Protect The Merger Or Sale Value Of Your Business: What You Can Learn From The DaimlerChrysler Debacle
Protect The Merger Or Sale Value Of Your Business: What You Can Learn From The DaimlerChrysler Debacle
When Merging Or Selling A Business, It's Business Profits Not Sales Revenues
When Daimler purchased Chrysler, Chrysler was having record revenues of 61 Billion Dollars and net earnings of 2.8 Billion Dollars. Revenues and profits were growing rapidly. Exciting new product lines were eagerly accepted by the market. The resulting projected cash flow would pay for the purchase.
Now, in 2007, Chrysler has revenues of 62 Billion Dollars and a 1.5 Billion Dollar loss with no projected growth and no current cash flow for financing. This proves one more time that cash flow is the basis of traditional companies' business value. To increase business value and business merger sales price, maximize your cash flow during the lead-up and sale period.
The Importance Of Business Cycles When Selling Or Merging
When Daimler bought Chrysler the auto industry as a whole was having record years. The three American automakers were selling cars like hotcakes. Costs had been brought down to where Chrysler was a low cost provider.
Compare that to the current industry weakness with reports of overcapacity, impending layoffs and inability to compete because of health care and retirement costs. Yes, the overall industry cycles do matter in the pricing of a business at the time of sale. Sell on the up-cycle. Up-cycles provide prospective purchasers with cash to buy your business and up-cycles provide your business with profits to sell.
Selling Period - Desperation Does Not Increase Price
When reports that Chrysler might be sold hit the street it was clear that Daimler was having a fire sale. Great for a buyer but a very tough negotiating position for a seller. Don't wait until even the "business challenged" can tell you must sell. If you wait too long before you start the business sale or merger process the bottom feeders will win.
Maintain Your Core Strengths When Looking to Merge
When Daimler purchased Chrysler a new design center had been completed allowing Chrysler to bring cars on the market in three years or less. This allowed them to compete with stylish exciting cars. Daimler, in an effort to milk profits, did not bring out a new car for three years prior to 2006, destroying this design leadership position. People bought Chryslers because they were an affordable style, not because they lasted forever. So what was left when there were no new models?
Protect Your Brands
While some may question Chrysler's brand value no one can seriously question Jeep's value. Jeep was very close to the Marlboro Man in American mystique. Yet Daimler let Hummer take Jeeps prized position as the "American Badlands 4 Wheel Drive Experience." Daimler, in 2007, finally brought out a Hummer competitor - right in time for a spike in gas prices. Always protect your brands and the value inherent in them.
Chrysler invented the minivan. Chrysler still has some very nice minivans. Yet in the day of the "crossover" or mix of SUV and Minivan, where is Chrysler's entry? What happened to the design studio again?
Keep Your Talent, They Are Your Business
In the name of efficiency Daimler didn't let Chrysler keep dancing the dance that got it to the ball. In a merger originally billed as a marriage of equals it very quickly became clear that the superior equal was Daimler. After all, they were the purchaser. But why chase off the talent you paid dearly for? Always keep your key people on the team if you want to maximize your sales or merger value even if you must share some of the rewards with them. Based on Chrysler's revival from death in the 1990's, someone there clearly knew what they were doing. It is a fatal mistake to lose your best people or worse yet force them to turn to your competitors.
Final Thoughts On Business Value
With the advantages of hindsight, it is clear that Daimler has made about every mistake possible thereby destroying the value of the Chrysler subsidiary. Chrysler lost profitability because it stopped being Chrysler. Chrysler lost its affordable style position when it lost its design edge and design speed. It lost much of the value in its key Jeep brand by not staying up with changing trends. These and many other mistakes took Chrysler from record profits to huge losses. Daimler bought in an up market cycle and sold in a down cycle. As a final insult, Daimler did not even allow a reasonable time on the market for the transaction to be negotiated. Avoid making these mistakes when looking to sell or merge your private business.
