With the Carlos Ghosn Scandal, many press articles wonder what the Renault-Nissan-Mitsubishi Alliance is exactly and what it will become.
In 2017, the Renault-Nissan-Mitsubishi Alliance was the world’s largest carmaker, tied with Volkswagen. In reality, the Alliance is anything but an integrated group. This alliance was born in March 1999, when the French carmaker Renault saved its Japanese competitor Nissan from bankruptcy by subscribing to 36.8% of its capital, which made Renault the largest shareholder of Nissan. Renault then put Carlos Ghosn at the head of Nissan with the purpose of restructuring it. It was an acquisition, but the word has never been uttered to avoid the risk of conflict always present in cross-border deals. Nissan was not “taken over” by Renault. From the outset, Renault wanted to forge an alliance of equals, contrary to the win-lose strategy imposed by Daimler on Chrysler, to mean a balanced relationship between two partners and oriented towards performance. It was in 2002, when Nissan had already recovered, that the idea of a cross-ownership between the two manufacturers was born. Renault increased its stake to 43.4% of Nissan, while the latter took 15% of the French carmaker. And in 2003 was created the Alliance (with a capital A) Renault-Nissan, a Dutch company, owned equally by Renault and Nissan to oversee and coordinate relations and rapprochement between the two groups. Mitsubishi joined the alliance in 2016, after it was saved by Nissan this time, which bought 34% of its capital.
By further standardizing their vehicles, the three companies share factories, develop common assembly platforms and make purchases together, with significant component cost savings and engineering costs in the absolute and intangible respect of everyone’s brand. In other words, the cost savings are substantial and now structuring for the three groups. There is no way back: a divorce would be a financial nightmare.
Chapter 15 of the book “Investment banking explained” presents the three keys for an M&A transaction that creates value: to have a strong strategic rationale for the deal, to document the assumptions underlying the strategy and to effectively integrate the two businesses and their cultures. The process was a disaster in the Daimler-Chrysler deal.
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Michel Fleuriet was the Harry W. Reynolds International Adjunct Professor of Finance, Wharton School of Finance at the University of Pennsylvania, and the founder of Université Paris-Dauphine’s master’s program in investment banking. Prior to his career in academia, Fleuriet served as chairman of HSBC France, chairman and head of investment banking at Merrill Lynch France, and CEO of Chase Manhattan France. He was for many years a professor of finance at HEC and holds a PhD in law from the Université Panthéon-Sorbonne and a PhD in finance from Wharton. His principal experience is in corporate finance and mergers and acquisition.