Case Overview

• The case examines the first-ever overseas acquisition by an Indian automobile company.
• It gives a detailed account of the acquisition of Daewoo Commercial Vehicles plant by Tata
Motors, world's sixth largest commercial vehicle manufacturer.
• The case describes the acquisition process along with the financial aspects of the deal.
• It explores the synergies arising from the acquisition.
• It also examines the efforts made by Tata Motors to integrate the acquired company. Finally, the
case explores the future of Tata Motors in the light of the acquisition.
• DCVC is hesitant to sell to a foreign company. The TM team spends a lot of time and effort in
educating DCVC about TM and accommodating some of the trade union demands. TM is
successful in creating a positive perception and becomes the preferred bidder for DCVC. It
manages to acquire DCVC for USD 102mn much below its previously anticipated price of USD
203mn.
4 Strategies that are required to enter a new
market
• Merger & Acquisition
• Solo (Greenfield)
• Joint Venture
• Export
Deal rationale (Strategic fit)
• Opportunity to hedge cyclicality of domestic CV business
• Enhance product portfolio and expand product range
• Managing operations in developed quality sensitive markets
• Access to technology and complementary product range
• Access new markets – Korea/ China
• Allow TM to save up to 2 years and considerable costs in the
development of its “World Truck” program –
• reduce development time and mitigate financial and marketing risks.
Problem In M&A
• DCVC preferred to be acquired by a European firm with technological
and financial resources that DCVC required.
• The DCVC union demanded no layoffs for the first 3 years after
acquisition.
How TM strategically mitigated these problems
• Structured program to educate DCVC about India and the Tata Group
• TMs communication was managed taking into consideration the more
hierarchical structure of DCVC .
• TM’s communication was focused on 2 key messages:
1. Strong global connectivity
2. Strong corporate governance, good reputation for ethical
management along with long term success despite being a family
owned business.
• Matching the work ethic of Korean companies.
• Agreeing to union demands after careful evaluation.
Overall Evaluation :
The M&A was hailed as a great success and a model for future acquisitions.
The combination of TM &DCVC created the fifth largest manufacturer of
medium and heavy trucks in the world. A number of events took place post
acquisition:
• In 2005, DCVC launched a new range of medium trucks, its first major
product in a decade and the first time the firm offered products outside the
heavy truck segment
• In 2004 exports doubled and in 2005 accounted for 66% of total heavy
truck exports from Korea to primarily South Africa and Middle East.
• No sign of union unrest and DCVC’s transfer to new owner had been almost
painless
• TM launched a new assembly facility in India for DCVC‟s Novus Truck
• Financial performance was strong and improved over the years as can be
seen below. Exports saw a growth of CAGR of ~86% from FY05-FY07.