How an M&A deal can go sideways and what to do about it

The 2018 M&A deal environment in the Philadelphia area was particularly strong across the middle market. And while the pace might not match the previous year, considerable deal activity is expected through 2019. Buyers and sellers looking to capitalize on the market should be mindful of the mistakes that can derail a deal, and how those mistakes can be avoided.

Smart Business spoke with Richard Snyder, director of audit and accounting at Kreischer Miller, about M&A pitfalls and what preparation ahead of negotiations can help buyers and sellers avoid them.

What tends to trip up M&A deals?

Any time the buyer doubts the quality of the information provided, there is a high risk of negative consequences. These first show as a loss in value and can eventually lead to the loss of a transaction. This may arise when information and documents requested by the buyer are slow to be provided, the seller cannot provide adequate explanations about certain details requested by the buyer, or information provided by the seller differs from the underlying support and details that come out of the due diligence process.

Complex issues such as customer concentrations, ongoing litigation, and environmental remediation may pose significant risks to a company that a buyer cannot overcome. These and others may impact the purchase price or may be too great a risk for a buyer, which results in the buyer walking away from the deal.

What happens if a deal goes sideways?

A great deal of resources are utilized by both the buyer and seller in a transaction. If a deal goes sideways, both lose the time and resources they put into the transaction. The seller’s management team loses valuable time that could have been spent on the operation of its business. Additionally, sellers may spend a considerable amount of money on professional services and other fees as part of the deal process. The business may continue to be for sale and a failed sale may make it less attractive in the marketplace.

A buyer may lose the lost opportunity cost to pursue other deals in addition to professional fees and other costs. However, it is important to note that the cost of failed mergers and acquisitions may far outweigh the costs spent on a potential transaction and walking away if the transaction is not right for both sides.

How can buyers and sellers increase their chances of success?

Sellers need to be prepared for the sale of their business by making sure they have a full understanding of the sale process and the necessary resources. Their books and records should reflect complete and accurate financial reporting and the owners should have a full understanding of risks that could affect the company’s valuation and potential salability. Understanding the latter gives the seller the opportunity to be upfront with a buyer and address potential issues before the sale process begins, which could offset any negative impact on a transaction.

On the buy side, it’s always important to have a sound due diligence process, and an understanding of the deal environment and the target’s industry and regulatory environment. Accurate valuations are also important in determining an appropriate purchase price, as well as having a plan for the integration of the business post transaction.

Who should be a part of the buyer and seller deal teams?

Sellers should have a good transaction attorney, accountant and possibly an investment banker. The investment banker will assist in preparing marketing information, taking the business to market and finding prospective buyers. It’s always a good idea to have an experienced accountant and attorney on the business advisory team. These advisers should not only understand the company, its industry and the deal market, but they should also have transaction experience.

Buyers often have internal teams that can run a financial analysis and conduct due diligence on a target. However, some buyers also work with an outside team on the financial due diligence.

There are multiple reasons deals don’t go through, but a significant obstacle is a lack of preparation. Having good advisers on both sides who are experienced and understand M&A is very important to a successful deal.

Insights Accounting & Consulting is brought to you by Kreischer Miller

The whys and hows of buying a business

When growing through acquisition, it’s imperative that the acquisition is the right company at the right price with the right integration strategy. That way you can make sure the company strengthens your existing business and accelerates your business goals. Business leaders and dealmaking experts shared what’s worked for them at ASPIRE 2018.

The discussion, moderated by Christopher Thel, director of Cohen & Grigsby, featured:

Jack Glover, Partner, Incline Equity Partners

Kevin Godin, CEO, AFC Industries

Peter J. Lieberman, Partner and chief compliance officer, Schneider Downs Corporate Finance, LP


Buy vs. build

The buy versus build decision just comes down to timeline. It’s much quicker to buy something than it is to build something. We’re always weighing that with the cost rate. So, the cost of an acquisition and time can be prohibitive versus the cost of a greenfield acquisition.

