Chrysler Corporation: Negotiations between Daimler and Chrysler

Abstract

This case may be taught singly or used as a merger-negotiation exercise with "Daimler-Benz A. G.: Negotiations between Daimler and Chrysler" (UVA-F-1241). Set in February 1998, the case places students in the position of negotiators for the company; their task is to value both firms, assess the potential earnings dilution of a combination, and negotiate a detailed agreement with their counterpart. The case can be used to explore such interesting negotiation issues as determination of a share-exchange ratio, treatment of major stockholders, and structuring a deal. Also, the case and exercise can be used to spark a discussion of acquisition in comparison with strategic alliance, or other less formal models of combination.

Excerpt

UVA-F-1240

Version 2.2

CHRYSLER CORPORATION: NEGOTIATIONS BETWEEN

DAIMLER AND CHRYSLER

In January 1998, Jürgen Schrempp, CEO of Daimler-Benz A.G., approached Chrysler Corporation's chair and chief executive officer (CEO), Robert Eaton, about a possible merger, acquisition, or deep strategic alliance between their two firms. As Schrempp argued:

The two companies are a perfect fit of two leaders in their respective markets. Both companies have dedicated and skilled work forces and successful products, but in different markets and different parts of the world. By combining and utilizing each other's strengths, we will have a preeminent strategic position in the global marketplace for the benefit of our customers. We will be able to exploit new markets, and we will improve return and value for our shareholders.

. . .

Keywords: merger acquisition strategy alliance negotiation valuation cross-border investment