In order to earn the greatest return when you sell or merge your business, make sure your profits are increasing, you are running with the business cycle and you follow a proper merger and sales process.
(c) 2007, Gregory Caruso
Protect The Merger Or Sale Value Of Your Business What You Can Learn From The DaimlerChrysler Debacle - To learn more about this author, visit Greg Caruso's Website.
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In the heat of summer 1997, Daimler Benz purchased Chrysler for 37 Billion Dollars in a reported business merger of equals. Now, not quite 10 years later DaimlerChrysler is selling Chrysler for a reported 7.4 billion dollars for 80% of the firm. If the loss of 30 Billion Dollars in business value is not bad enough apparently the entire purchase price being paid by the buyer Cerberus will be placed into Chrysler and not retained by Daimler. How did this happen and what lessons can you learn when planning the sale, merger, or valuation of your privately held business?
When Merging Or Selling A Business, It's Business Profits Not Sales Revenues
When Daimler purchased Chrysler, Chrysler was having record revenues of 61 Billion Dollars and net earnings of 2.8 Billion Dollars. Revenues and profits were growing rapidly. Exciting new product lines were eagerly accepted by the market. The resulting projected cash flow would pay for the purchase.
Now, in 2007, Chrysler has revenues of 62 Billion Dollars and a 1.5 Billion Dollar loss with no projected growth and no current cash flow for financing. This proves one more time that cash flow is the basis of traditional companies' business value. To increase business value and business merger sales price, maximize your cash flow during the lead-up and sale period.
The Importance Of Business Cycles When Selling Or Merging
When Daimler bought Chrysler the auto industry as a whole was having record years. The three American automakers were selling cars like hotcakes. Costs had been brought down to where Chrysler was a low cost provider.
Compare that to the current industry weakness with reports of overcapacity, impending layoffs and inability to compete because of health care and retirement costs. Yes, the overall industry cycles do matter in the pricing of a business at the time of sale. Sell on the up-cycle. Up-cycles provide prospective purchasers with cash to buy your business and up-cycles provide your business with profits to sell.
Selling Period - Desperation Does Not Increase Price
When reports that Chrysler might be sold hit the street it was clear that Daimler was having a fire sale. Great for a buyer but a very tough negotiating position for a seller. Don't wait until even the "business challenged" can tell you must sell. If you wait too long before you start the business sale or merger process the bottom feeders will win.
Maintain Your Core Strengths When Looking to Merge
When Daimler purchased Chrysler a new design center had been completed allowing Chrysler to bring cars on the market in three years or less. This allowed them to compete with stylish exciting cars. Daimler, in an effort to milk profits, did not bring out a new car for three years prior to 2006, destroying this design leadership position. People bought Chryslers because they were an affordable style, not because they lasted forever. So what was left when there were no new models?
Protect Your Brands
While some may question Chrysler's brand value no one can seriously question Jeep's value. Jeep was very close to the Marlboro Man in American mystique. Yet Daimler let Hummer take Jeeps prized position as the "American Badlands 4 Wheel Drive Experience." Daimler, in 2007, finally brought out a Hummer competitor - right in time for a spike in gas prices. Always protect your brands and the value inherent in them.
Chrysler invented the minivan. Chrysler still has some very nice minivans. Yet in the day of the "crossover" or mix of SUV and Minivan, where is Chrysler's entry? What happened to the design studio again?
Keep Your Talent, They Are Your Business
In the name of efficiency Daimler didn't let Chrysler keep dancing the dance that got it to the ball. In a merger originally billed as a marriage of equals it very quickly became clear that the superior equal was Daimler. After all, they were the purchaser. But why chase off the talent you paid dearly for? Always keep your key people on the team if you want to maximize your sales or merger value even if you must share some of the rewards with them. Based on Chrysler's revival from death in the 1990's, someone there clearly knew what they were doing. It is a fatal mistake to lose your best people or worse yet force them to turn to your competitors.