— Jack Glover

If you go into a situation where you’re going greenfield, while that may be cheaper, one of the things that you have to deal with is the only thing you can bring to bear on that is resources and capabilities you already have.

— Kevin Godin


Advisers on your side

A potential buyer who doesn’t have a track record — can’t demonstrate that they have financing in place, can’t demonstrate that they know what they’re doing when it comes to negotiating and executing an M&A transaction — is going to lose out in the competitive process to someone who can show up with a high probability of getting the transaction done.

— Peter J. Lieberman


Ask the right questions

You only find out the real reason a guy sold his business the day after you close. You hear all this stuff about, ‘I don’t want to spend time, or I want to do this or that.’ But there’s a reason why, right? I’m a big believer that they’re doing it either out of fear or greed. They’re either nervous about something, that something bad is going to happen and that they’re going to lose some value, or they think, ‘Geez, this is the absolute top of the market.’

— Jack Glover

One of the things that you have to make sure is that you understand the business you’re acquiring — at least the type of business they’re in — so that you can ask the right questions. So in our case, we’ve acquired businesses that were complementary to the base business we already had.

— Kevin Godin


What could go wrong?

The bad things almost always start from the beginning, and they almost always seem like they’re based on just a fundamental mystery of what the business is that the buyer’s buying at the time they bought it and trying to turn it into something that it’s not.

— Peter J. Lieberman

There’s no question that the biggest challenge in my experience is always fear. We actually have a presentation that we go through with the sellers on what to expect after. We do this even as we’re negotiating the deal. So, here’s how we hold people accountable, here’s how we do meetings, just the cultural issues in general, because the (lack of) trust and credibility is what will make an integration unsuccessful.

— Kevin Godin

The numbers are important, but the people end up being much more important. And that’s always the case for us — the difference between a deal that doesn’t go well and a deal that goes really well.

— Jack Glover


Pricing right

If you’ve got a business that’s an add-on that’s a third of the size of a platform, you’re probably not going to see the same multiple, but you’re going to be able to contract that difference over time by finding a strategic buyer.

— Peter J. Lieberman

We bought two companies between 11 and 12 times EBITDA. Those were what we think are very high-quality assets that have the ability to grow, but it’s a tough market and it’s very, very competitive. I will tell you that I don’t see that changing significantly. As interest rates tick up, that should probably moderate prices a bit. When I say moderate, not to bring them down, but just so that they don’t continue rising.

— Jack Glover


Integrate early and often

We start integration planning as soon as we have an LOI (letter of intent) signed. We assume that we’re going to execute the deal. We don’t get to that point without being serious about closing.

— Kevin Godin

You really have to always be integrating because we want the car to be running down the road at 100 miles an hour. But if we haven’t put the lug nuts on, we’re not going to go very far, very fast. There’s no silver bullet. It’s one of those things — you have to keep pushing. You’ve got to push hard at the integration, and then you’ve got to push hard on the growth at the same time.

— Jack Glover

Before you do anything, you’ve got to know what you want it to look like after it’s over. It’s tremendous to find an opportunistic acquisition candidate that you can jump into, but the best opportunities and the best deals and the best outcomes come from starting at a point where you know what the end result is supposed to be and you’re working toward that, as opposed to grabbing the next thing that comes in on the transit.

— Peter J. Lieberman

Office Depot, OfficeMax in talks to merge; deal seen soon

NEW YORK, Tue Feb 19, 2013 — Office Depot Inc., the No.2 U.S. office supply retailer, is in advanced talks to merge with smaller rival OfficeMax Inc. and a deal could come as early as this week, a person familiar with the matter said on Monday.

Both companies, which trail industry leader Staples Inc., are under much pressure from investors to boost profitability as well as shareholder value, and a merger would help them to cut costs, close stores and boost their clout with suppliers.

