney

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got a

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library of six Pixar films-it seemed expensive for Disney when compared to the acquisition of
DreamWorks in 2005, which had 59 films for US$ 1.6 billion.

According to Nelson Gayton, Professor at Wharton, “Any premium that Disney might have
paid for the Pixar acquisition must be evaluated in light of the nature of the animation content
that Pixar produces and the distribution possibilities it offers via new technologies.”

SUMMARY TO THE CASE

 THE DISNEY PIXAR PARTNERSHIP

In May 1991, Disney entered into an agreement with Pixar for developing and producing
three computer animated feature films. According to the agreement, Disney agreed to
produce movies to be developed and directed by Pixar's John Lasseter. Disney agreed to
market and distribute these movies.

Pixar was to be paid based on the revenue they got from distributing the films. Disney was to
get 85% of the distribution proceeds. Analysts felt that the agreement gave Pixar an expert
partner in the film business with great marketing capabilities. Toy Story was the first film
under the agreement. It was the first computer animated feature film that was more than an
hour long. The film generated over US$400 million in worldwide revenues. Pixar agreed to
produce five original computer-animated feature films in a span of ten years under a co-
production agreement with Disney after the release of Toy Story.

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  THE ACQUISITION

The Disney Board elected Iger as the company's CEO in September 2005. Iger got a call from
Jobs who said they might work together again. Analysts felt that Iger would find it difficult to
strike a new deal as it was heavily loaded in favour of Pixar.

However, Iger adapted the proposal his own way. He asked for Disney's content to be
distributed over the Internet through Apple's online store - iTunes. In October 2005, Iger and
Jobs signed a deal to sell the past and current episodes of television shows of its ABC and
Disney channels through iTunes. It started with five shows which included the popular shows
Desperate Housewives and Lost. Jobs was pleased with the Iger's suggestion of linking up to
offer videos through iTunes. Iger said that the deal with Apple was finalized in just three
days. Meanwhile, Jobs also started re-negotiating on the Disney-Pixar agreement. With this
reconciliation, there was speculation that Disney might acquire Pixar.

 THE RATIONALE

Analysts said this deal was more important to Disney than to Pixar. For Disney, the
acquisition gave it ownership of the world's most famous computer animation studio and its
talent, with whom it had teamed up to create block busters since the 1990s.

Its own animation films had failed and the timing was perfect. Chicken Little was its first full
computer animation film. The deal would bring the technology company Apple closer to
Disney, and Iger could further increase the digital content that was being offered through
Apple. Analysts said that having Jobs on the Disney board would give the company a
technology edge and direction. The creative genius behind Pixar's block busters, John
Lasseter, would be in charge of the new division and Disney would get the necessary push in
creativity.

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  THE ROAD AHEAD

On the several benefits Disney would derive, Nelson Gayton, Professor at Wharton School of
Business said, "I believe that the acquisition of Pixar was of utmost strategic importance to
Disney, not only because of where Disney's previous distribution relationship with Pixar
seemed headed, but also because of Pixar's potential value to Disney's 'family entertainment'
brand and assets, like theme parks and television, that feed off this brand."

There were some potential trouble spots for Disney that could arise from the acquisition. The
rise of Jobs to the Disney board as the single largest shareholder would have been a concern
for Iger.

Iger might be second to Jobs because of the merger with Pixar. An analyst said that Iger
might leave Disney in a year, but that the move was bold. Eisner had been at the helm for
more than twenty years and analysts felt that Iger had to be careful as he was still trying to
create his own identity.

CONCLUSION

Bob Iger says the acquisition of Pixar is his “proudest decision” because it led to the
revitalization of Disney animation and put Walt Disney on the path to other meaningful
investments. He told the investors during his first earnings call as CEO that Disney would be
disciplined in its approach to acquisitions, seeking out opportunities that helped the business
adapt, not just expand for the sake of expansion. Disney will acquire Pixar for $7.4 billion.

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“I’m proud of a lot of the decisions that were made,” he said in an interview on “Squawk on
the Street” with CNBC’s David Faber aired on Tuesday. “Certainly, the acquisitions — I’d
say of all of them — Pixar, because it was the first. And it put us on the path to achieving
what I wanted to achieve, which is scale when it comes to storytelling. That was probably the
best.”

