Chapter 7: Merger and Acquisition Strategies 209
A Merger of Equals: Making It Happen Isn’t Easy!Strategic Focus
Founded in France in 1833, Lafarge became a successful global
industrial company specializing in three product areas—cement,
construction aggregates, and concrete. The other party in a
“merger of equals,” that required well over a year to design and
bring to the conclusion the firms intended, is Holcim, a materials
and aggregates company that was founded in Switzerland in- Holcim’s global ambitions were obvious early when the
firm expanded into France and throughout Europe and the
Middle East during the 1920s. This expansion resulted in long-
term and active competitions between Lafarge and Holcim.
In April of 2014, Lafarge and Holcim announced that they had
settled on terms that would result in a merger of equals and that,
accordingly, they were prepared to seek regulatory approval of the
proposed transaction. Obtaining such approvals was anticipated
to be challenging given that the diversity of the independent
firms’ global operations meant that 15 or so different jurisdictions
could potentially object to a merger between the firms.
What influenced Lafarge and Holcim to want to merge
as coequals given the difficulties of doing so? The prevailing
thought is that mergers of equals are always more fragile to bring
about in light of the need to effectively meld what are commonly
two different cultures and specify the leadership structure that
will be used to operate the newly-created firm. These issues are in
addition to a core one of identifying the financial aspects of the
transactions that will appeal to each firm’s shareholders.
In spite of challenges such as these, Lafarge and Holcim
thought that merging as equals would create a firm with enhanced
and significant competitive abilities. Leaders of the two firms con-
cluded that together LafargeHolcim, the agreed upon name for
the combined firm, would have the most balanced and diversified
portfolio in the building materials industry. The firms anticipated
that integrating their operations would generate approximately
$1.5 billion in annual cost savings. In an overall sense, company
leaders thought that the anticipated positive benefits of merging
would come about primarily as a result of being able to meld
Holcim’s marketing strengths with Lafarge’s innovation capabilities.
Perhaps not unexpectedly, the transaction proposed
between Lafarge and Holcim almost fell apart. This happened
in March of 2015 when Holcim’s board, “after first agreeing to
a $44 billion merger with Lafarge, rejected the deal’s terms as
undervaluing Holcim. Corporate leadership also was a concern.”
This objection surfaced after the firms had received regulatory
approvals from key jurisdictions, including the European Union,
India, and the United States, regarding the number of divesti-
tures of units they would make to prevent them from having
highly concentrated positions in different global markets.
At the core of the dispute was the conviction among Holcim’s
board members that the financial terms should be more attrac-
tive for their shareholders and that Lafarge’s CEO should not
be appointed as CEO of the newly-created firm. One reason for
these convictions was that in the nearly one year since terms of
the initial merger were agreed upon, Holcim’s “operating perfor-
mance and share price had outperformed those of Lafarge.” After
restructuring the financing of the transaction and agreeing that
a different CEO would be appointed for the new firm, 94 percent
of Holcim’s shareholders approved the transaction’s terms.
After dealing with challenges, LafargeHolcim became a firm
that was a merger of equals in July 2015. Speaking to the future,
one board member said that “this isn’t just another merger. It is
an opportunity to create a new Number One in our industry.”
Assuming that this merger of equals achieves the potential some
anticipate, all of the work required to bring it about will be vali-
dated. Going forward though, implementation challenges may
come into play, at least in the short term, given the potentialincompatibility of Holcim’s decentralized management approach
with the more centralized approach that characterized Lafarge
when it competed as an independent firm. Those leading the
integration processes associated with the details of combining
the two firms will need to pay close attention to this issue.
Sources: 2015, Holcim and Lafarge obtain merger clearances in the United States
and Canada paving the way to closing their merger, Holcim Home Page, http://www.holcim.
com, May 4; 2015, Lafarge to cut 380 jobs ahead of merger with Holcim, Global
Cement, http://www.globalcement.com, May 19; M. Curtin, 2015, Holcim-Lafarge shows
‘merger of equals’ doesn’t equal smooth sailing, Wall Street Journal Online, http://www.wsj.
com, March 16; M. Curtin, 2015, A ‘merger of equals’ is more fragile, Wall Street Journal
Online, http://www.wsj.com, March 16; J. Franklin, 2015, Holcim and Lafarge name post-
merger board candidates, Reuters, http://www.reuters.com, April 14; J. Revill, 2015, Holcim
moves step closer to Lafarge merger, Wall Street Journal Online, http://www.wsj.com, May 8.FRANCK FIFE/AFP/Getty Images
Shown here left to right shaking hands during an announce-
ment of their firms’ intention to merge are Rolf Soiron,
the chair of Holcim’s board of directors and Bruno Lafont,
CEO of Lafarge SA. Later, Eric Olsen was selected as the
CEO of the newly formed firm, called LafargeHolcim.