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Home » Business And Finance Articles » Protect The Merger Or Sale Value Of Your Business What You Can Learn From The Daimlerchrysler Deba

Protect The Merger Or Sale Value Of Your Business: What You Can Learn From The DaimlerChrysler Deba

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.

And here is another random article you might be interested in...

Business Cartoons Mean Business

Let's face it, unless you're Donald Trump, business can be pretty dull most of the time. Maybe that's why so many people decorate their cubicles and offices with cartoons. A good laugh can really perk up your day! So why don't more businesses use business cartoons?

It's interesting that so few companies make the connection between cartoons and business. Are they afraid of not being taken seriously? Are cartoons just funny little drawings that no one really pays attention to? Publications like the Wall Street Journal, Barron's, Forbes and Harvard Business Review all publish business cartoons regularly. What's going on here?!

Maybe we're so buried in spreadsheets, reports and memos that it's hard to see where business cartoons might be able to help out. Here are some examples of how business cartoons used correctly can be a boon to both your morale and your bottom line:

Company Newsletters

Newsletters are a great place to use business cartoons! Corporate newsletters are usually filled with all sorts of company information, important information to be sure, but pretty dry reading nonetheless.

If you want your employees to really read your newsletters, give them something fun! Good business cartoons get discussed at the coffee machine, hung up in cubicles and faxed to business contacts. They're a great way to not only get your people to actually open the company newsletter, but explore and discuss it!

Business Presentations

You're sitting there in the conference room wishing you had a cappuccino IV to keep your eyes open while some guy drones on and on and on. Graphs, pie charts, more graphs, some bullet points, etc... Let's face it, it's hard to keep a dark room of sleep deprived people engaged.

Why not pep up your presentations with some good business cartoons! Not only are they a good way to get a presentation going (similar to starting a speech with a joke), but they're a great way to make your point throughout in a memorable way.

Websites & Intranets

Business cartoons are a wonderful way to get business prospects and customers visiting you online day after day. Years in sales taught me that people buy from people they like, and what better way to foster a good business relationship than by offering not only your products and/or services, but also a good laugh!

Of course you want your staff visiting your website and intranet often as well. Adding business cartoons will give your employees a great reason to check in on all your company information too!

Advertising & Email Campaigns

Looking for more customers? Nothing succeeds like business cartoons!

Many Fortune 1000 companies use business cartoons in their email campaigns. Some report astronomical email open rates, and click-thru rates in double digits! According to MarketingSherpa.com, companies are usually opposed to using business cartoons initially because they don't see the value in a 'cute' little cartoon. The website also notes, however, that when the business cartoons become the most clicked on portion of the email, companies quickly change their minds.

Business cartoons are a great way to advertise as well! They're quick, fun, and they grab your attention - wonderful attributes for potential customers to associate with your business!

Training Manuals & Fax Cover Sheets

Want to keep your trainees engaged in their training? Business cartoons are a fun way to break up the often lengthy training sessions and help your new employees relax.

And fax cover sheets just about beg for good business cartoons! Make sure your fax is well received not only by the person you intend to read it, but by the couple of other people who'll get a good laugh as they pass it along.

Business Cartoons are Good Business

As you can see, business cartoons simply make good business sense. Whether you use them in newsletters, powerpoints, websites, advertising, or manuals, business cartoons enliven your projects and promote interaction with both customers and employees.