Analysts were sceptical when Disney announced the acquisition. Disney paid a lot for the
animation studio. The company's board and its former CEO questioned the deal. However,
Iger is being praised as a genius, today. Since Pixar's first film, "Toy Story", came out in
1995, the animation studio has earned more than $14.billion. According to data from
ComScore, Disney's acquisition has brought in over $12 billion, as a part of their revenue.

Disney already had a relationship with Pixar, having co-produced films like “Toy Story,”
“Monsters, Inc.” and “Finding Nemo” and aided with the films’ distribution. Iger saw a
company full of innovation and creativity that he could use to revitalize Disney animation.
The integration of Pixar into Disney helped convince other brand owners that their legacies
wouldn't be lost; this also includes Lucasfilm. The deal to acquire 20th Century Fox was
initiated by Iger.

Pixar's management was kept in place by Disney. This was necessary for the growth of trust
that would allow Steve Jobs to approve the acquisition. Because of the disruption that Steve
had at Disney, the companies had to create a set of guidelines that would safeguard the
creative culture of Pixar.

Pixar's acquisition with Disney has resulted in the release of over 10 full feature animated
films, all of which have reached a total gross of over $3.6 million. Disney and Pixar have
been able to combine forces and create a profitable business model. The Disney Pixar films
have made over $7 million over the course of 18 years. There was a gross profit of $5,893
million.

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Pixar has the technology to help Disney-Pixar release movies twice a year. The Disney and
Pixar acquisition has been very successful because they have made large profits. Toy Story,
A Bugs life, Cars a few examples of what Pixar technology used to produce. Disney has
given large amounts of funding to Pixar so they can create these films and use Disney's name
to reach a larger audience, resulting in a synergy.

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 CASE STUDY – B
DAIMLER- CHRYSLER MERGER

INTRODUCTION

Daimler Benz AG of Stuttgart, Germany, and the Chrysler Corporation of Auburn Hills,
Michigan, surprised the business world at a press conference in London on May 7, 1998,
when they announced their “merger of equals made in heaven.” This major cross-border
transaction, with an equity value of $36 billion, was the largest merger of its kind to date.
Robert Eaton and Jurgen E. Schrempp, co-chairmen of DCX, announced their expectation
that this deal would be “not only the best strategic merger or the best prepared merger, but
also the best executed merger.”

In 1996, Daimler-Benz Chief Executive Juergen Schrempp concluded that his company
needed a partner to compete in the increasingly globalized marketplace. The conclusion was
drawn by Chrysler in 1997 based on two factors. The Asian economic crisis and excess auto
manufacturing capacity would inevitably lead to industry consolidation. It became clear that
Daimler-Benz and Chrysler could survive alone if they continued to go it alone.

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SUMMARY

The merger of Daimler-Benz and Chrysler took place in May 1998 in a $37 billion deal. The
deal formed an auto giant with total revenues of $130 billion, 34 factories in 34 countries, and
annual unit sales of 4.4 million cars and trucks. Daimler is strong in Europe and Chrysler in
North America, and in terms of product lines, with Daimler's luxurious and high-quality
passenger cars and Chrysler's line of low-production-cost trucks, minivans, and sport utility
vehicles. It became clear that the Germans were taking over the Americans after the company
set up co-headquarters in Stuttgart and Auburn Hills. The early 2000 departures of Thomas
Stallkamp, the initial head of DaimlerChrysler's U.S operations. Schrempp was in charge of
the company even though he was supposed to remain until November 2001.

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  THE TIMELINE

In 1999 DaimlerChrysler focused on squeezing out cost savings from the integration of
procurement and other departments. The automotive businesses were organized into three
divisions: Mercedes-Benz, Chrysler Group, and Commercial Vehicles. DaimlerChrysler
announced in 1999 that it would phase out the aging Plymouth brand. DASA was renamed
DaimlerChrysler Aerospace after it was merged with Chrysler's services arm.

The European Aeronautic Defence and Space Company (EADS) was formed in 1999 after
the merger of DaimlerChrysler Aerospace with two other European firms, the French
Aerospatiale Matra and the Spanish CASA. DaimlerChrysler would hold a 30 percent stake
in EADS, which would be the largest firm in Europe and the third largest in the world.

