Ciba had a reputation for producing high-value effects for its customers’ product. Their mission
was to be the global leader and they were committed to be number one in the market. They seeked innovation to enhance the performance of their products. Their core value was to produce and sell specialty chemicals and enhances the durability and performance of their products throughout the world.
Ciba was the leader in biological and chemicals group. They were dedicated to meet the needs in healthcare, and agriculture. Ciba made themselves the corporate giant by introducing several new lines of product in the industry such as Additives, Colors, Consumer Care, Performance Polymers and Water Treatment.
Ciba drove on the concept of Value Based Management. It seeked the evaluation of strategic projects, portfolio adjustment, financial reporting, compensation, incentives and share investment plans. Ciba entered the strategic alliances and joint ventures to start selecting portfolio adjustments. The company also provided shareholder’s with regular and more comprehensive financial information. Then, Ciba introduced incentive share plans and variable pay schemes to ensure that the interests of shareholders were tightly linked.
The core dimension was to create a stronger infrastructure, expand the company aboard, and maximize the quality and durability of their product. And most importantly, Ciba created a global organizational structure, business support center, efficient chain supply, cross functional team, etc.
3. What effect did the acquisition have on Ciba's balance sheet and performance?
Ciba net present value remained on the positive side. While referring to Ciba’s Annual Operating Income, Ciba’s Net Sales had increased to about nine percent from 1997 to 1998; research and development had a three percent increase from the previous year. Ciba was growing fast within a short period. However, with all the rapid growth, Ciba earned their first loss in June of ’98 of about 791 CHF m. It was primarily a write-off of CHF 1 billion in the acquisition of Allied Colloids in March of ’98. (Refer to Appendix 2)
The performance of both the Additives and Pigments divisions was outstanding. Profit margins had increased in both divisions, partly due to volume and mix improvements, and better capacity utilization. Consumer Care results remained the same, while Textile Dyes' where somewhat weaker with the notation that there were tougher textile market conditions.
Ciba concentrated on profitable top line growth, expanding margin, higher velocity, strategic projects and performance-based leadership to keep the company at a rapid and fast growing trend. Referring to the Appendix 3, Ciba’s objective was to have sales growth be greater than the market. As a result, the performance of sales grew to 19%. Ciba projected EBITDA to be 15% of Sales and a result in performance, EBITDA grew to 15.7% of Sales
Ciba focused on sales growth, the improvement of the sales to its net assets ration and the cost of capital to drive performance on sales. Ciba measured performance with financial and non-financial indicators. It measured it’s value by its Economic profit.
Ciba mission statement/core value:
- PERFORMANCE - be committed, reliable, credible
- CUSTOMER FIRST - create value for our customers
- INNOVATION - innovate across the whole company
- LEADERSHIP - lead by example
- SUSTAINABILITY - create value for all our stakeholders
4. Who won? Who lost? Be specific and provide detailed analysis.
The winner can only be the one who is the biggest. However, one must give up another to gain. Allied Colloids was the world leader in water treatment. Allied Colloid and Ciba had a similar structure growing in the industry by acquiring and merging into other same indexes. Ciba saw the advantage and wanted to capitalize on Allied Colloids by having the market for every different division it possibly could.
Ciba had gained a competitive advantage by acquiring two different companies and merging them into one. Both Allied Colloid and Ciba have introduced a market line to compete with and reduce its competitor. Ciba was unstoppable trying to gain global control of the market by creating many different divisions and expanding globally. Ciba now has the wealth and infrastructure to expand.
But by growing big and fast, there is a lot of room for marginal errors. Perhaps, Ciba was concentrating on maximizing the wealth of the shareholder, while it sales was increasing, Ciba was carrying a net loss in June 1998. In the end there is no real loser, but there is a financial gain or loss. However, as for Allied Colloid and Ciba, there perception was to the number one in the industry and Ciba achieved that.
Reference
- UK Business Park. http://www.ukbusinesspark.co.uk/index.htm
- Ciba Company. http://www.ciba.com/
- Ciba's Acquisition of Allied Colloids. http://giddy.org/zurich/cibaalliedcase.htm#19aprilLex#19aprilLex
Appendix 1
Appendix 2
Appendix 3
Appendix 4
Financial data in U.S. dollars
Financial data in U.S. dollars
Financial data in U.S. dollars
