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Andersen Consulting Announces Results of Automotive Study

3 December 1999

Andersen Consulting Announces Results of Automotive Mergers And Acquisitions Study

    Still 'Eat or Be Eaten?'  Tier Ones Enter Post-Merger Integration Era

    DETROIT, Dec. 2 -- Andersen Consulting today announced the
results of a recently completed five-year study on automotive mergers and
acquisitions (M&A).  Analyzing the impact of M&A on company performance,
Andersen Consulting studied more than 25 of the top independent automotive
supplier companies globally.  While this aggressive consolidation continues,
research shows that in 1997 and 1998, median shareholder returns for more-
active acquirers (those that made six or more acquisitions between 1992 and
1997) fell below that of less-active acquirers for the first time since 1992.
    The study isolates three major areas of explanation for diminishing
shareholder returns as a result of mergers and acquisitions in the last five
years, including:
    * Rushed due-diligence:  Many senior automotive industry executives
      reported an inability to adequately understand the potential for
      operational synergies and cultural compatibility.
    * Rushed integration:  Andersen Consulting researchers found companies
      often fail to take the necessary six to 18 months to concentrate on
      integrating purchasing, reducing costs and locating synergies across new
      business units.  These companies are less successful in the M&A process
      than consolidators who pause to "digest" the new acquisition.
    * Changing M&A climate:  Over the five-year period of the Andersen
      Consulting study, several factors affected the evolution of mergers and
      acquisitions, including an increase in deal size and rising price
      premiums for acquired companies.

    "We continue to see an increase in automotive mergers and acquisitions,
and in the average dollar value of these deals, but that trend may soon
change," said Randy Barba, partner, Andersen Consulting Automotive, Industrial
and Transportation (AIT) group.  "It isn't clear whether suppliers will
ultimately create value through consolidation; however, I believe OEMs will
continue to buy components in traditional ways, particularly for legacy
platforms and plants."
    Andersen Consulting also points to managerial solutions for easing the
integration of M&A activity, including increased pre-deal identification of
synergies, and the speed and effectiveness of integration following the deal.
Together, these and other factors may impact the overall success of future
automotive mergers and acquisitions.
    The Andersen Consulting Automotive, Industrial and Transportation (AIT)
group partners with the world's largest automotive OEMs, suppliers and
industrial equipment manufacturers to deliver value and provide financial
management and business solutions.  The company links people, processes and
technologies to strategies through its expertise in the areas of mergers and
acquisitions, product differentiation, customer relationship management,
channel management and eCommerce.  Andersen Consulting is an $8.3 billion
global management and technology consulting organization whose mission is to
help its clients create their future.  The company employs 65,000 people in 48
countries, including more than 4,000 AIT employees, and can be found on the
Internet at http://www.ac.com .