Once merged arcelormittal would have annual

This preview shows page 16 - 19 out of 30 pages.

Once merged, ArcelorMittal would have annual production capacity of 110 million metric tons of steel (or 9.7 per cent) of the global output of 1.132 billion tons in 2005. The combined entity held no threat of monopoly because the top-10 steel producers together held only 26 per cent of the global capacity. The 11 June 26, 2006, €1 = US$1.26
This document is authorized for use in educational programs at Birla Institute of Management Technology, until September 28, 2016. Use outside these parameters is a copyright violation. Page 9 9B10M001 largest of the 10 now held a little less than 10 per cent of total global capacity despite being three times larger than the second largest company. The industry was still fragmented, with room for consolidation. ISSUES IN AUGUST 2006 GMB had provided four principles to guide integration: 1. Bifocal vision: The integration team would focus on optimizing the combined entity ArcelorMittal, not the two companies individually. In doing so, it would keep an eye not only on short-term cash generation but also on fundamental multi-year improvements aimed at creating enterprise value. 2. Keeping it simple: Integration would be a seamless extension of daily life. The responsibility for delivering targets would lie with line managers. The integration team would use the ongoing budget and planning cycles in each company to drive the timing of integration. 3. Focus: The integration would be driven around four “core” processes: budgeting and control, capex planning, operational control and human resources (HR). 4. Best of both: Because ArcelorMittal was a merger of equals, the team would seek the best-in-class processes in each company to incorporate into the combined entity. Granboulan and Scotting needed to deliver an efficient and rapid integration, while also securing the day- to-day business. The top-down financial target of synergies amounting to $1.6 billion, provided by GMB, was based on learning from earlier acquisitions at both Mittal and Arcelor. Granboulan and Scotting needed to validate this number from within ArcelorMittal, from the bottom up. The involvement of line managers would ensure their buy-in, which was essential to formulating and implementing the action plans for delivering the synergies. Initially, the merger would primarily affect only those working in procurement, sales, marketing and the corporate center. Some time would pass before the impact of the merger trickled down to operations because the plants had limited overlap. The time lag would thus create uncertainty for a large swathe of the combined entity. Given the deadline of six months to achieve integration, Granboulan and Scotting needed to act quickly to decide on the composition of the integration team, bring the team together, identify the role of the integration office and determine the essential characteristics of the integration process.
This case study has been based on actual experiences, but the description of specific events may have been adapted to facilitate teaching, discussion and debate of various challenges that managers may face under such circumstances.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture