A Study on Consolidation of Value After Corporate Acquisition:Take Hota Industrial MFG (1536) As an Example

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Title:	A Study on Consolidation of Value After Corporate Acquisition:Take Hota Industrial MFG (1536) As an Example
Authors:	Tsang-Hai Lin
Contributors:	Department of Business Administration
Keywords:	merge of equals;five force analysis;cluster effect;market segmentation
Date:	2005
Issue Date:	2009-11-17 11:17:07 (UTC+0)
Publisher:	Asia University
Abstract:	According to the statistics released on March 8, 2005, by Taiwan's Ministry of Economic Affairs, since the Corporate Acquisition Law was promulgated and took effect in February 6, 2002, there were a total of 288 cases of corporate acquisition worth NT$151.89 billion in Taiwan. The year 2004 saw the highest peak of the statistical period in which 218 cases took place, worth NT$72.53 billion. Soon after that, in 2005 corporate acquisitions occurred in succession, such as BenQ acquiring Simens, Wan Hai Group acquiring United Epitaxy Company with stock options; and in the wake of the financial merge policy, Shin Kong Commercial Bank acquiring Macoto Bank, China Man-Made Fiber Corporation acquiring Taichung Commercial Bank, King's Town Construction acquiring Tainan Business Bank, etc. Besides, in traditional industries, Chia Hsin Cement Corp., for instance, branched out by setting up Chia Hsin Cement Asset Management Co. in a bid to reinvent itself and enhance its fixed asset turnover. All of this adequately reveals these firms' acquisition ensemble logic by drawing on the formulae of 1+1>2 and 2-1>1 in quest of the maximum business performance. It is estimated that there is a chance to create a new peak in 2005 on the island. How to consolidate tactic practices to achieve a rate of return on investment two times over the capital invested, then, has become an issue for current business management. Successful business acquisition, however, is not easy after all, and this phenomenon started not very long ago on the island. The case in point is Hota Industrial MEG. Co. (HIMC). Ever since the acquisition of stock options and operation transfer in 1990, not only has the company gone listed successfully, but it itself also is the only exporter in Taiwan which sells automobile parts and components to the new car markets in Europe and America. Its operating income has grown from the over NT$60 million before the acquisition to NT$1,548 million in 2004. By participating in the individual case observed and conducting in-depth reviews with the key figures in consolidation, through literature review and verification of various kinds of competition tactics and thinking logic, this study concludes that the successful consolidation of the individual company lied in its transition strategy of re-orientation, in its establishment and development of a complete system required by listing, and in the cluster effect induced by the development of the HIMC Suppliers Interaction and Exchange Association. Foreseeing the trend of the market, HIMC focused on producing auto parts instead, thereby activating a cross-straight labor division framework. Going listed helped expand the company's sales in the EU and American markets, and the company also created a complete 8-cycle system for internal control. Furthermore, due to the development of the HIMC Suppliers Interaction and Exchange Association, the cluster effect has fermented, forming a potential entry obstacle. As a result, this study attempts to verify competition strategy and logical thinking through an individual case and proceed to infer key causes to the success in order to serve as a reference for other consolidation strategies after acquisition.
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