The deal is expected to be structured as a stock-for-stock transaction, the person said, but the source also warned that the talks could still fall apart.

Office Depot has a market capitalization of $1.1 billion while OfficeMax has a market value of $932 million.

Analysts have long called for consolidation in what they see as a cluttered sector, in which sales crumbled during the global financial crisis. Office supply stores are also fighting a battle for relevance, with shoppers increasingly buying their paper, toner and technology online or at mass merchants.

Office Depot declined to comment on the news of a potential deal. Representatives for OfficeMax were not immediately available for comment. The news was first reported by the Wall Street Journal.

Neuberger Berman LLC, one of OfficeMax’s top investors and which has pressured the company to do more for shareholders, said it would support a merger with Office Depot Inc. depending on deal terms.

Tom Froehle identified the best firm to combine talents with to create Faegre Baker Daniels

Tom Froehle, chief operating partner, Faegre Baker Daniels LLP

Tom Froehle, chief operating partner, Faegre Baker Daniels LLP

In executive roles at Baker & Daniels LLP over the past 10 years, Tom Froehle had weighed in on some 20 inquiries from other law firms about possible mergers with Baker & Daniels.

However, none of those led to serious discussions until the economy began its downward spiral.

“What we saw during this downturn was that clients wanted to look much harder at value,” says Froehle, who was, at the time, chief executive partner at Baker & Daniels. “Law firms were consolidating, and quite frankly, clients were consolidating in terms of using fewer law firms and looking for firms that had more extensive depth and breadth. We told ourselves that rather than be reactive, we have to try to be proactive.”

That meant going on the offense to find the right partner to create a successful merger. So the Baker & Daniels team started sorting through offers to narrow down the prospective suitors. While doing so, they came upon a firm called Faegre & Benson, located Minneapolis. Froehle said Baker spent a great deal of time trying to identify a partner that it thought would be a good fit, although the leaders could only do so much in terms of looking at websites and seeking out information. They also turned to anecdotal information that they heard from people familiar with the firm. Then they spent a lot of time evaluating and talking with the Faegre & Benson leadership team about the firm’s culture and strategic vision to ensure, before they made a move, that there would be alignment.

Here’s how Froehle, now chief operating partner, and his team scored a win at the newly merged Faegre Baker Daniels LLP, in operation one year now.

Finding a fit

When the topic of a merger comes up, the process can often seem overwhelming, especially when companies of considerable size and expertise are involved. To make the task less intimidating, start by looking at companies in complementary markets to yours, those that occupy the same market position and that serve at the top of their market.

Comparing those statistics gives you a better chance of finding the right fit, and every place in which similarities are identified increases the odds of success. After determining which factors would make or break the deal for your company, it’s time to go through the list to match potential suitors with your company.

“We looked at firms that appeared to have a similar qualitative excellence,” Froehle says. “There is some pretty good data in terms of rankings in those things that can help you identify companies from a qualitative standpoint.”

Then it’s time to look at culture to determine whether there is a good fit.

“On the cultural front, some things will stand out,” Froehle says. “Baker & Daniels was founded in 1863 and Faegre & Benson in 1886. So you had two very long-standing firms. Both firms had histories of civic involvement, with people committed to the community; they did pro bono and were diverse, and we saw really similar cultural values there.”

The next step can command the most time of anything else in the process. It’s time to get beyond the facts and figures and meet with the players face to face.

“A lot of it is just spending time with people; certainly both leadership teams should spend a lot of time together,” Froehle says. “We had what turned into an opportunity when we started discussions in 2010, but there was a client conflict situation that we just couldn’t resolve. That client conflict went away in early 2011, and we recommenced discussions. I think the fact that we had a pretty extended amount of time to spend with each other and to get other partners involved in those discussions helped us figure out whether we thought there was going to be a compatible culture.”

