Business expert voices concerns over Lafarge mega-merger
AN expert from Warwick Business School has questioned the wisdom of the deal announced yesterday which will see Swiss cement firm Holcim buying French rival Lafarge to create the world’s biggest cement maker.
Christian Stadler, Warwick Business School associate professor of strategic management, researched Lafarge as part of a ten-year study into long living companies.
He said: “I can see the logic in this merger, but there are big question marks as to whether a merger on this scale will work.
“There are lots of examples of mega-mergers destroying value rather than enhancing it. A prime example comes from the car industry when Daimler and Chrysler merged, both companies lost billions of pounds before they agreed to part again.
“When BP merged with Amoco in 1998 they had many problems in terms of increased complexity and duplications, it certainly affected BP’s performance for a long time.
“Lafarge merging with Holcim makes a lot of sense in terms of increasing scale, because cost is a big problem in that industry, it will also increase global reach, but neither have done a mega-merger before and the challenges can be tremendous when it comes to implementation.
“It is the processes, the small details that you can’t put on paper, and the clash of cultures. Lafarge has a strong French culture, while Holcim is rooted on the Germanic side of Switzerland.
“Both companies have experience in acquisitions, Holcim acquired Aggregate Industries in 2005, while Lafarge bought Orascom in 2007, but a merger on this scale is a different proposition altogether and will create many new challenges.”
Stadler believes the deal has a good chance of being passed by competition commissions in the various regions.
“There are overlaps in North America and in Europe which will mean they will have to do divestments to overcome concerns about cartel building and price fixing, but I think they will able to respond to get this sorted,” he said.
Holcim’s acquisition of Lafarge will create the world’s biggest cement maker, worth around £33bn with combined sales of £26.5bn.
The two firms said they would sell some assets to ease competition concerns.
The combined firm will be based in Switzerland.
