Danfoss Motion Controls acquiring Holip (B)
Danfoss Motion Controls purchased Holip in November 2005. After acquisition, Danfoss used a dual-brand strategy and Holip was left as an independent business with its own sales and distribution network. The lean cost structure was maintained and accounting, IT, HR and manufacturing were not integrated with Danfoss’ to any significant degree. Financial reporting was required to be consistent with Danfoss’s standards; employee benefits were improved, and plants were brought up to the minimum environmental and safety standards.
The most important synergy came from joint procurement of components and Danfoss also benefited from Holip’s low cost production capability by transferring certain Danfoss-branded product lines to Holip. Few synergies were achieved in R&D. Competition in the good enough segment intensified and the growth of the Holip-branded line had slowed. In November 2008 Erhardt Jessen, a vice president of Danfoss Motion Controls and chairman of Holip, had to recommend what Danfoss should do with the Holip business and whether the dual brand structure should be continued. The (B) case describes the acquisition and the developments between 2005 and 2008.
Acquiring a low cost competitor is one major way a premium brand multinational manufacturer can enter the “good enough” segment of a Chinese market. This case demonstrates some of the challenges that management faces in trying to capture the full potential of having a low cost business unit in its portfolio. Here there are particular issues with respect to dual branding, the degree of integration between Danfoss and the acquired company, and the retention of the key Chinese managers in the acquired business. Depending on the course’s learning objectives, the Danfoss-Holip case series can be taught either by using the A case followed by the B case, or by using the A1 and A2 cases followed by the B-case.
November 2005 – November 2008
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