Froehle says it is valuable to flush out concerns early, rather than to wait until after the merger vote occurs. The goal was to combine the firms and the way they did things, so a lot of time was spent early in the process talking about how to develop the best governance structure for a new firm. But instead of taking one thing intact from one firm and another thing from the second firm, they instead approached it to determine what made the most sense so that they could tell the partners what the new firm would look like.

In effect, they built a model of the new company.

“By having that in place, and then being able to share with partners at both firms, ‘OK, here is what this new firm looks like,’ was really helpful in terms of allowing people to deal with the hard part about change, the uncertainty. Although we still have plenty of uncertainty, we tried to provide a real framework of what this is going to look like.”

Working it out

The last task is to determine the mix. This may be the most important task as you discuss common goals to reach a consensus.

“There were those who wanted to do something to not just get bigger but to actually help us serve clients better, and we saw some real synergies and opportunities to combine strong practices that would make even stronger practices,” Froehle says.

“Look for opportunities to complement and supplement strengths in each firm. We had no geographic overlap. Sometimes when you have offices in the same geography, it causes real friction in terms of how you deal with that. We didn’t have any of that, and so we had a lot of additive benefits. I think when people saw that and saw the opportunities to work together, they found that they like each other.”

Froehle says one of the fundamental underpinnings of the merger was the ability it created to serve clients better by providing broader and deeper expertise across a wider range of services. Helping employees understand that and the positive opportunities created has been an important piece of helping them get comfortable with the new organization and create a culture of excitement about being able to better serve clients. Even before the combination was complete, Froehle and his team set in writing what the expectations were of the partners.

“It has been a way for people to buy in to, ‘Here’s what we all expect of each other,’ and that’s been very useful,” he says. “This year, we are in the process of doing a similar thing for our associate lawyers in terms of trying to be much more definitive about what those expectations are, and that is going to be something that was necessarily different from what we had in either of the legacy firms.”

The other issue to address is the clients, as they need to be reassured that their relationships with the firm will not be changing for the worse.

“We went to our top 100 clients over the course of a year to talk about the combination,” he says. “It was interesting to share feedback with other folks in the firm about what we were hearing. Many clients were excited to hear about the new capabilities that were part of the combination. That has been really positive.”

Spread the good news

After the dust has settled and a single company is arising, the task turns to communication and feedback. Sharing positive news goes a long way toward reinforcing the common culture that is being developed.

“We try to open every meeting we have of any kind of group with a sharing of good news,” Froehle says. “These are things that are happening across the firm and with a real focus, at least this first year, on things that involve collaboration of people from the two different legacy firms.

“Those examples have been really helpful to others, who may say, ‘Wow! Somebody I know down the hall has been working with somebody I don’t know and that’s been a really positive thing that will help me be more inclined to step out of my comfort zone.’”

Froehle says that the effort to share good news about effective client collaborations, an additional focus on travel to allow people at the different locations to meet one another and other communication about what was happening across the firm were geared to help people recognize that there was a developing sense of a singular, combined culture. The feedback from those who have had those interactions and the opportunities to connect with each other have all been very positive and have helped to reinforce the internal message.

While recognizing that it would have been easier in some ways to maintain the status quo, Froehle says the long-term benefits of this approach are going to be very positive for the 1,600 employees.

“Obviously, it required the people and the leadership teams from both firms to have that mindset going in, but once they got that mindset, it became really exciting to think about creating something new.”

How to reach: Faegre Baker Daniels LLP, (317) 237-0300 or

The Froehle File

Tom Froehle
Chief operating partner
Faegre Baker Daniels LLP

Born: Grand Forks, N.D., but I really only lived there for a couple of years. I grew up in and had all my schooling in Bloomington, Ind.

Education: Undergraduate degree at Indiana University in Bloomington and my JD from the University of Michigan in Ann Arbor.

 What was your very first job?

