Panasonic Moves to Consolidate Past Acquisitions

question 105

Essay

Panasonic Moves to Consolidate Past Acquisitions

• Minority investors may impede a firm’s ability to implement its business strategy by slowing the decision making process.
• A common solution is for the parent firm to buy out or “squeeze-out” minority shareholders

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Increased competition in the manufacture of rechargeable batteries and other renewable energy products threatened to thwart Panasonic Corporation’s move to achieve a dominant global position in renewable energy products. South Korean rivals Samsung Electronics Company and LG Electronics Inc. were increasing investment to overtake Panasonic in this marketplace. These firms have already been successful in surpassing Panasonic’s leadership position in flat-panel televisions.

Despite having a majority ownership in several subsidiaries, Sanyo Electric Company and Panasonic Electric Works Company that are critical to its long-term success in the manufacture and sale of renewable energy products, Panasonic has been frustrated by the slow pace of decision making and strategy implementation. In particular, Sanyo Electric has been reluctant to surrender decision making to Panasonic. Despite appeals by Panasonic president Fumio Ohtsubo ’s for collaboration, Panasonic and Sanyo continued to compete for customers. Sanyo Electric maintains a brand that is distinctly different from the Panasonic brand, thereby creating confusion among customers.

Sanyo Electric, the global market share leader in rechargeable lithium ion batteries, also has a growing presence in solar panels. Panasonic Electric Works makes lighting equipment, sensors, and other key components for making homes and offices more energy efficient.

To gain greater decision-making power, Panasonic acquired the remaining publicly traded shares in both Sanyo Electric and Panasonic Electric Works in March 2011 and plans to merge these two operations into the parent. Plans call for combining certain overseas sales operations and production facilities of Sanyo Electric and Panasonic Electric Works, as well as using Panasonic factories to make Sanyo products.

The two businesses were consolidated in 2012. The challenge to Panasonic now is gaining full control without alienating key employees who may be inclined to leave and destroying those attributes of the Sanyo culture that are needed to expand Panasonic’s global position in renewable energy products.

This problem is not unique to Panasonic. Many Japanese companies consist of large interlocking networks of majority-owned subsidiaries that are proving less nimble than firms with more centralized authority. After four straight years of operating losses, Hitachi Ltd. spent 256 billion yen ($2.97 billion) to buy out minority shareholders in five of its majority-owned subsidiaries in order to achieve more centralized control.
-When does it make sense to buy a minority interest, a majority interest, or 100 percent of the publicly traded shares of another company?

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