DaimlerChrysler set a goal of becoming the number one automaker in the world within three
years. The company needed to increase its presence in Asia and gain a larger share of the
small car market in Europe. The $2 billion purchase of a 34 percent stake in the company by
DaimlerChrysler was announced in late March. The company bought a 3.3% stake from
Volvo. In 2000, DaimlerChrysler joined with GM and Ford to create Covisint, an Internet-
based global business-to-business supplier exchange.

 THE ROADMAP

The company faced a lot of challenges and its lofty goal would remain unfulfilled. James P
Holden, his CEO position. In the late 1990s, Chrysler spent a lot of money on product
development and increased its work force as costs went up. Chrysler spent over $5 billion in
the second half of 2000. The U S division. He launched a major restructuring effort in
February 2001 that included cutting $2 billion in costs, making additional cuts in supplier
costs, slashing 20 percent of its workforce, and making changes to Chrysler’s product line
that included the elimination of the Jeep Cherokee (the Grand Cherokee remained in the
product line) and the launch of the Jeep Liberty.

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After the September 11, 2001, terrorist attacks, global economies began to weaken. Car
makers began offering buyer incentives that wreaked havoc on their profits. The 1998 merger
may have been a mistake since Schrempp claimed that the deal would create the most
profitable car maker in the world. In September of 2003 the company had a market cap of
$38 billion. Daimler had a market cap of $47 billion.

The Mercedes division launched the E-Class sedan, the SLK roadster, and the Maybach
luxury vehicle. The Crossfire and the Pacifica were launched in 2003 by Chrysler. The Dodge
Ram pickup and its passenger cars could be purchased with its powerful Hemi engine. The
300C sedan and the Dodge Magnum sports wagon were released in 2004.

DaimlerChrysler made several changes to its strategy because of the fierce competition in the
auto industry. The company sold its Aero Engines business. The firm, then acquired a stake
in the company in order to cash in on Asia's growing truck market. In April 2004,
DaimlerChrysler's supervisory board voted against providing funds to bail out the struggling
company, which was saddled with a huge debt load. The platforms for Chrysler's small and
mid-sized cars were developed by Mitsubishi, which played a crucial role in Schrempp's
Asian expansion strategy.

The failure to provide funds put a strain on the business relationship between the two and
threatened to result in huge problems for Chrysler, which had cut back on engineering
capacity as it relied on Mitsubishi to develop its small and mid-sized cars. Without a partner,
DaimlerChrysler moved ahead in the Chinese market. The DaimlerChrysler restructured its
joint venture with Beijing Automotive Industry Holding Co. Ltd. to increase its presence in
the region.

The Chinese Fujian Motor Industry Group and the Taiwanese China Motor Corporation are
going to launch several cars in the Chinese market by 2005. In 2004, DaimlerChrysler
signalled that it would sell its interest in the South Korean company after rumours that it was
faltering.

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The 1998 merger promised to deliver, but DaimlerChrysler was a far cry from that. The
company had a lacklustre financial record due to the loss of Chrysler. The goal of becoming
the number one auto company in the world was unfulfilled as DaimlerChrysler remained the
world's number three car maker. The hoped-for results remained to be seen.

INFERENCE

 INTEGRATION OF THE TWO ORGANIZATIONAL CULTURES

In the present case, it is difficult to integrate different corporate cultures. The organizational
culture of the buying company is not imposed on the acquired counterpart due to the fact that
it is a merger of equals. The aim is to combine the cultures involved, integrate them and
create a new, shared corporate culture. The integration of organizational cultures can be
divided into three main stages.

The willingness to solve the problems is related to shock, psychological stress and
willingness to solve the problems. There is a certain level of patience required for the three
stages of integration. The employees are shocked and stunned at the beginning of the
integration process. The integration is impeded by an internal rivalry among employees. This
is made worse by the fact that well-trained and qualified personnel neither wants, nor needs
to impose itself to that kind of stress and pressure.

Qualified employees prefer to leave the company than suffer from internal competition. There
is a phenomenon that can be observed in the case of Daimler-Benz and Chrysler. It is even
harder to succeed because of the loss of qualification and competencies. The staff is willing
to enter into the integration process after having fought and settled the internal rivalry battles.

The employees of both businesses need to be involved in the design of the integration
process. When designing and managing the integration process, cultural differences in
behaviour and attitude of the affected staff have to be taken into account. With regard to the
integration of two completely different corporate cultures, the declared aim is to combine
aspects of both cultures in one. This can become an insuperable obstacle.