My dad operated a small store that sold hockey equipment, so from the time I was about 12 I worked there. My dad ran the business and I sort of helped. I really just learned a lot about customer service, how important each individual customer was and how you could really make an impact on each individual customer’s experience by how you responded. The individual experience of working with customers was really valuable.

Whom do you admire in business?

I really admire John Lechleiter, Ph.D., who is the CEO of Eli Lilly and Co. I admire his vision and his ability to help people in the company to understand what an important role they can play in the world in terms of a pharmaceutical company. I often think people are not all that excited about that but he really has talked about innovation and how they are helping change lives. I think he has done just a really marvelous job of doing that.

 What has been the best business advice you ever received?

Two things. One, communication is important. Somebody once told me that no matter what you think, it probably takes you 10 times to say something before people really hear it, listen to it and understand it. The second is to remember that everything you do sends a message to those people around you. That is something I think we often forget.

What is your definition of business success?

Because it is a little bit different, the organizational hierarchy, I think a big part of my view of success is when my partners feel like they have succeeded or at least when they feel like they’ve been a material part in achieving that success.

How to facilitate a healthy transition for your business

Ricci M. Victorio, CSP, CPCC, Managing Partner, Mosaic Family Business Center

If you are a business owner, key manager or employee of a company going through an organizational transition, such as a merger or leadership change, it is likely you will experience performance disruption caused by confusing messages, speculation or lack of information. And you are not alone.

Often the planning for these important events happens behind closed doors with only the owners and advisers, leaving everyone else to speculate about the future.

Ricci M. Victorio, CSP, CPCC, managing partner for Mosaic Family Business Center, says business owners can avoid these challenges by being more transparent about upcoming changes and engaging everyone in the process.

“The key is communication, communication, communication. It’s important to identify what you can control and learn how to be flexible with all the rest. When you’re getting ready for a transition or succession, you might feel like you’re surfing a tidal wave. There’s an art to keeping your balance in an ever-changing world,” she says.

Smart Business spoke with Victorio about how to prepare yourself and your company for major business transitions.

What are the most common stumbling blocks that occur when a company is heading for change?


The most common stumbling blocks typically center on communication. Today’s older generation grew up learning to keep financial affairs close to the vest. So sometimes even a spouse doesn’t get involved in the planning until asked to sign papers.

Other times, people don’t feel comfortable sharing their ideas and concerns during shareholder meetings because they’re afraid of disrupting the artificial harmony that’s been established. They may have private conversations outside of the boardroom, but during meetings there’s often a fear of disrupting the delicate balance.

Further, business owners involved in a transition can be so overwhelmed by either the fear of confrontation or the lack of planning, the project begins to loom large and they’re stopped in their tracks. They feel as if there’s no way they can get through it; it becomes so daunting they often just hope it goes away.

How can these stumbling blocks be avoided?


Instead of keeping all conversations behind closed doors, when appropriate include key players such as family members, managers and those who will be most involved in the strategic design of the transition plan before you start actually planning. In these conversations, ask the group, ‘If we could do anything without worry of failure or confrontation, what would be best for our family and company?’ At this stage, there should be no pressure of commitment; it’s just brainstorming and idea building.

Engaging a succession coach can help facilitate dialogues that are creative, innovative and energizing, and potentially serve as the foundation of solutions to what might seem like an impossible endeavor.

Once you have a vision, you can develop an implementation plan. Break it down into a timetable and get key players involved to determine who spearheads specific initiatives and what the outcomes should be. Document the vision and itemize each step to be executed on a schedule for all involved.

Owners and other decision makers in a business likely won’t find it easy to facilitate these discussions, so consider using an experienced adviser to guide and focus the conversations and break the task into manageable segments. It can be difficult and even intimidating for groups to internally identify and discuss their own problems, but it’s helpful to have someone from the outside keep discussions open, comfortable and inclusive.

It’s also important to reach out to the overall organization, including employees, clients, customers, franchisers and vendors to communicate the vision of the plan — not the intricacies, but the expectation of the fulfillment of the plan and how it affects each party. This will help clarify what each can expect and what their roles will be.

