Question

Porsche wanted to gain control of VW in 2005. The attempt was ultimately sabatoged and VW ended up buying Porsche instead. What sabotaged Porsche's attempt to take over VW?

Answer 1

In the beginning, Porshe started buying up VW shares, which came into light in mid of 2005. Initially no one knows the real motive of buying the shares of VW but when the news came into light, it was known to the world that Porshe was trying to acquire more than 20 percent of the VW Group and also become the largest single shareholder. The buying up of VW shares continued by Porshe, which acquired 25 percent of stake in VW Group by mid 2006 and 30 percent of stake in VW Group by mid 2007. Though the company claimed that they do not want to completely take over VW Group but to become the world's biggest car makers, by the end of 2008, Porshe had acquired 42.6 percent of VW shares.

But, when the worldwide financial system in 2008 hit the iceberg of recession, the banks stopped lending money to Porshe to complete the takeover of VW and started to call in their loans which triggered a liquidity crisis at Porshe. Then Porshe started to seek for outside investors who might porvide for the complete takeover of VW Group. But by the time Porshe found required number of investors to facilitate their acquisition, the other major shareholders of VW started to divert their fund into Wolfsburg which made Porshe to essentially collapse into the arms of VW. This merger completed in 2011.

The hit of the recession and the immediate actions taken by other major shareholders in VW helped VW to acquire Porshe which raised its share prices.