Pirelli vs Continental

Type :

Case study

Pages :

6 pages

Format :

.doc

Published date :

01/16/2009

Category :

Business & market

Sub category :

Business strategy

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Summary :

Introduction.
Summary.
The reasons why Pirelli wanted to merge with Continental?
The shareholders meeting.
The reason of the failure.
Conclusion.
Bibliography.

Abstract

Around 1990, due to a substantial number of tyre manufacturers on the market, pirelli SpA though of taking over the German tyres company named continental AG. And after a long merger attempt which lasted more than two years, it finally ended with the sale of the continental shares, owned by pirelli, to German institutions. This case focuses on the fact that many factors can affect a decision-making for a merger, such as specific laws or various pressures from main actors on the market. The case study will try to retail the story of pirelli's takeover attempt, the reasons for its final failure, but also the importance of the shareholders' meeting in the decision-making. This case deals with the severe competition within the global tyre market which really begun during the late 1980s, with the carry out of transnational mergers between several competitors. In 1978, the five biggest tyre manufacturers owned 55 % of the tyre global market. Because of an over-capacity in this market, merger seemed to be essential for companies such as pirelli, continental, in order to obtain more market shares and therefore enhance their position on the global market. One of the best ways to convince small companies to merge is to keep low prices until these small manufacturers cannot afford the costs anymore and decide to be bought out by one of the major competitors.