Schenker's acquition of BAX Global


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Schenker's acquition of BAX Global

  1. 1. The Case of DB Schenker and BAX Global <br />MariyaArnaudova<br />Organizational Design for Networks<br />Fall 2010<br />
  2. 2. Schenker in 2004: <br />Leading International Logistics Service Provider <br />I. Prior to Acquisition<br />1. Schenker<br />2<br />
  3. 3. Schenker in 2004: <br />Political and Economical Environment<br />I. Prior to Acquisition<br />I. Prior to Acquisition<br />1. Schenker<br />Political Situation<br /><ul><li>Political discussions on transport market liberalization
  4. 4. Pan-European regulations harmonization</li></ul>Economical Situation<br /><ul><li>Dependent on German economy (slackening)
  5. 5. Drivers of global economy: US and Asia with strong economic growth </li></ul>3<br />
  6. 6. Schenker in 2004: <br />Strengths, Weaknesses, Opportunities and Threats Analysis <br />I. Prior to Acquisition<br />I. Prior to Acquisition<br />1. Schenker<br />4<br />
  7. 7. Schenker in 2004: <br />Business Performance <br />Services offered: <br />Transportation:<br /> Air<br />Land<br />Sea<br />2. 3PL <br />3. Value-added services<br />Customers: <br />1. B2B (automotive, high-tech industries)<br />2. “Official supplier” of customs clearance and forwarding for the International Olympics Committee at the 2004 Olympic Games in Athens <br />3. EU enlargement possibilities <br />I. Prior to Acquisition<br />I. Prior to Acquisition<br />1. Schenker<br />Strong performance of Schenker, overshadowed by Railion<br />5<br />
  8. 8. BAX in 2004: <br />Key Figures <br />I. Prior to Acquisition<br /><ul><li> International Shipping Company founded in 1971
  9. 9. Headquarters: Irvine, California
  10. 10. Number 1 heavy-lift cargo businesses(US)
  11. 11. Among the 20 largest US logistics companies
  12. 12. Presence: 130 countries(America and Asia)
  13. 13. Employees: 11 500 people
  14. 14. Revenue: $2.4 billion (2004)
  15. 15. Operating Profit soared to $56.2 million(2004) from $3million(2003)
  16. 16. Unit revenue: $2.44 billion</li></ul>2. BAX Global<br />BAX Global Revenues ($ millions)<br />6<br />
  17. 17. BAX in 2004: <br />Key Figures Cont. <br />I. Prior to Acquisition<br /><ul><li>Services:</li></ul>-international air and sea freight forwarding<br />-transport services in US<br />-supply chain management<br />2. BAX Global<br />BAX Global 2004 Revenue Mix<br />BAX Global 2004 Areas of Revenue Generation<br />7<br />
  18. 18. Reasons for M&A Activity <br />M&A Classification <br />Reasons for M&A according to Ansoff: <br />Instability of market  quick market entry<br />(2) Need of competent management <br />(3) Need to enlarge capacities <br />(4) Cheaper product developed outside <br />II. Why Acquisition?<br />1. Explanation 1<br />Theory<br />However, still a great number of M&As were unsuccessful...  <br />8<br />
  19. 19. M&A Success Factors<br />M&A Consequent Tendencies <br />Acquisition Integration<br />M&A SUCCESS<br />Organizational Differences<br /><ul><li>Culture
  20. 20. Management style</li></ul>Objective, financially efficient<br />Subjective, motive-driven<br />Level of goal attainment<br />Level of position among competitors<br />Level of satisfaction<br />Change of Return on Investment<br />Change of Return on equity<br />Change of company value<br />II. Why Acquisition?<br />Strategies vs Market place<br />1. Explanation 1<br />Theory<br />Studies found that firms in the same industry tend to merge more frequently  Reduce competitive uncertainty<br />9<br />
  21. 21. Resource-based view applied to M&As <br />Becker 2005 <br />M&A Success<br />Resources Fit<br />“Resources are the tangible and intangible entities that enable the firm to produce efficiently and/or effectively a market offering that has value for some market segment or segments” <br />Sourcing fit<br />Organizational core resources<br />functional<br />Subjective motive-driven M&A success<br />Research and Development fit<br />Service provision fit<br />Objective financial and economic success of M&A <br />Sales fit<br />Organizational cultures fit<br />intangible<br />II. Why Acquisition?<br />Corporate cultures fit<br />1. Explanation 1<br />Fit of company image<br />Reputational assets<br />Theory<br />Level of Integration<br />Fit of customer structure<br />Situation Factors<br />Becker (2005): the more similar the resources fit, the more successful the M&A activity is<br />10<br />
  22. 22. Horizontal Acquisition: <br />Schenker and BAX Global Resources Fit <br />Resources Fit<br />M&A Success<br />Organizational core resources<br />functional<br />Subjective, motive-driven factors<br /><ul><li>Excellent positioning among competitors
  23. 23. Relevant expansion of network
  24. 24. Similar/same industry
