Managing International Acquisitions

In the Managing International Acquisition simulation dealt with the merger and acquisition of a foreign national bank overseas. In doing the research for this project, I found interesting examples of recent mergers of Reebok/Adidas, Nextel/Sprint, and MBNA/Bank of America.

The Reebok/Adidas merger is all about catching Nike, the industry leader in market share. The objective of the tieup is clear. The two companies, which jockey for No. 2 and No. 3 slots behind Nike (NKE ), view their prospects for competing against the Beaverton, Ore., behemoth as better together than apart. (www.businessweek.com)

In Europe especially, the shadow of Nike grew larger in the last year as the U.S. company surpassed Adidas in the soccer shoe segment for the first time -- for Adidas, a game-changing event equal to, say, Toyota (TM ) surpassing Ford (F ) in U.S. sales. (www.businessweek.com)

In the U.S., Nike reigns supreme. In 2004, it had about 36% market share in the athletic-footwear market, according to the Sporting Goods Manufacturers Association International, while Adidas has 8.9% of the U.S. market and Reebok 12.2%. The U.S. ranks as the world's biggest athletic-shoe market, accounting for half the $33 billion spent globally each year on athletic shoes. (www.businessweek.com)

It is clear that this merger is a product of both companies desperation to catch Nike and surpass their market share. Instead of cutting into each others shares and profits, the two companies uniting in this cause stands a better chance to catch Nike.

Nextel and Sprint merger was the most surprising merger that I have been aware of in my young life. The two companies are no where near alike. Nextel works off of a network platform called IDEN and Sprint works on CDMA platform. These two platforms are not a like.

Once doing the research it became clear to why this merger happened. Sprint PCS, which is part of Sprint (Telecom Carrier), wanted to separate themselves from the corporation. They did not have the sufficient funds to do it on their own so they needed to merge in order to raise enough capital to be able to split off and survive. Sprint Nextel has begun the process of separating the operations of Sprint's local telecommunications business, including consumer, business and wholesale operations, and will seek regulatory approvals to spin off the local telecommunications business to Sprint Nextel shareholders in a tax-free transaction, which is expected to be completed in 2006. (www.biz.yahoo.com)

The cash-and-stock deal would make Bank of America already the nation's third-biggest bank, also the largest credit card issuer in the country, with 40 million active accounts containing $143 billion in outstanding balances. The Charlotte, N.C.-based financial services giant ranked fourth in the card business at the end of 2004, according to CardWeb.com. (www.cnnmoney.com)

The banking behemoth has long had a voracious appetite for adding customers through acquisitions. Two weeks ago, Bank of America took a $3 billion stake in a Chinese bank. It spent last year digesting FleetBoston Financial as part of a takeover valued at $47 billion on the day it was announced. (www.cnnmoney.com)

In looking at the three preceding mergers it is obvious that they were all done to impact the financial well being of the companies. What is not apparent yet, but will be over time, is, was it worth it.

The acquisition of MBNA by Bank of America makes Bank of America the largest credit card issuer in the country. The impact of the merger though will affect many. 6,000 jobs will be lost once the merger is complete. The deal values MBNA at $27.62 a share, or about $35 billion based on Wednesday's closing prices. Under deal terms, MBNA shareholders will receive $4.125 in cash and 0.5009 shares of Bank of America common stock for each of their shares. (www.cnnmoney.com)

At an analyst