GE & Honeywell: A Failed Merger
|
Case Code: BSTR085 Case Length: 14 Pages Period: 2004 Pub Date: 2004 Teaching Note: Available |
Price: Rs.400 Organization: General Electric Company, Honeywell International Inc. Industry: General Business, Countries : US Themes: Mergers, Acquisition and Takeovers |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Honeywell Background
Honeywell was a diversified manufacturing and technology company operating in four major segments - Aerospace, Automation and Control Solutions, Specialty Materials, and Transportation and Power Systems. It was headquartered in New Jersey and at the end of 2002, employed approximately 100,000 people in 95 countries around the world. Honeywell started out by producing temperature control systems in the late-1880s. An inventor named Albert Butz (Butz) patented a concept for a temperature control system using a furnace regulator and alarm. On April 23, 1886, he formed the Butz Thermo-Electric Regulator Co., in Minneapolis to develop his concept. Later in the same year, he invented a product, which he called the 'damper-flapper', which used electro-mechanical devices to regulate the working of furnaces in homes to adjust the temperature automatically. Butz's company was later acquired by the Consolidated Temperature Control Co...
The Proposed Merger
Analysts said that GE's offer for Honeywell was prompted by the fact that Honeywell's businesses in aircraft engines, industrial systems, and plastics, were a good fit with GE's own businesses. When Welch found out in mid-2000 that Honeywell's board was on the point of deciding on a merger with UTC, a rival of GE in the aerospace market, he lost no time in making a bid of his own. Honeywell's management also felt that a merger with GE would be more desirable than one with UTC and aborted talks with UTC immediately. As the merger talks were in progress, GE began exercising control over all aspects of Honeywell's operations and Honeywell's management was expected to take approval from GE on all important matters such as hiring new employees and major operational decisions...
Repercussions of the Failed Merger
Some analysts felt that there could have been more to GE's abandoning of the deal than what met the eye. One suggestion was that the economic situation in the US and the world had worsened since the merger was first proposed. GE probably felt that buying Honeywell was too great a risk at a time of economic downturn. This was probably why GE did not fight the opposition too hard in spite of Honeywell's urge to resubmit the proposal after revising the price downwards. The EC was also severely criticized by analysts, mainly in the US. Some of them felt expecting a merger between two American companies to seek approval from authorities around the globe was going too far. Boeing, an aircraft manufacturer based in the US, felt that the EC was trying to protect European aircraft manufacturing companies, notably Airbus, or European engine-makers from the combined market clout of GE-Honeywell...
Conclusion
The GE Honeywell merger was historical for a variety of reasons, notably the size of the deal and the fact that it marked the first time that transatlantic authorities differed in their analysis of a merger. The issue also brought to light transatlantic differences in anti-trust laws. This raised important questions about the viability of companies seeking approval from various agencies around the world before taking major decisions. For instance, according to analysts, the focus in anti-trust cases in the US was on customers' interests. Mergers or corporate decisions which affected customers adversely were usually viewed unfavorably. In Europe, however, they said the focus seemed to be on preserving competitors and protecting their interests, as was proved by the GE-Honeywell case...
Exhibits
Exhibit I: Annual Financials - GE
Exhibit II: Annual Financials - Honeywell
Exhibit III: Major Business Segments in Which GE and Honeywell Operate
Buy this case study (Please select any one of the payment options)
| Price: Rs.400 |
Price: Rs.400 | PayPal (9 USD) |
