Miele's Cross-Border Acquisition of Komie Ltd. (Korean Distributor)
KDI School of Public Policy and Management, Korea
Volume 5: 2010, pp. 5-28; ABSTRACT
In the acquisition of companies, the valuation of a cross-border target is perhaps the managerial analytical skill that global managers may want to learn and understand more than any other. Rather than rely entirely on financial specialists, global managers would prefer to know how to do it themselves for at least three reasons. First, understanding valuation is critical for a successful cross-border acquisition because it eliminates the problem of paying beyond synergy potential. Second, since managers can understand the risks of a cross-border acquisition better, such risks can be handled more appropriately. Third, valuation has become a prerequisite for meaningful participation in a company's resource-allocation decisions. This paper introduces assets-, market-, and cash flow- based valuation methods for a cross-border company and applies them to the case of Miele Korea. In 2005, Miele & Cie, KG, a global home appliances manufacturer headquartered in Germany, intended to enter the Korean market by acquiring a subsidiary of Ssangyong Corporation, Komie Ltd., the exclusive distributor of Miele products in Korea since 1990. The general manager of Miele wanted to know the maximum price they could offer for the successful deal-making of the Korean company.