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Several initiatives were launched to promote the integration of organizational cultures in the
DaimlerChrysler deal. Several seminars, workshops and trainings were offered that informed
staff about the merger and the integration process and that were meant to sensitizing the
employees for working with new colleagues with a different cultural background. The
integration process of DaimlerChrysler failed and several factors led to a clash of culture.

 THE CLASH OF CULTURE

Due to a culture clash, the integration of the two organizational cultures of Daimler-Benz and
the Chrysler Corporation failed. The cultural differences made the post-merger-integration
process at DaimlerChrysler AG harder than in other M&As. DaimlerChrysler's management
did not succeed in laying the foundation for a shared organizational culture despite efforts to
harmonize the two corporate cultures. The organizational cultures were not compatible. The
values and morals that came to light in the day-today work were fundamentally different.

The two parties seemed to be quite similar at first glance. They look like us, they talk like us,
and their English is flawless. The differences became obvious in the daily work. At Daimler-
Benz and Chrysler, creativity in the decision-making process was asked for and strongly
encouraged.

Daimler-Benz's culture is based on authority, bureaucracy and centralized decision making,

while Chrysler's values include efficiency, empowerment of the employees and equal rights
among all staff.

The compensation structure of the corporate cultures led to the confrontation between the two
parties. The American managers received generous pay packages that were disapproved of by
their German counterparts. When an American manager was transferred to Germany, he
gained twice as much as his new supervisor. The management of DaimlerChrysler wanted an
approximation of the two compensation structures and a solution to the problems, by fixing
very low base salaries and high performance-based incentives.

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The German and Americans employees had different working methods. A lot of red tape
versus no red tape; long or even endless reports and discussions versus reports based on the
minimum necessary. The Americans preferred the trial-and-error method to come to a
solution and that is why they thought to be disorganized because the Germans preferred to
develop detailed plans.

The organizational structures of the two parties are different. The Germans are known for
their pronounced hierarchies and their top-down-management, and Chrysler's management
backs on flat hierarchies, which causes incomprehension among the Germans.

The integration process at DaimlerChrysler failed due to the different organizational cultures.
The foundation for a shared corporate culture that reflected aspects of both cultures was not
laid because management did not succeed in bringing in line the two cultures. For the most
part, the different organizational models applied in Germany and the U.S.

 ORGANIZATIONAL MODELS
a) The U.S. American Model: The Americans don't rely on others to reach a goal; they
are their own person. In a business context, this is expressed in the fact that working
contracts can be negotiated individually. Everyone is responsible for their
performance in salary negotiations. This individualism characterizes the American
people, but they also know that this individual unfolding is only possible to a certain
degree and within certain general limits and regulations imposed by society. The
Americans are very efficient. American companies tend to be goal and performance
oriented. The results are not the only thing that counts. The trial-and-error method is
often used to solve a problem. Time is money and therefore a scarce resource for
Americans. Everyone is responsible for their own economic survival in a free market
economy. There are certain moral rules and regulations that have to be complied with
within the rivalry battle.

b) The German Model: In contrast to the U.S. The German organizational model is

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 characterized by a greater power distance. Negotiating is based on authority and

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 hierarchies play an important role. The Germans are more team-oriented. It's not
always the individual who comes first. They see a team or a work group as a kind of
security and protection because they are more risk-averse than Americans. Due to
their fear of taking risks, they are not very fond of novelties. The decision-making
process according to the German model is fundamentally different. The Germans
develop detailed plans instead of trial-and-error. Once a decision is reached, plans get
implemented very quickly and precisely. The differences can be simplified into a
tabular form such as;

 THE DAIMLERCHRYSLER DEAL – A MERGER OF EQUALS?

The merger of the two companies was supposed to serve a shared goal and both parties
involved hoped for gaining competitive advantages thanks to newly created synergy effects.
The merger was thought to be a merger of equals, but soon it became obvious that this was
not the case.

The name of the newly founded company seemed to promise equal status of the two
organizations, as well as the co-management of the DaimlerChrysler AG by Jürgen Schrempp
former CEO of Daimler-Benz, together with Robert Eaton – former CEO of the Chrysler
Corporation, suggested that the merger of the two car manufacturers was one of equals. But
during the post-merger-integration it came to certain difficulties and discrepancies due to the
differences in the organizational cultures involved.

