Bmw’s Purchase of Mg Rover

INTRODUCTION

International automobile industry has seen a lot of mergers and acquisitions for last two decades, as companies were trying to grow, get access to new technologies, achieve increasing economies of scale, as well as entry new markets and segments through becoming full-line producers. However, in fact, auto mergers and alliances failed at least as often as they succeed.

MG Rover was a company that had been formed through a serious of mergers and acquisitions with the aim to create a large corporation that can compete in the automobile industry. It was founded in 1877 and undergone through some painful restructuring initiatives until it declared a bankruptcy on April 08, 2005. Historically, British government had an idea of ‘national champions’ approach in car manufacturing industry, which led to bringing together several smaller successful car manufacturers (Austin, Morris, Triumph, Rover and Jaguar) into one giant company, that eventually was called MG Rover.

This paper will focus on the Rover’s takeover by BMW as this was one of the dramatic mistakes happened to the company, which led to the decline of the British automobile industry as a whole.

BMW’s PURCHASE OF MG ROVER

Rover’s acquisition by BMW was one of the major disasters that happened to a company. It happened when British Aerospace (the previous owner of Rover) sold the company in an attempt to raise cash and avoid bankruptcy after the failure of its regional jet business. The deal between British Aerospace and BMW was signed in early 1994. Combination of BMW and Rover appeared to be a winning one, as both companies could benefit from it. For Rover this was a very good opportunity to get an access to technical innovations and financial resources, whilst BMW could benefit by utilization of Rover’s mass production capabilities. In particular, the prestigious four-wheel-drive Land Rover division could help BMW to compete with Mercedes, Ford and GM - companies that had developed their own...