What are the red flags that tell you a transition is going badly or not as planned?


Confusion or dysfunction within the management team is one of a few signs of difficulty that typically arise during a transition. Often it’s revealed that management is unsure where the company is going or what the plan is. Additionally, departments that are not cooperating well with each other — also called ‘silos’ — can typify dysfunction.

If management isn’t confident that the transition will include them, their productivity will slow and they’ll likely start looking around for something more stable and secure as a backup plan. A high level of turnover in management might prompt others to start abandoning ship.

When is a good time to seek outside counsel?


The best time is when you know or others are imploring you to consider that it’s time to begin succession planning. For any business owner between the ages of 45 and 75, if you have a business that is worth perpetuating, you need a long-term strategic succession plan and a short-term contingency plan to protect it. It’s worth bringing in an adviser who can help you with both kinds of plans. You’ve got to think beyond your own needs because your business has so many people tied to it who count on its success.

All of the planning responsibility doesn’t have to be on you. You can pull people into the transition process and get them enrolled so you’re no longer alone in the endeavor. If or when you do step aside, you can do so knowing you have people there to maintain and even grow the business. The hearts of those involved in the company might be broken when a founder passes or moves on, but that creation, built lovingly, does not have to crumble.

Ricci M. Victorio, CSP, CPCC, is managing partner for Mosaic Family Business Center. Reach her at (415) 788-1952 or [email protected]

Insights Wealth Management & Family Business Consulting is brought to you by Mosaic Financial Partners

How to deal with the practical and emotional aspects of a merger or acquisition

Robert T. Pacholewski, Vice President, MelCap Partners LLC

Selling your company or merging with another company is a time-consuming process that requires meticulous attention to detail. While there are practical and necessary steps to prepare for a merger or acquisition, such as obtaining counsel, choosing an investment banker and preparing your financials for review by potential buyers, there is an emotional component as well.

“A big concern a business owner has in this situation is to prepare for  the reality of letting go of something he or she has had for many years,” says Robert T. Pacholewski, vice president at MelCap Partners LLC. “You can talk about a sale and all the positives associated with it, but the reality is, it can be difficult to let go.”

He says that while it is an exciting event, there can be remorse and doubt.

“Many business owners have spent more time with their business than with their own family. Letting go of that is a hard thing.”

Smart Business spoke with Pacholewski about how to complete the M&A process, both practically and emotionally.

What can trigger the M&A decision?

One of the triggers for a seller is age and impending retirement. Another trigger is that an owner might want to leave his or her current business to start a new enterprise or look for outside investors to get additional capital infused into the business.

On the acquisition side, a business owner  may be looking to buy another company to enter into new markets, to capture new technologies or products, to acquire a company’s management skill set or to gain production capabilities.

Who should business owners consult before moving forward with a merger or acquisition?

Owners should consult their most trusted advisers at the time a deal is put forward. Consulting with a trusted attorney, accountant or investment banker can help owners determine if they are ready to sell or merge. Many times, an investment banker can be brought into a situation by an owner’s trusted adviser. The investment banker can more fully vet the process and talk with the business owner about what is involved in the very emotional decision of merging or selling a business.

Also, business owners on the verge of an M&A decision might benefit greatly from talking with a close personal friend who has gone through a similar process to better understand what they are getting into from a business owner’s perspective. Most private middle-market business owners will only do this once, so they need to make sure they understand what they’re getting into. It can be exciting, but it can also be very difficult letting go.

What should be discussed and put in order before moving forward with a merger or acquisition?

In the event that your business is going through an expansion, launching a new product or entering into new markets, make sure that it has had enough time to come to fruition before deciding to sell. It could create a potential problem wherein the buyer might believe that the plan could be too difficult to complete  if the sale is announced during such an event.

