Two days before Christmas, Geely announced it had settled commercial terms with Ford on the acquisition of Volvo cars. It is only now, however, that the two sides actually have a deal. The Hangzhou-based manufacturer will not get its hands on the assets until the third quarter, two years after registering interest.
The leisurely time scale says a lot about China as an acquirer. The price (representing an enterprise value about 70 per cent of book value) and deal structure (including $200m of vendor finance) show that Ford was pretty desperate to offload the loss-making Swedish automaker. But Geely faced two big hurdles. The first was intellectual property. Chinese start-ups, not just in cars, have flourished by pursuing a simple but effective strategy: take designs and parts from established global manufacturers, then reverse-engineer them. Disentangling technologies owned by Ford from those owned by Volvo was hard enough; the seller needed assurances from the buyer that it would then respect them.
Source: Financial Times