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UNIT 12 •• MERGERS AND ACQUISITIONS<br />
You work in the Corporate Strategy Department of<br />
Rinnovar International. Work in small groups. Analyse<br />
the information you have gained from the Listening<br />
(see audio script page 167) and from reading the<br />
company profiles below. Discuss the advantages and<br />
disadvantages of buying each company and note<br />
down your ideas.<br />
2 Prepare a presentation of your ideas. Rank the<br />
companies in order of suitability and indicate which<br />
company you think is the best choice for<br />
an acquisition.<br />
3 Listen to each other's presentations. Note down any<br />
key points.<br />
4 Meet as one group. Decide which company, at<br />
this stage, seems to be the most suitable as an<br />
Location: Mumbai, India<br />
Type of business<br />
Established: 2004, by two Indian women, a famous model and a film star.<br />
Products: Hair- and skincare. Strong position in bath and shower products.<br />
Very dynamic R&D department creating high-quality, reliable products for<br />
the competitive world market.<br />
Customers: High-profile clients, e.g. airlines, hotel groups, embassies, top<br />
department stores.<br />
Financial<br />
Good record of profits in previous three years, but international sales have<br />
slowed down.<br />
Management<br />
Team needs to be strengthened. Its board of directors is dominated by the<br />
two founder members; other members are relatives with little business<br />
experience. Company needs more exporting. marketing and financial<br />
expertise from outside the company to expand.<br />
Ownership<br />
Owners may not permit 100% ownership by Rinnovar. They will probably<br />
want SO/SO share of equity and profits.<br />
Additional information<br />
The market for hair- and skincare products is growing fast in India,<br />
but the company faces strong competition in world markets.<br />
Hondo Beauty Products<br />
Location: Seoul. Korea<br />
Type of business<br />
Established: 1982<br />
Products: A range of cosmetics, bath and shower products supplied<br />
to major cosmetic companies in Korea and to buyers in Asia, the US<br />
and Europe.<br />
Ultra-modern factory in Korea. Exceptionally good quality control.<br />
Very rtexible. Has many partnerships with foreign companies.<br />
Financial<br />
Fast profit growth in the previous three years, but increasing<br />
competition from China and India could reduce its profit margins.<br />
Management<br />
The members of the board of directors are all Korean. The<br />
management style is very consensual and decision-making is slow.<br />
Ownership<br />
60% owned by the Kim family. 40% private shareholders.<br />
The family would consider 100% ownership by Rinnovar International,<br />
but are likely to negotiate hard to get the right price.<br />
Additional information<br />
In the future. Hondo is certain to experience strong competition from<br />
low-cost producers in developing countries.<br />
Location: Belo Horizonte. Brazil<br />
Type of business<br />
Established: 1992<br />
Products: A wide range of mass-market products in the hair-, skin- and<br />
bodycare segments of the market.<br />
Strong position in cosmetics and fragrances market.<br />
Uses direct selling. Has over 480 sales reps in Latin America, including 265<br />
in Brazil. Is considered a highly ethical company using natural ingredients.<br />
Does not test products on animals.<br />
Financial<br />
Expansion seems already to be slowing down. Slow growth in profits in<br />
previous three years. Heavy investment in overseas plants will affect future<br />
profits in the short term.<br />
Management<br />
The company is <strong>ru</strong>n by Gustavo Lopez and his family. Lopez is a<br />
strong, autocratic CEO, while the younger members are much more<br />
entrepreneurial. This is creating great tension in their team. The younger<br />
members would like a more decentralised st<strong>ru</strong>cture for the company.<br />
Ownership<br />
Probably the family would want to retain a majority shareholding in<br />
the company unless Rinnovar made an offer they couldn't tum down.<br />
Additional information<br />
The market for cosmetics is growing fast in Brazil.<br />
Sheen Hair Products<br />
Location: Palm Beach. Florida<br />
Type of business<br />
Established: 1978<br />
Products: Shampoos, hair colours and other haircare products sold<br />
exclusively to beauty salons. Its products include many well-known<br />
brand names.<br />
All its production is located in low-cost developing countries.<br />
Financial<br />
Steady but unspectacular profits growth in the last three years.<br />
Profit margins have declined due to strong competition.<br />
Management<br />
An experienced team.<br />
All members are American. They have little experience of selling in<br />
global markets.<br />
Ownership<br />
Publicly owned company. 100% ownership possible if the right price<br />
was offered.<br />
Additional information<br />
Because of its strong brands, the company has maintained its share<br />
of the US market in spite of strong competition.<br />
Has received a bad press recently for locating its production<br />
overseas and for paying local employees very low wages.<br />
Watch the Case study<br />
commentary on the DVD-ROM.<br />
Writing<br />
Write a report to the Chief Executive of Rinnovar International on the<br />
four possible acquisitions. Give your recommendation for acquisition.<br />
c:) Writing file page 131<br />
119
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