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Making a Seemingly Impossible Deal Possible

Facing unprecedented challenges, Whirlpool sought to acquire Hefei Sanyo, a Chinese manufacturer. Through bridge-building efforts, we made this complex deal happen.

An Acquisition with Unprecedented Challenges

Facing a mix of modern and traditional trade methods, as well as an increasing amount of capable local competitors, multinational companies find it difficult to win in the Chinese market.

Executives at Whirlpool recognized the strategic importance of China but saw the challenges in growing organically. As a result, the company sought to buy a majority stake in Hefei Sanyo, a local leading home appliance manufacturer. The challenges it faced were unprecedented: Hefei Sanyo was more than three times Whirlpool’s size in the local market, had a completely different operating strategy, and was partially owned by the Chinese government.

Whirlpool looked to BCG to navigate through this complexity. The company presented us with a two-part challenge: how can you make this deal happen, and once it does happen, how can you leverage Whirlpool’s assets without losing the local strength of Hefei Sanyo?

Building Bridges to Secure a Deal

Working on-site at each office, our team became deeply embedded in each company, doing in-depth research and getting to know who the influencers and decision makers were on each side of the deal. We developed a transaction structure to control the business at an operational level, as well as detailed strategies for accelerating regulatory approval, human resources migration, and sales integration planning.

Because the local Chinese government owned part of Hefei Sanyo, our team also had to conduct bridge-building efforts with government officials. Seeking government subsidies, we had to demonstrate how the deal would benefit the local community as Whirlpool headquarters would move from Shanghai to Hefei.

Managing more than ten complex work streams, we bridged the cultural gap and made the deal happen. This resulted in a successful merger in October 2014. Operating today as a profitable, $1 billion-plus business, the two companies truly integrated into one. They reflect the best part of both; the local understanding and agility of Hefei Sanyo is now multiplied by the global strength and operational efficiency of Whirlpool.

Q&A with the Partner

Veronique is a partner in our Shanghai office. She has experience in consumer markets and retail. She received her MBA from Stanford Graduate School of Business and her BA in economics from Fudan University.

Q: What was your role on this project?

A: I worked very closely with senior leadership on both sides of the deal. It was my responsibility to develop credible, deep relationships with key people on each side, so that I could help them understand each other. During one phase of the project, I worked side by side with the CEO of Hefei Sanyo on a daily basis. This closeness was crucial to the process of this complex deal.

Q: What made this deal so challenging?

A: Any reverse integration is challenging. This one was particularly so because the target was larger than the company purchasing it. The two also had very different operating strategies, making it difficult for them to relate. Hefei Sanyo was agile. They had local know-how, and could quickly develop and launch new products. Whirlpool’s key strength was strategic perspectives and long-term planning.

Q: How did the government’s partial ownership of Hefei Sanyo affect the deal?

A: It was crucial that we received government support of the deal. We had to illustrate how the deal would benefit the local community, beyond the commercial value itself. To do so, we built a pitch that explained how we would move the Whirlpool headquarters from Shanghai to Hefei, and explained the benefits that would come from that. The proposal was successful and it helped us get assistance through government subsidies in certain areas.

Q&A with the Operations Specialist

Caroline is a project leader in our Shanghai office and a member of our Consumer Goods practice. She started as an associate in 2007 and then left for two years to get her MBA from Stanford Graduate School of Business. She was a consultant during the time she was on this project.

Q: What was your role on this project?

A: My role evolved over time, but overall, it was my job to drive the project management office (PMO) piece of the project. We had ten complex work streams happening in parallel, so it was up to the PMO module to identify the steps we had to follow and any interdependencies. A lot of times the work stream owners were too deep in the operational details. They needed help to see the big picture and to make sure that they were on track, so that’s where I came in.

Q: What made working on this project so satisfying?

A: The team. Because this deal was so complicated and we were involved in so many different work streams, our team had to stay responsive and in constant contact with each other. When the deal was approved by all parties, we all felt so proud because it was truly a group effort. We all went beyond the expectation to make it happen.

Q: What was your biggest takeaway from the project?

A: I’ve always been a highly structured person, but this project taught me the importance of not only having a solid plan but also a solid backup plan. Because this project had many twists and turns, it was key that we stay flexible. This adaptive mentality and desire to go above and beyond carries through all of our BCG projects.

Q&A with the Pricing Analyst

Eric is a consultant in our Beijing office. He joined us in October 2012. He attended Peking University, where he received both a bachelor of science and master of science in electrical and electronics engineering.

Q: What was your role on this project?

A: When I started on this project, I was an associate. I was able to immediately help with the details of this project, focusing on pricing structure and market review. As I became more experienced, I took on more responsibility. I developed strong relationships with their sales teams, partnering with them throughout the postmerger process.

Q: Sounds like you got a lot of exposure early in your career. Can you tell me more about that?

A: Yes, I was very impressed by how quickly BCG integrated me into the team and how soon I was able to provide value, including presenting my findings to the client. My colleagues took the time to mentor me, so I was able to take on more responsibility and solve more complex challenges.

Q: What attracted you to BCG after getting your electrical and electronics engineering degree?

A: I was very impressed with how much exposure I was able to get so early in my career at BCG. That is exactly what I was looking for when I was thinking about my path.

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