Tata: master of the gentle approach

Some cracking quotes in this businessweek.com article on Tata’s approach to takeover & mergers – a very strong contrast to the Kraft approach which we heard from the presentation at RGS. Just a few of the quotes which appealed to me were:

"Tata: master of the gentle approach"

"The Indian giant has found a way to acquire companies across the globe—and still tread lightly"

"More strategic partner than vulture capitalist"

"In all its deals, Tata has been careful to signal its respect for workers"

"It chooses its targets carefully" (due diligence)

"Tata is unusual in that it hasn't laid off any workers or shuttered any facilities following its overseas acquisitions (though it has had layoffs at home in the past decade)"

"Tata buys companies overseas not to reduce costs but to improve [its own] capabilities"

"With its overseas acquisitions, Tata typically leaves executives in place……. allows Tata to stay focused on bigger strategic issues"

You can read the full article here:

http://www.businessweek.com/magazine/content/08_08/b4072064372042.htm

An Anglo-Indian success story

The last major case study we are going to consider is the Tata takeover of Jaguar Land Rover in 2008. Compared with some of the other mergers and takeovers we have studied this is a “good news” story. It is a great example to know really well as it can be applied to so many of the bullet points. You can read some useful reports from the Daily Telegraph by clicking on the links below:

Jaguar Land Rover to create 1,000 jobs

10 Nov 2011

Jaguar Land Rover boosted by Chinese demand

14 Nov 2011

8,000 apply for 1,000 new Jaguar jobs within seven days

17 Nov 2011

JLR to create 1,500 jobs in Merseyside

03 Jan 2012

A bit of personal research here. I had an appointment at the local Halifax branch in Tewkesbury High Street last week and asked the financial advisor what had been the biggest change for him following the merger (bullet point 5 - impact and reaction of stakeholders….). He said the biggest change had been to their computer based administrative systems. He explained that these had not been phased in but had been introduced in a “big bang” on 12 September 2011. He explained how lots of Lloyds’ staff had come over to the Halifax branches at that time to help Halifax staff with any difficulties. All Halifax staff were given workbooks and computer based training and had two days off the job training – a hugely impressive investment in staff training to make it work. Without doubt the transfer of 38 million customers onto a single administrative platform (and the way Lloyds Banking Group got the Halifax staff engaged with this process) is an impressive example of managing change. One you could use for quite a few of the bullet points (e.g. bullet point 2 – the problems of M&T, bullet point 3 - the factors influencing the success of M&T etc.)

Claudia's wow paragraph

Apologies for putting Claudia in the spotlight, but I asked her to type up this wow paragraph from her essay on bullet point 3:-

"One of the major factors which can seriously influence the success of mergers and takeovers is due diligence. If due diligence is not done thoroughly, the prospect of a merger or takeover may not be as positive as the bidding company thinks. For example, when RBS acquired ABN AMRO, they did not carry out satisfactory due diligence. They did not realise how many sub prime related investments were associated with ABN AMRO, and these investments went bad after the takeover had gone through, causing terrible consequences for RBS. Eventually, £1.5 billion had to be written off. If thorough due diligence had taken place before RBS made their offer, RBS could have walked away from the deal and the situation could have been avoided".


C Pallett, 2012

Come on Irene

Superb interview here from 2010 with Irene Rosenfeld, Kraft CEO. She covers the expected synergies of the Cadbury deal (extra $1bn revenue by 2013), how she sees the two companies as "highly complementary", some of the political/media issues in Britain and the closure of the Somerdale factory

The interview can be viewed on youtube here:

http://www.youtube.com/watch?v=aT_5DQIksDo&feature=related

The UK car industry: A case for the benefits of foreign takeovers?

The car industry has so far been a bright spot in the UK economy, with BMW, Toyota & Jaguar Land Rover all announcing plans to increase production at UK plants over the last 12 months. About 1.5m cars will be built in Britain this year, up from 1.4m in 2011 according to the Society of Motor Manufacturers and Traders. This is the fourth consecutive year that there will be an increase in UK car production. The vast majority of these cars will be exported.

It should be considered that all of the UK “top 5” car makers are foreign owned:-

2010 UK top 5 car manufacturers

1 Nissan 423,262

2 Mini 216,302

3 Land Rover 179,165

4 Honda 139,278

5 Toyota 137,054

If a “Cadbury’s Law” had been in place as a barrier to foreign takeovers, would UK car manufacturing be providing as many jobs for British workers?

If you want to read a bit more in support of a view that foreign investment is healthy for the UK economy, there is quite an interesting piece on the BBC site where Jim O’Neill of Goldman Sachs talks about the value of foreign investment in regenerating  Manchester.

http://www.bbc.co.uk/news/business-17269654

In 2010, Mr O'Neill led the so-called “Red Knights” consortium in an unsuccessful attempt to wrest control of Manchester United from its American owners, the Glazer family.

US government blocks mobile merger

Thanks to Jonny Richmond for coming up with a real “wow example” in his essay on government intervention in mergers and takeovers. The example given was of a failed takeover bid from the United States in 2011 where the second largest mobile phone company (AT&T) attempted to takeover the 4^th largest operator (T-mobile USA) in a proposed $39 billion deal. The reasons this deal was eventually dropped was due to government intervention from the U.S. government. The American government actually sued to block AT&T’s acquisition of T-Mobile USA, a deal that would have created the largest carrier in the country. The reason the U.S. government intervened was to protect customers.  James M. Cole, the Deputy Attorney General, said: 

“We believe the combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for their mobile wireless services”.

This article from the New York Times gives more detail:

http://dealbook.nytimes.com/2011/08/31/u-s-moves-to-block-att-merger-with-t-mobile/

The AT&T/T-mobile USA deal was finally called off in December 2011 with the main reason being the opposition of the U.S. government to the proposed takeover.