"Whirlpool Corp.: Structuring the Deal to Acquire Hefei Rongshida Sanyo Electric Company" case study deals with Whirlpool Corp., a motor-driven washing machine producer established in 1911. The company is considering the acquisition of Hefei Sanyo to enhance its strategic positioning in China.
Benjamin C. Esty; Nancy Hua Dai
Harvard Business Review (216019-PDF-ENG)
October 15, 2015
Case questions answered:
- How will Whirlpool Corp. fulfill its target of acquiring more than 50 % share of Hefei?
- Should the company go for a Private placement of equity or Tender offer?
- What should be the Bid/offer price?
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Case answers for Whirlpool Corp.: Structuring the Deal to Acquire Hefei Rongshida Sanyo Electric Company
This case solution includes an Excel file with calculations.
Company Overview – Whirlpool Corp.
Whirlpool Corp. was established in 1911 as a motor-driven washing machine producer. Its product portfolio includes Refrigerators, Air conditioners, Cooking stoves, among others. Additionally, it is considered as the largest “White goods” manufacturer in the world.
The company is focusing on stringent cost control and restructuring its business. At present, Whirlpool Corp. is trying to acquire Hefei Rongshida Sanyo Electric Company to enhance its strategic positioning in China.
- The growth in the national economy is considered as lower because of the recent financial crisis.
- Higher demand for white goods and other consumers products point out to a higher disposable income of people.
- Increasing entry of global business giants points out development in the national economy.
- The exchange rate of the national currency (RMB) is considered as stable.
Porter five forces
- Threats of new entrants in this industry are relatively low.
- Rivalry among existing competitors is high in terms of the price of the product and the volume of sales per year.
- The bargaining power of suppliers is high as there is a limited number of suppliers.
- The bargaining power of buyers is high.
- The threat of substitutes is high.
- The rules and regulations regarding the business activities by foreign companies in China are severed (Need to establish JV). In addition, it is pretty hard and time-consuming to get approval in merger and acquisition with a Chinese company.
- The cost of operating a business and maintenance as a foreign company in China has been increased and it offers lower competitiveness.
- Finding a joint venture with Chinese companies seems less fruitful and it failed to offer the expected economic benefit to the company.
- At present, people are becoming more dependent on using White goods and consumer products.
- Because of the development trend and higher disposable income in Chinese society, people tend to buy more and intend to use foreign goods.
- The presence of new technology and efficient usage might cause a further reduction in the product and service price.
- In order to ensure higher safety and increased production efficiency, new technology needs to be implemented.
- The industry is highly regulated in terms of foreign companies operating in China.
- In order to do a merger or acquisition, it is required to take permission from multiple authorities like NDRC, CSRC, MOFCOM, and the local government.
- The environment activists are pointing out to the production process and raw materials used in producing these consumer products.
- Because of the sever carbon emission reduction policy, a company that emits a higher amount of carbon will face negative consequences like a higher tax burden.
Company analysis (SWOT analysis of Whirlpool Corp.)
- Strong product portfolio.
- Strong market positioning all over the world.
- Economies of scale.
- Failure in positioning in the Chinese market.
- Inefficiency in management and operation in the foreign market (China).
- Strong binding of govt. rules and regulations.
- Building a long term relationship with other peer companies.
- Increased demand for White goods and consumer products.
- Opportunity to use the supply and distribution channel of the other company.
- Legal and regulatory issues.
- Lower acceptance among Chinese people.
- Negative pressure from the recent financial crisis