Furthermore, the leadership duo, Schrempp and Eaton, did not seem to be in agreement about
where to lead to the joined company. It appeared to be the problem, that Chrysler was neither
acquired by Daimler-Benz, nor was it guaranteed equal status to its German partner.

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The German management gave Chrysler the freedom to do what they had always done and
bet on their past successes. Daimler-Benz wanted to take advantage of Chrysler's efficiency,
which was supposed to continue after the merger. Due to the merger a number of key players
had left the corporation and the remaining employees were demoralized and demotivated.

The management of the company was taken over by the Germans. James P Holden and
Thomas T Stallkamp. They were dismissed within 19 months. The German manager was
replaced by them. Wolfgang Bernhard was appointed as the new COO. The leadership squad
at the Chrysler division was taken over by the Germans. The DaimlerChrysler merger could
no longer be considered a merger of equals.

In the year 2000, he stated that he had never had the intention of a merger of equals. The
merger of the two car manufacturers would not have taken place if the real intentions of
Daimler-Benz had been known from the beginning. The merger of the two businesses was a
failure. Daimler- Benz turned out to not be the hoped-for strong partner that would help the
corporation to manage the new difficult challenges that occurred in the car industry.

The merger with Daimler-Benz drove Chrysler into chaos, instead of making use of new
synergy effects and gaining competitive advantages over their competitors. In the third
quarter of 2000 Chrysler had a loss of $512 million and the share price dropped from $108 in
January 1999 to $40 in 2007 seemed inevitable.

CONCLUSION

Many cross-border M&As fail because of seemingly insurmountable difficulties. The merger
between Daimler-Benz and the Chrysler Corporation also happened. The merger couldn't be
bridged due to cultural differences. The failure of the merger was not caused by the fact that
it did not make sense to join two successful businesses of the same sector in order to make
use of one company's strengths to complement the other company's weaknesses. The merger
did

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make sense from a strategic point of view, but the problems that doomed the merger to failure
were the opposing and contrary corporate cultures and organizational models.

Daimler-Benz tried to take over the Chrysler division as if it were a German company. This
approach failed from the beginning. One should not disregard the cultural differences
inherent in cross-border or cross-cultural M&As. One corporate culture can't replace the
other. A new culture has to be created based on elements of both cultures and a consensus has
to be reached.

The merger of the two companies was never going to be a success unless both parties were
willing to compromise. In order to avoid the failure of cross-border M&As, it is important to
consider the important aspects before the merger takes place. Taking into account cultural
discrepancies and how they will affect day-today work is important. These two questions
pose importantly when a merger occurs:

 Can there be communication problems due to language barriers?

 How should different leadership styles be applied?

It's important to identify and define common goals and to elaborate certain rules for business
processes. A good and far-reaching communication strategy is essential.

The merger of DaimlerBenz and the Chrysler Corporation was not failure from the beginning,
but due to cultural differences and wrong management decisions. If both parties had put all
cards on the table from day one on, if they had combined their strengths to pursue a shared
goal, if they had paid more attention to the cultural discrepancies and therefore managed the
post-merger-integration process successfully, they would have had great chances to generate
vital synergy effects and become a leading figure in the world’s car industry.

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JUSTIFICATION AND CONCLUSION
From the above case studies, I have realised the major reasons for companies to opt for mergers
and acquisitions. The reasons are specified below:

 Synergies: By combining business activities, overall performance efficiency tends to

increase and across-the-board costs tend to drop, due to the fact that each company
uses their strengths.
 Growth: The acquiring company can grow its market share without doing a lot. A
horizontal merger occurs, say for example, when a competitor's business is bought for
a certain price.
 Increase supply chain pricing power: A business can eliminate an entire tier of costs
by buying out one of its suppliers. A vertical merger can take place when a company
buys out a supplier to save on costs. A company that buys out a distributor will be
able to ship out products at a lower cost.
 Eliminate competition: Many M&A deals allow the acquirer to gain a larger market
share. A large premium is needed to convince the target company's shareholders to
accept the offer. It is not uncommon for the acquiring company's shareholders to sell
their shares and push the price lower, in response to the company paying too much for
the target company.

