Franz shuler

PMI CASE STUDY :

Acquisition of

Franz Schuler GMBH by Titan Products, INC.[pic 1]

Presented by : AOULLAY Fatima-Ezzahra, WROZ Carmen & ESSOLHI

Ahmed Youssef On January, 9th 2018

Agenda

1. Overview & Summary of the case study
2. Your charge & our solution proposal
3. Conclusion

OVERVIEW OF BOTH COMPANIES

Titan's operating style

Senior management (CEO & VPs) : working on strategic direction => setting both short and long-term goals.

Mid-managers : they make less decisions because they have to concentrate on doing their job.

Rank-and-file-employees :

• a policy of hiring only recent graduates with outstanding academic performance ▶ Reserve important management positions for long-term Titan employees ▶ Jobs are secure & well paid.
• Loyal and good followers

Strengths of Titan's Products Inc.

• Manufacturing ability,
• Size,
• Highly trained personnel & Internal-training expertise,
• Reputation as a high-quality supplier & recognized trade names and products,
• Strong distribution network,
• Strong balance sheet (50% debt to equity ratio) & excellent credit rating,
• 100 years of continuous operation,
• Excellent research and product development,
• Management development programs,
• Relationships with suppliers and customers,
• No union,
• Low turnover.

Titan's situation in 1999

• European & Asian competition begin to take market share with similar or better products and lower costs
• 1994 : Merger of 2 formidable US competitiors
• 1996 : Combination of negative currency swings, higher raw material prices and an intensified regional and country competition in Europe and in their most profitable markets in Asia.
• 1998 : Value Chain Repositioning (VCR) program : depart from longstanding policy of being only a parts supplier and to actively compete with some of their customers.
• Important aspect of the VCR program was the acquisition of small to medium sized specialty manufacturing companies.

The acquisition as viewed by the Titan senior management

Titan did not have the technology, nor the experience or skills, to support the new value-chainrepositioning strategy.

• Access to markets for value-added (i.e. finished) products,
• Trained sales and technical-support personnel,
• Knowledge of how to sell direct rather than through distributors,
• Manufacturing capabilities for finished products in domestic and overseas locations,
• New product-engineering personnel, ▶ New distributors.

=> The CEO wanted to embark on a strategy of acquiring one or more firms in the finished goods business.

• Based on his knowledge of Franz Schuler GMBH, Davis had opened discussions with its CEO, Heidler Schuler, about a friendly acquisition.
• The consultants reported that an acquisition of Franz Schuler would increase Titan’s capabilities.
• They highlighted major differences in the two organizations and that the key to success was how to integrate Franz Schuler into Titan.
• ( in this new market significantly, positioning Titan with the needed competencies, skills, and talents to be considered a major player in their new market; (paper))

Franz Schuler's operating style

Management : Franz Schuler GMBH was a mixture of family-made decisions coupled with the German system of Works Councils and unions.

Rank-and-file-employees :

• a policy of finding & hiring experienced & trained personnel with the right skills, talents and abilities, by going into similar industries.
• Reserve important positions for the most skilled personnel.
• The wage and compensation package was not the highest in the industry;
• Lose young employees
• (No need to wait for advancement. paper)

“Put the right person in the right job and great things could happen”.

Franz Schuler's strengths

• Small, specialized niche player in the finished-goods business,
• Close and direct contact with customers & most product sold direct to them
• Quick decision-making process,
• Highly trained personnel & Diverse mixture of engineers and business personnel in key management positions,
• No debt,
• Excellent manufacturing facilities,
• Reputation as a reliable supplier & Franz Schuler’s trade name,
• Infrastructure to both sell and support business in all European countries and Asia,
• Outstanding product development group,
• Well-organized and placed field sales group,
• Strong competitive position within their markets and segments,
• Good relationship with German and Cologne governmental agencies, works Council and union & suppliers

Franz Schuler's situation in 1999

• Franz Schuler became a customer of Titan Products in 1990, and that vendor-customer relationship continued until the late 1990s.
• Franz Schuler had enjoyed a long history of growth and profit but since that has changed:

• Some of Franz Schuler's customers had consolidated their efforts through mergers and join-ventures so that they could leverage better buying power.
• Customers demand to enlarge the volume of products or they will go to larger competitors.

=> Value of the company had declined each year for the past three years

In 1999 Heidler was approached by Andrew Davis, who asked him to consider becoming a potential acquisition for Titan’s VCR program.

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