Continental Acquires Hoosier Tires

[Frank Messina]

The "everything stays the same" chant is the Novocain they inject to keep everyone calm while they figure out where to start chopping. They have to recoup their purchase price and most times the acquiring company isn't looking to do that over the next 20 years. People will be shed and products that don't match the new corporate model will be cut as well. That's just the reality. Just look at Dunlop/Goodyear.
Frank

[cycleguy55]

Originally Posted by Frank Messina

The "everything stays the same" chant is the Novocain they inject to keep everyone calm while they figure out where to start chopping. They have to recoup their purchase price and most times the acquiring company isn't looking to do that over the next 20 years. People will be shed and products that don't match the new corporate model will be cut as well. That's just the reality. Just look at Dunlop/Goodyear.
Frank

Fair enough - especially when it comes to back end or shared services. Do you really need two IT departments? Can HR and/or Accounting for Hoosier become a 'satellite' location with core services delivered from Continental HQ? Does Hoosier need a Treasury or Accounts Receivable department when it can tap into Continental's?

Just some examples, but the acquiring companies that are successful evaluate these and other services to see where 'synergies' can be found and costs eliminated. If they do it well they won't negatively impact customer services - but that requires focus, commitment and dedicated resources. Do it poorly and you have a disaster.

[ACademic]

M&A involves seeking synergies, plain and simple (cycleguy55 is correct).

Assume for a moment that Hoosier is accretive (helps the buyer make higher profit margins) to Continental's bottom line. The first people to go are usually Finance/Accounting and Human Resources, as the integration will bring both companies onto a common accounting and personnel framework. You don't need the redundancy...you eliminate that quickly to save money. Salesforce overlap will also be impacted fairly early on so some regional sales people will also be impacted. Consolidating IT departments can be a little tricky, but that eventually occurs, too. This is all typical post-M&A fact.

Hoosier will more than likely benefit from better purchasing power via Continental's larger enterprise-wide national agreements with key vendors. So they should actually MAKE more money per tire after the acquisition than before. If it's a niche market (it is), then expect price increases, too. So Continental wins twice...sells the same tires for more money AND reduce their costs.

Most senior management (except where there is overlap) will all be tied down to 2-3 year employment agreements with non-compete provisions. That will keep them fed until they either prove themselves worthy of being part of the larger organization (and the change in culture that will persist), or they will be leveraged out as some consolidation invariably takes place within the first two years of the acquisition. I was always jealous of the acquirees receiving those deals (guaranteed income).

Any Continental managers that kill the Hoosier brand/following/quality won't last three years. So Continental (and their senior management team) is heavily motivated to keep the brand very alive and for it to continue to prosper.

I've done M&A for over two decades so I would suggest that the naysayers relax a little and let the process work itself out.

[Lou1119]

Originally Posted by ACademic

M&A involves seeking synergies, plain and simple (cycleguy55 is correct).

Assume for a moment that Hoosier is accretive (helps the buyer make higher profit margins) to Continental's bottom line. The first people to go are usually Finance/Accounting and Human Resources, as the integration will bring both companies onto a common accounting and personnel framework. You don't need the redundancy...you eliminate that quickly to save money. Salesforce overlap will also be impacted fairly early on so some regional sales people will also be impacted. Consolidating IT departments can be a little tricky, but that eventually occurs, too. This is all typical post-M&A fact.

Hoosier will more than likely benefit from better purchasing power via Continental's larger enterprise-wide national agreements with key vendors. So they should actually MAKE more money per tire after the acquisition than before. If it's a niche market (it is), then expect price increases, too. So Continental wins twice...sells the same tires for more money AND reduce their costs.

Most senior management (except where there is overlap) will all be tied down to 2-3 year employment agreements with non-compete provisions. That will keep them fed until they either prove themselves worthy of being part of the larger organization (and the change in culture that will persist), or they will be leveraged out as some consolidation invariably takes place within the first two years of the acquisition. I was always jealous of the acquirees receiving those deals (guaranteed income).

Any Continental managers that kill the Hoosier brand/following/quality won't last three years. So Continental (and their senior management team) is heavily motivated to keep the brand very alive and for it to continue to prosper.

I've done M&A for over two decades so I would suggest that the naysayers relax a little and let the process work itself out.

I have to agree with you on this. I also have made many acquisitions in the last 1/4 of a century. Yes there will be a shake out of several departments most of them in the admin functions. The consolidation of sales forces can be a real minefield if not handled properly . On the positive side there should be resources available to the Hoosier brand that probably weren't there or not even considered when the company was private.

Someone said that the synergies would be a real positive thing. One thing I learned early on was " Never make an acquisition based on Synergies". They tend to evaporate before your eyes or the different cultures of the companies make them go away quickly.
Give this a chance: it could be extremely positive.