On one hand, we saw a successful acquisition of Pixar by Disney. The reasons behind the
success of this acquisition are as follows:

 Merging corporate cultures: The merger of the corporate culture of two companies
requires certain things in the change management process to be right. Disney and
Pixar were able to do this. The approach towards the merger was constructive, with
Disney as it employed the talent of Pixar, Disney accepted the employment conditions
of Pixar, which helped the talented people stay, and the communication between the
executive teams from both sides was effective.
 Managing changes: The relaxed atmosphere of Pixar was ready to be accepted by
Iger. Disney accepted the t-shirt and slacks approach of Pixar as its strength, even
though we

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 see the dominant force in mergers. The old employment agreement of Pixar was
accepted by Disney and its employees did not have to sign a new agreement. Disney
made a lot of promises. After reviewing the list of promises, executives of Pixar found
that each and every promise was kept. Pixar became more comfortable doing things in
Disney's way after this confirmation.
 The corporate culture of Pixar remained unchanged: The deal between Disney and
Pixar allowed employees to use the same email id. It did not consume the advantages
of Pixar; Pixar's identity was not taken away. Disney encouraged Pixar to make more
than one movie in a year.
 Utilisation of Pixar’s assets by Disney: It is obvious for the employees of the
company that is getting acquired to be nervous as in most of the mergers there is a
vast change in the working environment. The merger of Disney and Pixar was unique
in that Disney asked Pixar how things should be done. Senior Pixar employees were
asked by Iger how to improve their divisions of Disney. Pixar needs to improve the
animation department and computer-generated animations.

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 To conclude, the merger of Disney and Pixar was one of the most successful in recent
years. Both companies benefited from this acquisition. It was a benefit for Disney
because of the innovative ideas in the animation studio. The merger gave many
blockbuster movies. The negotiations between the companies were the main reason for
the merger's success.

On another hand, we saw the case of Daimler- Chrysler and the reasons why their merger
was not a success model.

The reasons for their failure are as listed below:

 Integration: Due to the fact that this merger was a “merger of equals”, the
integration of the two cultures was to create a new shared corporate one. Both
organizations need to learn from each other to generate synergy effects. The
attention Daimler-Benz leaders paid to writing a leaflet annoyed Chrysler
executive. The resignation of Thomas Stallkamp, a 19-year veteran of Chrysler, at
the end of 1999 might be seen as a failure of the merger integration process.
Stallkamp is quoted as saying that, he had spent most of his career implementing
supply chain management and that he wanted to explore those areas at a slower
pace. However, both parties weren’t willing to compromise in order to succeed in
the integration processes. The root cause of an unachieved integration is a
negative answer.
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  Time concept: The merger of Daimler-Benz and Chrysler was announced five
months after formal negotiations began. The period of time from the idea of a
merger until an agreement is reached is estimated to be around two years. The
way to achieve the objectives of the fusion could not have been defined
accurately. The merger took place on November 12, 1998. However, the deadlines
did not take into account the time needed by employees to adapt to the new
circumstances.

 Communication: Daimler-Benz executive went weeks without speaking with

Juergen. He preferred to keep in touch with the lower levels. Chrysler was left
alone by Juergen. It would have been expected that the CEOs would share their
views in order to find a common goal and operate as a team at the top. It was
important to start the discussion to create a healthy relationship and release the
company's potential after reading the first paragraph. Better issues are addressed if
the communication is clear. No communication plan could be put in place among
all stakeholders because of the lack of communication among leaders. Both
internal and external communications were chaotic.

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 FINAL NOTE

It is to be noted that the reasons mentioned for the success of Disney-Pixar were defied by
the Daimler- Chrysler. For two companies to turn into a synergy, it is important that they
communicate first. A healthy dialogue between the two firms would create clarity and
help in the smooth functioning of the same.

The other reason was understanding the organisational culture. While Disney- Pixar did
an amazing job of not changing the two, Daimler-Chrysler majorly failed due to the same.
Disney didn’t change the working model and the organisational culture of Pixar, instead it
utilised the assets of Pixar to its greater benefit.

The top leaders of a firm should position themselves to adhere to the changes brought in
as a matter of greater good for the company. The leaders, specifically should be able to
create a sense of unity and drive thew organisation into the road of success, instead of
having diverging opinions.

On the whole, it is evident that, a merger and/ or acquisition can either break or create
new avenues to the business. Purpose of M&A should be clear, followed by which the
companies should also be flexible in learning to accustom themselves to the new business
model.

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