  25. 25. Similar/same intermodality</li></ul>Sourcing fit<br /><ul><li>Similar/same services: transportation, 3PL, value-added services </li></ul>Service provision fit<br />Objective financial and economic factors<br /><ul><li>Increase of revenues from expansion areas</li></ul>II. Why Acquisition?<br />1. Explanation 1<br /><ul><li>Sales in strategically important regions: EU, Asia, USA</li></ul>Sales fit<br />Practice<br /><ul><li>Similar/same industry</li></ul>intangible<br />Progressive Integration<br />Corporate cultures fit<br />Situation Factors<br />Reputational assets<br /><ul><li>B2B customers
  26. 26. Same industry customers (automotive, high-tech, etc)</li></ul>Fit of customer structure<br />11<br />
  27. 27. M&A Theoretical Analysis <br />2. Explanation 2<br />12<br />
  28. 28. Mega-Carriers Trend <br />“Customers are asking more and more for global or pan- regional services and this, as well as the low prices for acquisition targets, is leading to a strong consolidation trend.[...] A lot of these purchases are part of a strategy to conquer the world''<br />Thijs Berkelder<br />Petercam(Amsterdam)<br />Reasons for Large Scale Economies:<br />-globalization and international presence<br />-offer full array of intermodal transportation capabilities<br />-possibility of IT integration<br />-offer tracking and tracing services<br />-easier to comprehend the extent of logistics costs<br />-Logistics Market status quo<br />2. Explanation 2<br />In-Practice Consolidation:<br />-Deutsche Post acquired DHL international(2000) and Exel(2005)<br />-Kühne&Nagel takes over ACR(2006)<br />-Maersk buying P&O Nedlloyd (2006)<br />-Deutsche Bahn acquires Stinnes AG(2003)<br />13<br />
  29. 29. Post-Acquisition Activities <br />Figures<br />Operating Profit<br />€27 million<br />-increase in Transport and Logistics revenue by 27.1%<br />-BAX contributed with € 2 629million<br />-shift in revenue in Asia/Pacific from € 816 million to € 2, 180 million<br />Operating expenses:<br />-€1, 905 million(cost of materials)<br />-€ 39million (personnel expenses)<br />-€274 million(other)<br />Further Course of Action:<br />-Schenker and Bax merge in Malaysia(2008)<br />-Offering full service for event logistics(2009)<br />Complete integration(2009)<br />-Charges against Schenker and BAX(2010)<br />III. Post-acquisition<br />Schenker's International Presence Growth<br />14<br />
  30. 30. References <br />Academical Articles/ business reports:<br />-S. Bologna, “Business strategies of the Third Party Logistics Service Providers”, University of Gdansk,<br />2007<br />-Deutsche Bahn AG, Deutsche Bahn Annual Report 2005, 2006<br />-Deutsche Bahn AG, Deutsche Bahn Annual Report 2006, 2007<br />-F. Green, W. Turner, S. Roberts, A. Nagendra, E. Wininger, “A Practitioner's Perspective on the Role of a<br />Third-Party Logistics Provider”, Journal of Business & Economics Research- June 2008, 2008<br />-C. Langley Jr. and Capgemini, “The State of Logistics Outsourcing. 2007 Third-Party Logistics(Results<br />and Findings of the 12th Annual Study)”, 2007<br />-H. LIN and G. GAO, “The Approaches of development Advanced Third Party Logistics Service for the<br />Medium-sized Third party Logistics Service Providers”, School of Economy&Management, Shanghai,<br />2009<br />-B. Schmidt, “The dynamics of M&A Strategy. Mastering the Outbound M&A Wave of Chinese Banks”,<br />2010<br />-A. Reagan, J. Song, “An Industry in transition: third party Logistics In the Information Age”, Institute of<br />Transportation Studies and Department of Civil & Environmental Engineering, University of California,<br />2000<br />Web sites:<br />Article: “Eye for Transport”(3PL news portal), “Geologistics, Schenker and BAX Global settle US<br />Antitrust case with US$24m”(October, 2010) retrieved from:<br /><br />us24m<br />Article: “Deutsche Bahn at a glance”(2009) retrieved from:<br /><br />Article: “2010 top 10 international logistics companies list”(2010) retrieved from:<br /><br />Article: “Schenker, Inc. and BAX Global Complete Integration”(March, 2009) retrieved from:<br /><br />11799993-1.html<br />Article: Logistics Asia Magazine, “Schenker, BAX Global merge in Malaysia”, Logistics Insight<br />Asia(January, 2008) retrieved from:<br /><br />Article: STEPHANIE STOUGHTON, “Deutsche Bahn to Buy BAX Global Division”(November,<br />2005),The Associated Press, retrieved from:<br /> content/article/2005/11/16/AR2005111601497.html<br />Article: Bloomberg- Business and Financial News, “Deutsche Bahn to Buy Brink's BAX for $1.1 Billion<br />(Update3)”,(November, 2005)retreived from:<br /><br />pid=newsarchive&sid=aGTrp5hIMEgU&refer=top_world_news<br />References<br />15<br />
  31. 31. 16<br />Discussion Questions<br />Imagine you were a manager at BAX Global. How would you feel about the acquisition?<br />Ignore the proposed theoretical frameworks for the acquisition. In your own opinion, what were the reasons for it?<br />Do you think that the acquisition was a good decision?<br />