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7. Managing IS integration in four M&As at Trelleborg AB

7.4 Case C: CRP Group

In January 2006 Trelleborg, through the Engineered Systems business area, completed the SEK 950 M purchase of CRP Group from Barclays Private Equity. CRP Group was an engineering company with annual sales of slightly more than SEK 1,000 M and 500 employees, primarily in the UK and the US. The company, which was founded as late as in 1974, had at the time of deal five UK- and US-based production units.

in the UK and the US. Sales and marketing offices were located in important offshore areas.

Table 7.2 Six dimensions of IS integration in the Dynaflex case

Dimension Description

Synergetic potential

Technical economies Marketing, production, logistics, experience Pecuniary economies Limited

Diversific. economies Potential growth Organizational Integration

Interdependency type Pooled Degree of Integration Preservation Integrated Activity Functional Intentions & Reactions

Friendliness/Hostility Collaboration

Reaction Low

IS Ecology

Infrastructural Moderate

Transactional Low

Informational Extensive

Strategic Low

Integration Architecture

Integration level Informational Integration structure Enterprise-Wide IS integration role

Proactivity Reactive

CRP’s operations related primarily to systems for the subsea sector of the oil and gas business. The company was active in systems for seismic surveys, drilling operations and subsea production, with solutions for deepwater flow assurance and buoyancy systems, as well as many specialized engineered polymer-based solutions. As a result of the acquisition, oil and gas related operations within Trelleborg were expected to increase with 7-8 percent of total group sales.

7.4.1 Dimension A: Synergetic potential

The purchase was said to make the Trelleborg Group a market leader on a global market (with some kinds of market definitions), but it did not lead to such a position that it would have significant impact on monopoly or monopsy economies. Rather, the deal was justified with the already profitable business of the acquired company as well as potential savings in marketing, sales and product development. The target company also represented diversification economies. It was said to have its business in a potentially growing market. Further, scrutinizing the business of the CRP Group, there was an apparent overlap with the business within Trelleborg. However, whereas Trelleborg had a strong presence in northern Europe, the CRP Group had similar business, but mainly in UK and US. CRP’s production

facilities were located in Skelmersdale (also head office) and Barrow-in-Furness, in the UK, as well as in Randolph and Canton, Massachusetts, and Houston, Texas, in the US. The M&A could thus be seen as a market extension with similar products but at different markets. The complementarity opened up for potential economies of scale in, for example, production, scheduling and logistics, but it was not the outspoken ambition to seek synergies within this area.

The CRP acquisition was a step into an attractive segment. We already had some business within this segment, but with CRP we at least tripled our precense in that segment. (LEO, 040408)

A late update in the CRP case is that Trelleborg is now seeking to further leverage synergies in the overlapping business. The business of CRP group was mainly in the offshore industry. Within Trelleborg, the already existent offshore business was mainly located to Trelleborg Viking, a Norweigian-based part of the Trelleborg group. Trelleborg Viking was established in 1896, and serves customers mainly in northern Europe from their location in Nedre Eiker, about 60 km west of Oslo. During 2007 an integration project started with the ambition to integrate Trelleborg Viking’s offshore-business into the newly created unit Trelleborg CRP. At the time of the writing this project has just commenced.

7.4.2 Dimension B: Organizational integration

The CRP group was left rather undisturbed after the purchase. The group was annexed under the Trelleborg umbrella as a new business unit, called Trelleborg CRP. Trelleborg had no ambition to leverage synergies related to production, scheduling, or logistics. Therefore the unit could be kept separate. However, it was not a pure holding approach that was taking place. The ambition was to integrate sales, marketing, and product development. Trelleborg also wanted the new division to culturally become a part of the group.

It is of course hard to put the finger on exactly what that would be, but we want of course CRP to take part of some Trelleborg spirit, whatever that might be. (JTP, 060411)

From a Trelleborg Group perspective, the management also wanted some control over what was going on in the business unit, although management of the unit would be highly decentralized. Trelleborg representatives expressed that the former CRP employees were surprised by the passive approach taken by Trelleborg after the deal was settled.

They expected more dramatic changes, drawing towards the absorption-alternative, than took place in reality. This was a manifestation of different corporate cultures, but as no extensive integration was expected, the cultures could be described as different, but not clashing. The norms and values never had to be confronted.

When it came to the integrated activities and their dependencies, the sales, marketing, and product development were considered to be functional activities with pooled dependencies.

The purchase of CRP Group was in judicial terms an acquisition and with the definition of acquisition applied in this text it also seemed like a typical acquisition – a takeover of a less powerful organization by a more powerful one. However, as in the Kléber case, development took a slightly different path with Trelleborg management, in many ways regarding CRP as an equal part and choosing “preservation” as the integration strategy. To further complicate the distinction between acquisition and merger in this case, with the integration of Trelleborg, Viking integration was turning out to be some kind of reversed absorption. The “acquired” unit was now absorbing operations of the

“acquiring” company.

Now that CRP and Viking are joined organizationally, it is natural that the initiative stayed with the former CRP management, simply due to its size. That part was some three to four times larger. (LEO, 040408)

This clearly highlights why it might be hard to distinguish between mergers and acquisition, and why theoretical developments foremost have been on the combined phenomena and avoiding the discussion of where to draw the line.

7.4.3 Dimension C: Intention & reactions

Peter Nilsson, Trelleborg’s CEO made a clear statement already in the press release following the closure of the deal: