Merger and Acquisition Case

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In January 1998, Jürgen Schrempp, CEO of Daimler-Benz A.G., approached Chrysler Corporation’s chair and chief executive officer (CEO), Robert Eaton, about a possible merger, acquisition, or deep strategic alliance between their two firms. As Schrempp argued: The two companies are a perfect fit of two leaders in their respective markets. Both companies have dedicated and skilled work forces and successful products, but in different markets and different parts of the world. By combining and utilizing each other’s strengths, we will have a preeminent strategic position in the global marketplace for the benefit of our customers. We will be able to exploit new
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Under the leadership of Lee Iacocca and with the support of federal loan guarantees, Chrysler managed to turn itself around one more time, returning to profitability in 1982. While the late 1980s proved tough for the industry as a whole, the introduction and meteoric rise of the family minivan (a market controlled 47% by Chrysler as of 1996), coupled with the 1987 acquisition and subsequent exploitation of the Jeep brand name, left Chrysler the envy of the U.S. auto market by the mid-1990s. As Fortune magazine stated in late 1996, “If a vehicle is in demand and generates high profit margins, you can bet Chrysler’s making it.”4 While Chrysler’s success and relatively conservative management style attracted praise from industry observers, it also attracted the attention of Las Vegas billionaire Kirk Kerkorian, who with the help of retired Lee Iacocca, mounted a hostile bid for Chrysler in 1995. The (U.S. dollar) $55 per share ($27.50 today following a 2-for-1 stock split in 1996) not only failed to win the approval of Chrysler’s board, but also turned out to be largely unfinanced, leaving Chrysler to continue under its current management. Chrysler products Chrysler focused heavily on trucks in its product offering. In 1997, trucks, including minivans, accounted for about two-thirds of Chrysler’s vehicle sales in the United States and cars accounted for about one-third. Chrysler’s trucks
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