BenQ Corp.'s Failed Acquisition of Siemens' Mobile Devices Division

Many reasons were attributed for the failure of the new company. BenQ's acquisition of Siemens' mobile devices business was a rare case of a small entity acquiring a larger unit.

According to Y.H Yeh (Yeh), professor and director of Graduate Institute of Finance at Fu-Jen Catholic University, Taiwan, in cases where the buyer is smaller than the bought, it is essential for the acquiring company to be financially sound and have healthy operations. "That means growing strong comes before growing big. You must have enough money to deal with future uncertainties," said Yeh.

BenQ's August 2005 sales were 21% lower when compared to the same period the previous year.

The bankruptcy of BenQ Mobile and the consequent loss of about 3,000 jobs created a furor in Germany. Both Siemens and BenQ were held responsible for the debacle. The German public felt that Siemens was guilty of creating false hopes that the loss making unit would be saved. "From an economic point of view, Kleinfeld perhaps acted in the correct manner, but his reputation as someone who can turn around companies in a tough but always fair way has been lost," said an editorial in Financial Times Deutschland. There were also reports suggesting that Siemens sold the division because closing it down would have tarnished its reputation...