BenQ Corp.'s Failed Acquisition of Siemens' Mobile Devices Division
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Case Code: BSTR250 Case Length: 17 Pages Period: 2005-2006 Pub Date: 2007 Teaching Note: Not Available |
Price: Rs.400 Organization: BenQ Corp,Siemens AG Industry: Consumer Electronics Countries: Worldwide Themes: Mergers, Acquisitions, Strategic Alliances |
Abstract Case Intro 1 Case Intro 2 Excerpts
"It's a deal too good to be true for BenQ. They get the whole business and a decent brand for free."
- Daniel Wang, an analyst at brokerage Primasia Securities in Taipei in 2005.
"It's natural they (Siemens) act surprised, because it wouldn't be very ethical to say they knew the mobile division was going to go down so they wanted to get rid of it. I'm not saying they knew this, but [I'm] pretty sure they knew this [unit] wasn't doing very well."
- Brad Akyuz, senior analyst in the mobile devices division of Current Analysis in 2006.
"They (BenQ) waited until the Siemens money was used up and then simply turned off the tap."
- A sector analyst in 2006.
Introduction
In November 2006, BenQ Corp. (BenQ) announced that it would cut 400 jobs at its Shanghai, China plant. This unit had belonged to the mobile devices division of Siemens AG (Siemens), a major German engineering and electronics company, up until October 2005, when it, along with plants in Germany, Brazil, etc., and R&D labs in Germany, Denmark, and China were sold to BenQ. After acquiring the division, BenQ renamed it BenQ Mobile GmbH (BenQ Mobile). BenQ Mobile had, in September 2006, filed for bankruptcy protection after a year of heavy losses. BenQ was a prominent Taiwanese electronics and computer peripherals manufacturer. As of 2005, it was also the sixth largest manufacturer of mobile phones in the world.
Though it largely acted as an OEM for global brands like Nokia, Motorola, etc., it also sold mobile phones under the BenQ brand. The company had big plans to expand its operations and build its brand all over the world.
In October 2005, it acquired the loss-making mobile devices division of Siemens. With the acquisition, BenQ planned to sell co-branded mobile phones (BenQ-Siemens) in addition to the BenQ and Siemens brands. Siemens started manufacturing mobile phones in the late 1990s. Despite producing high quality phones, it was unable to make a mark in the highly competitive industry, and the business began incurring huge losses. In 2005, after yet another year of losses in the mobile phones business, Siemens decided to exit the business. However, securing the future of its employees was high on its list of priorities. Therefore, it looked to sell the division to a company that would assure the continuity of the division's operations in Germany.
In June 2005, BenQ acquired the entire mobile division which comprised the company's manufacturing units in Germany, Brazil, and China. However, the acquisition brought a range of problems for BenQ. The company failed to turn around the bleeding German unit, which incurred losses of € 840 million within a year and threatened to destabilize the parent company.
The loss was attributed to BenQ's lack of management and marketing experience as well as to the tough German labor laws that prevented BenQ from laying off people. Consequently in September 2006, BenQ Mobile filed for insolvency.
This affected around 3,000 German workers who were abruptly asked to leave without any compensation. The labor issue attracted widespread criticism against BenQ and Siemens, with German labor leaders and politicians alleging that BenQ's acquisition of the Siemens' mobile division was a carefully scripted plot by the two companies to avoid compensation payments to the workers, which ran into millions of euros.....
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