Aker Kvaerner Group
their huges
debt, that was the main reasen for their crises, I start the assignment with telling the storry back
from 1996. Then I explain about Kvaerners way thru crises after crises and until to days almost
bankruptcy. The assignment try to analyze what went wrong and way it went wrong.
Expanding and growth by loan financing
In 1996 Kvaerner was the biggest engineering company in Norway. Kvaerner wanted as most
corporations to increase the value of the company and grow even bigger. To do this it’s a normal
process to expand their business to foreign countries. Kvaerner already had a lot of operations
around the world, but to grow bigger Kvaerners CEO, Erik Tønseth, saw it as necessary to
increase their international attendance in shipbuilding, oil and gas, pulp and paper and
engineering and construction.
During 1996, Kvaerners CEO, strengthen its engineering base internationally through the
acquisition of the UK-based conglomerate, Trafalgar House.
To move the headquarter to London was a big change and an operation with high acquisition
cost.
At this time Kvaerner already had a lot of debt and to finance the new changes they borrowed
more cash from the banks.
The changes resulted in a broader business portfolio and this required greater and more exigent
management than Kvaerner had.
The management capacity didn’t correspond to this requests.
The consequences were weak integration of the acquired units and no realization of synergies
between the different business areas.
In the following years, increasing financial and operational difficulties followed strong growth
financed through debt.
No dividends and increase in share outstanding
After 1997 the company had to stop to give dividends to save money, but they kept invest money
to expand their business and to try to increase the revenues. But they didn’t earn the money they
hoped, and the company started to increase shares outstanding to earn money. In 1998 they kept
selling shares, and the value per share just kept falling.
After two years following this strategy the company hadn’t seen anything ells than red numbers,
and in 1999 the CEO Erik Tønseth got fired.
Restructuring and downsizing
The new CEO, Kjell Almskog, changed the strategy and initiated a major sell-off, focusing on
realizing capital through divestments. Now it was the agenda for change that again was in focus.
This involves a series of fundamental structural changes in order to create a company with a
clear focus on two core business areas: Oil & Gas and Engineering & Construction.
An intense focus will be maintained on the debt reduction program to meet the earlier announced
objective for the Group to have zero net debt by the end of year 2000.
Kvaerner planned to build shareholder value by creating a profitable Norwegian player with the
strength to compete internationally in selected regions and market areas. They planned to do this
by:
• strengthening profitability through improved operation and better co-ordination between the
Engineering & Construction (E&C) and Oil & Gas (O&G) business areas.
•