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Apollo Tyres and Cooper Tyres Buyout: The Deal Gone Sour, What Next for Apollo Tyres?

CASE STUDY, STRATEGIC MANAGEMENT
Institute of Public Enterprise , 7 pages

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Apollo Tyres and Cooper Tyres Buyout: The Deal Gone Sour, What Next for Apollo Tyres?

 

The deadline, December 31st 2013 was fast approaching for both Apollo Tyres Ltd. (Apollo) and Cooper Tire & Co (Cooper) since Apollo agreed to buy Cooper to strengthen its presence in both North America and China. Apollo could sense a huge treasure pot in Cooper as it had a huge presence in North America, China and parts of Europe as well. However, the treasure pot turned out to be an albatross neck for Apollo as the senior management team seemed to have hurried itself towards the decision to buy the US-based Cooper Tire & Rubber Company by overvaluing the latter’s potential. The attempts by Apollo to get the deal revised hit a dead lock as Cooper remained adamant and filed a complaint in Delaware Court against Apollo for enforcing the buyout at the earliest. The Delaware Chancery Court did not find merit in the argument of Cooper and found that Apollo did not breach any agreement.

The ruling was a setback to Cooper, which wanted to compel Apollo to buy Cooper through the judicial ruling. Even an appeal by Cooper tyres against the rule in the Delaware Supreme Court was dismissed, which forced Cooper tyres management to come to terms with reality. With the court ruling by its side, Apollo waited for the move from Cooper tyres. With an unfavorable decision stacked against the company, the CEO of Cooper tyres, Roy V. Armes believed it to be prudent to call off the deal. On December 30th 2013, just one day before the conclusion of the agreement, had everything gone well, Roy V. Armes called off the deal stating the Apollo tyres had failed to find finance for the transaction...........

Teaching Note Preview

Apollo Tyres and Cooper Tyres Buyout: The Deal Gone Sour, What Next for Apollo Tyres?

 

Synopsis

The case study was written to analyze how the intent of acquiring a company went wrong in the backdrop of less transparency between the stakeholders. The case study discusses the issues pertaining to the due diligence process which is very important for any company before taking a major decision like acquiring another company. The case study also brings forth issues pertaining to the inadequacy of foresight of leadership in the entire process as the entire deal was expected to be closed in a span of six months.

The case study also brings forth issues pertaining to the supplier who could cause havoc in the process of merger or acquisition in case the former is not happy with the deal. The case study brings into limelight how the Chinese supplier of Cooper tires could successfully place the spanner in the deal, completely halting the entire process. The case study is also a reflection of how human resources issues can put a break on the entire process of the deal, if the apprehensions are not handled appropriately and addressed with firm commitment from the potential acquirer.

During the discussion, the participants may also discuss how the mergers and acquisitions have gone wrong in many instances and a good example is the acquisition of Ranbaxy Laboratories Limited, an Indian multinational pharmaceutical company by Japanese pharmaceutical company Daiichi Sankyo. The class may also discuss how the exemplary and smooth acquisition of Ranbaxy Laboratories Limited by Sun Pharmaceuticals Limited.

Prerequisite Conceptual Understanding

The students or the participants should be encouraged to read the background material which enhances the understanding of the application of the concepts from a broader and wider perspective.

  • • Michael A. Hitt, et al., Strategic Management, Cengage Learning, 2012
  • • Marion Devine, “Successful Mergers”, The Economist, 2004
  • • Scott A. Christofferson, et al., “Where mergers go wrong”, McKinsey Quarterly, May 2004

 

Expected Learning Outcomes

  • • Understand the nuances pertaining to the decision to buy Cooper tires by Apollo tyres and the implications of such a buyout for both the companies
  • • Debate role of Apollo tyres and Cooper tires in aggravating the problem to such an extent that the court had to intervene between the two companies
  • • Discuss the role of the Chinese partner of Cooper tires and the workers in US in putting brakes on the entire deal going smoothly

 

Case Positioning and Setting

This case study can be suitably used in MBA Program in Strategic Management course in Merger and Acquisition module

Assignment Questions

I. What are the advantages for Cooper tires and Apollo tyres from the deal?
II. What could be the reasons for the Chinese partner for not parting with the financial information?
III. ............

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Abstract


The case study engages the participants in the discussion pertaining to problems faced by an organization in the process of global expansion. The case study brings in how lack of due diligence would result in inadequate execution of the process of acquisition and the extent organizations spar to defend their position. The case study helps the participants to understand the nuances of decision making with reference to culture, expansion, acquisition, etc. The case study also poses the questions pertaining to how deals go wrong when caught unawares and sensitizes the participants about the implications of poor due diligence and emergence of unforeseen conditions, marring the entire process of undertaking certain activities.



Pedagogical Objectives

  • To understand the importance of due diligence in acquisition of a company
  • To discuss the issues arising out of cross-cultural expansion in the light of clash of opinions and views
  • To discuss and debate the extent to which a deal can go sour if the issues arising are not understood and addressed properly

Case Positioning and Setting
This case study can be suitably used in MBA Program in Strategic Management course in Merger and Acquisition module





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- Case Study
- Teaching Note (**ONLY for Academicians)
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