Final Thoughts On Business Value
With the advantages of hindsight, it is clear that Daimler has made about every mistake possible thereby destroying the value of the Chrysler subsidiary. Chrysler lost profitability because it stopped being Chrysler. Chrysler lost its affordable style position when it lost its design edge and design speed. It lost much of the value in its key Jeep brand by not staying up with changing trends. These and many other mistakes took Chrysler from record profits to huge losses. Daimler bought in an up market cycle and sold in a down cycle. As a final insult, Daimler did not even allow a reasonable time on the market for the transaction to be negotiated. Avoid making these mistakes when looking to sell or merge your private business.
In order to earn the greatest return when you sell or merge your business, make sure your profits are increasing, you are running with the business cycle and you follow a proper merger and sales process.
(c) 2007, Gregory Caruso
Protect The Merger Or Sale Value Of Your Business What You Can Learn From The DaimlerChrysler Debacle - To learn more about this author, visit Greg Caruso's Website.
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David BarrDavid Barr is the President of Venture Opportunities, Inc. David has been a professional business broker/intermediary since 1980 focusing on General Business Brokerage and Mergers and Acquisitions representing client transaction value from $400,000 to $20,000,000. Mr. Barr has handled the sale of over four hundred and fifty companies. David earned a university degree from the State University of New York majoring in economics and business. David holds the Mergers and Acquisition Master Intermediary and the Certified Business Intermediary designations from the International Business Brokers Association. He is also a Senior Business Analyst and a Texas licensed Real Estate Agent. For more information about David and Venture Opportunities, visit www.bizdealmaker.com. - Visit David Barr's Website |
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Linda RichardsonLinda Richardson is the Founder and Executive Chairwoman of Richardson, a global sales training and performance improvement company. As a recognized leader in the industry, she has won the coveted Stevie Award for Lifetime Achievement in Sales Excellence and she was identified by Training Industry, Inc. as one of the “Top 20 Most Influential Training Professionals.” Ms. Richardson is credited with the movement to Consultative Selling and is the author of ten books on selling and sales management, including Sales Coaching — Making the Great Leap from Sales Manager to Sales Coach, and Stop Telling, Start Selling. She teaches sales and management at the Wharton Graduate School of the University of Pennsylvania and the Wharton Executive Development Center. Linda is a frequent speaker at industry and client conferences, has been published extensively in industry and training journals, and has been featured in numerous publications, including The Wall Street Journal, Forbes, Nation’s Business, Selling Power, Success, and The Conference Board Magazine. Learn more about Richardson's sales training and performance improvement solutions at http://www.richardson.com web - Visit Linda Richardson's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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Jeff FosterWebBizIdeas.com is a Minneapolis website design company founded to help people start an internet business by providing them with website, business, and internet resources that help foster the growth of successful online businesses and develop innovative Internet business ideas. We specialize in internet consulting & internet marketing. - Visit Jeff Foster's Website |
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David AchesonDavid Acheson is the founder of DCJA Consultancy. DCJA Consultancy is a management consultancy business specialising in B2B sales consultancy. They offer bespoke and packaged sales consultancy including Sales Optimisation Review, Interim Sales Management, Sales & Marketing Review, 1:1 Sales & Management Staff Analysis, Management Training, Solution Sales Training, Creation of New Pay Plan, KPI's, run Customer Feedback Campaigns, assist with Recruitment, Coaching, Appraisals and set up Strategic Marketing Campaigns. David spent his early career in accountancy and then moved into sales in 1982, working in Office Equipment, IT, Advertising, Training, Outsourcing and Consultancy. He has held many Senior Positions in SMBs and Global Organisations including Head of Sales Operations & Head of Business Development. His knowledge, skills and great experience of the Sales Industry has led to David making keynote speeches and running educational sessions to key businesses through organisations including The Chamber of Commerce and Business Link. - Visit David Acheson's Website |
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