How Geely Waited for Volvo

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Case study: How Geely waited for Volvo
By Pedro Nueno and Gary Liu

The story. Li Shufu, founder of Chinese automotive maker Geely Group, had long wanted his company to buy Volvo, the Swedish carmaker. Volvo would provide the innovation, branding and technology needed to propel Geely in particular and China’s auto industry in general, into global markets. The financial crisis of 2008, and the big losses suffered by the US auto industry, gave Mr Li an opportunity that was, in his words, like “a world famous movie star marrying a peasant in China”. More

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The challenge. Apart from the difficulty of getting anyone at Volvo – or Geely – to take the proposal seriously, the deal would be complex, additionally so because it would be international. In 2007, Mr Li sent a letter to the US headquarters of Ford, Volvo’s owner, that expressed its interest in purchasing Volvo. The letter was ignored. Early in 2008, Mr Li met a senior Ford executive at the Detroit auto show. Ford was courteous but appeared unimpressed by Geely’s small size.

The initial strategy. Mr Li set up an acquisition team. He invited Rothschild, an investment bank with experience in acquisitions, to help with the deal. Rothschild was assigned responsibility for the overall co-ordination and the valuation analysis of Volvo’s assets. The acquisition team also included: Freshfield, the law firm, and Deloitte Touche Tohmatsu, the accountants. Freeman Shen, then vice-president of Fiat China, with experience in European and US companies, also joined the team.

The ongoing strategy. Geely deployed a number of tactics:
● Keep lines of...
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