Automotive

Strategic acquisition of a leading U.S. automotive supplier by a Chinese venture

A global Chinese automotive manufacturer and a Chinese International Investment & Development company formed an investment venture to acquire the assets of a leading steering and halfshafts U.S. automotive supplier. The strategic acquisition of this automotive supplier, with $2 billion revenue and 8,000 employees, will help the Chinese automotive venture to become a leading supplier with state of the art technology and marquee brand. The acquisition will provide the U.S. automotive supplier access to new capital to grow the business in the lucrative Chinese and Indian automotive markets, in addition to competing better with current market leaders.

Challenge
A.T. Kearney helped the client work through several key due diligence issues and coordinate the deal-making apparatus. Because the OEM seller was interested in ensuring that intellectual property was sufficiently protected in a Chinese purchase, establishing requisite trust was a significant challenge. Besides, with other Asian companies competing for the deal, the client had to develop its unique value proposition to drive negotiating advantage. Finally, within just a few weeks, the operational due diligence team had to visit multiple plants and engineering centers to assess the manufacturing state of the U.S. automotive supplier.

Approach
Throughout this due diligence engagement, A.T. Kearney served as management’s strategic advisor on matters relating to buyer-seller team coordination and completion of operational due diligence activities. The team also conducted detailed research and assessment activities:

Industry and competitive analysis — conducted a global assessment and developed an industry forecast of 5-year market evolution, plus assessment of the target company versus competitors
Market positioning — evaluated the target’s position in U.S., Europe, and Asia markets, and reviewed the target’s book of business to ensure growth success
Manufacturing and tech center review — assessed plants around the world and evaluated engineering and management capabilities to evaluate current state
Customer and supplier health check — interviewed the target’s key customers and suppliers to determine state of the relationship
Transition services agreement — reviewed target’s separation planning with its parent company, and developed risk mitigation recommendations, especially to avoid cost escalation of the acquisition
Deal management / PMO — coordinated all activities with legal, HR, investment banking, environmental, tax / finance, and acquisition teams to drive strategic focus

Results
The client was able to successfully complete deal negotiations within the aggressive timeframe. In particular, the key intellectual property issue was sorted out to the mutual benefit of buyer and seller, and did not escalate into a major hang up. Additionally, the client gained a comprehensive advisory report on the company’s manufacturing and engineering assets, in addition to identified customer and supplier risks.