Emerson Process Management: Metran Acquisition

Abstract

This case is used in Darden's first-year strategy course and is appropriate for MBA, Executive MBA, GEMBA, and executive education programs. The president of a key division of Emerson, a well-known diversified global manufacturing company, and his team address important questions about expanding into Russia through the acquisition of a relatively small company that has a strong local brand. How should a successful firm evaluate and enter new markets that are experiencing political and economic uncertainty? Excerpt UVA-S-0252 Rev. Jun. 8, 2016 Emerson Process Management: Metran Acquisition Steve Sonnenberg looked up from the Metran acquisition review report he was reading to gaze out at the Russian midwinter landscape just as the wheels on the Soviet-era Aeroflot Ilyushin II-62 on which he was a passenger touched down unsteadily on the Chelyabinsk airport runway. It was January 2004, and Sonnenberg and his team were in Chelyabinsk to assess the prospect of acquiring Metran Industrial Group for the Emerson Electric Co. (Emerson) Process Management (Emerson Process Management) business platform. As president of Rosemount Inc., Emerson Process Management's flagship company, Sonnenberg was leading Emerson's effort to expand into Russia. Sonnenberg recalled: Russia was an important emerging market. With one of the largest oil and gas reserves in the world, it represented a great opportunity to expand our process automation and control systems business. But in 2004, there were a lot of question marks around owning a company in Russia, as well as around Metran itself. Five years earlier, we had considered investing in Metran and decided against it. As we prepared for the Chelyabinsk visit that winter, we asked ourselves—had enough changed at Metran for us to jump in now? Sonnenberg was confident in his team's capabilities and encouraged by the warm reception the team had received during a recent visit to Metran. Nevertheless, many vexing questions remained: Was the time right for Emerson to expand its presence in Russia? If so, should the Metran acquisition drive that expansion? If the acquisition moved forward, what would be the best price and structure for the deal? Finally, how might Metran combine with the Emerson Process Management business in Russia so that the best qualities of both companies were retained? That is, how could Emerson maintain the quality and reliability of its Emerson Process Management brand while taking advantage of Metran's reputation for responsive, locally focused client relationships? Sonnenberg realized that these questions, and many others, would have to be answered by the next month, when David Farr, Emerson's corporate CEO, was coming to visit Chelyabinsk. . . .