Mittal Steel in 2006:

Changing the Global

Steel Game

Presented by:
Group 12
Sravya Avula H19015
Sugandh B19054
Mallika Jain B19146
 An overview of the Mittal management activities:
Introduction: This case is about the merger of Mittal Steel Industry and Arcelor Steel Industry which was merged in 2006. Mittal steel
was on the verge of announcing unsolicited €18.6 billion bid to acquire the European steelmaker Arcelor. Mittal steel and Arcelor were
at this point the two largest and most global steel producers.

Post-merger focus:

• Quick turnaround time

• Smooth operations
• Revenue generation
Methods of doing business:
Strategic Vision of the Mittal
Management: • A private equity business model
• 5-year Business Plan to increase ROI
• Running out of “low hanging fruit” efforts
methods to earn profit • The Mittal Method - ‘’6 key steps’’
for integration efforts
• Global consolidation to move away • Modern management techniques
from a volatile erratic sector. From • Regional Integration
handful of 50-60 million
steelmakers to 5-6 mega companies • War Rooms and use of e-tech
• KIP- Knowledge Integration Program
• To vertical integrate or not?: Is • KMP- Knowledge Management
variation in prices of raw materials Program
country wise the answer or it is
driven by workforce cost
 Steps To Ensure Post-merger Performance

1 2 3

Communication Strategy: Integration Team and Crafting a brand-new

• Core Communication Strategy Mechanism: Organization identity:
within the organization should be • It is crucial to decide on the • Understand the pulse of the
clear. management team’s role in the employees from two firms through
• Top management involvement to integration process. interviews and surveys.
gain the authenticity and support. • The roles and responsibilities of the • Understand their perspective of the
• Detailed communication from integration team. firm’s strength and weakness, and
respective managers to their • Formation of dispute resolving accordingly devise a strategy to
employees addressing issues of mechanism. represent the combined firm.
uncertainty. • Detailed plan setup and regular • Devising end-to-end rebranding
• Media involvement to communicate monitoring mechanisms. strategy for the combined firm.
the message across groups.
Steps To Ensure Post-merger Performance
4 5
Realizing Operational &
Functional Abilities:
• Realizing the anticipated synergies in
the shortest possible time.
• Include the objectives of the
integration in the annual budget
plans of the firm.
• Formulating the initiatives by
allocating ownerships to the process.
• Tracking the performance and
measuring it through adequate KPI’s.
Formal Integration Actions:
• The idea is to achieve a brand-new
identity as a single entity which is in
line with customer requirement.
• Finalizing and devising the plan to
effectively utilize the combined
synergies.
6
Cultural Integration:
• Issues arising out due to cultural
differences between the within the
two firms should be tackled.
• Develop a homogenous cultural
entity using the available diversity to
our advantage.
Arcelor Mittal Acquisition Challenges:
Synergy Implementation Technology Integration

• Arcelor was comparable in size to Mittal Steel • Product lines of both companies differed in terms of
• They excelled in turning around derelict steel quality
companies and not well functioning ones • Earlier acquisitions of well functioning integrated steel
plants (like ISG) were a mixed success

Mittal Arcelor Acquisition Type Year

Crude Steel Production (m tonnes) 59 50.6 Hamburger EAF & DRI 1995
Revenue / ton (Euro) 436 684 Rurhort & Hochfield EAF & DRI 1997
Implied operating cost / ton 339 611 Unimetal EAF & DRI 1998
Operating income / ton 97 72

Communication
• Their tactic of first building credible relationship failed in
arcelor acquisition
• Initial attempts of friendly takeover was rebuffed
Cultural Shift
• Both companies had grown very differently, with Mittal steel
growing inorganically thru acquisition of many steel plants
in post communist countries
• Arcelor was only the fourth acquisition on Western Europe of
the Non DRI type
 EU market where Arcelor was

01 located had very moderate growth

prospects (1% annually till 2010)

France steel industry had one of the

02 highest labor costs (>$100 / t)

Arcelor ownership itself was spread

Arcelor 03 across three countries in Europe –
France, Luxembourg & Spain

Acquisition
Risks 04
High risk of paying a premium price
for acquisition

High risk of impact on credit ratings

05 & uncertainty about raising the

required capital for acquisition