Furthermore, it is important to get your facilities in order. This can be simple housekeeping, such as making sure facilities are clean and putting on a coat of paint.

Also make sure your company is in compliance with all laws and regulations that govern how you do business. You don’t want any negative surprises.

Once the decision to move forward is made, what are the steps that follow until the M&A process is complete?

First, determine the goals and objectives you want to achieve through the sale process and hire an investment banker whom you expect will meet them. It is not uncommon for business owners to think their company is worth more than it actually is in the market.  An investment banker will evaluate the business and present a range of value for the business. Business owners have to evaluate their goals and objectives realistically and have people around them who can help them meet their goals. A sale process can take six to 12 months to complete and it would be a major setback if expectations were unrealistic and not met.

Then put together basic information on your business, such as sales, production, customers and suppliers to create your confidential sales memorandum. This may require looking ahead two or three years and back four to five years to put all the projections and historical data together for prospective buyers.

After all the information is gathered, the investment banker will put together a group of potential buyers and market the business.  Eventually, you will enter into a letter of intent with one buyer to allow that entity to complete due diligence. It typically takes 90 days to complete the transaction.

How can business owners brace employees for the change?

Usually, the sale is kept confidential from employees until the business is sold, with the exception of key managers. When communicating that the business has been sold, it is critical to talk with your employees about the process because they want to know what it means to them. For instance, do they still have a job? Both the management team and your employees are vital to your business going forward. Make sure you communicate with them at the appropriate time.

How you present the news can vary from company to company, but generally, it’s best to talk with them in a way that is consistent with your style and philosophy.

Making the companywide announcement can be very emotional. If you’ve owned and operated a business for 30 years, your employees can become like family, and it can be a very emotional conversation.

Whatever your delivery, the general message should be that a lot of careful thought and consideration went in to the sale and you’ve found the right buyer to allow the company to move forward and prosper in the future.


Robert T. Pacholewski is vice president at MelCap Partners LLC. Reach him at (330) 239-1990 or [email protected]

Insights Mergers & Acquisitions is brought to you by MelCap

Fiat ups Chrysler stake by 5 percent in move towards merger

DETROIT ― Italy’s Fiat SpA has raised its stake in Chrysler Group LLC by 5 percent to 58.5 percent, meeting a final target set by the U.S. government as the two groups move closer to creating one of the world’s leading auto makers.

Fiat has managed Chrysler since a 2009 bailout deal with the U.S. government. It has paid a total of around $2 billion for its majority stake and agreed a number of conditions to be met before a full merger could take place.

Sergio Marchionne, CEO of both groups, has made Fiat one of Europe’s top turnaround stories and wants to elevate the company to a global player through Chrysler.

“The acquisition of a further 5 percent of Chrysler is a fundamental step in completion of the integration between our two groups,” Marchionne said in a statement on Thursday.

Chrysler and Fiat said they had formally committed to the U.S. Treasury Department to produce the 2013 Dodge Dart sedan at a Chrysler plant in Illinois, the last performance event of three agreed with Washington in 2009.

That commitment, along with proving late last month to the U.S. Environmental Protection Agency that the new Dart can achieve an unadjusted combined fuel economy of 40 miles per gallon, triggered the 5 percent ownership increase. The group had said it would reach the target by the end of 2011.

“There was no real new element today, they have jumped the first, the second and now the third fence,” a Paris-based analyst said.

The remaining 41.5 percent ownership of Chrysler remains with a healthcare trust, called VEBA, affiliated to the United Auto Workers union.

Marchionne told Reuters in December it was possible Chrysler would have an initial public stock offering in 2013 as the UAW seeks to cash out or reduce its shareholdings.

Icahn interested in merger between rivals Navistar, Oshkosh

DOWNERS GROVE, Ill. ― Billionaire investor Carl Icahn wants Navistar International Corp. to consider merging with rival Oshkosh Corp., though he has not yet made a formal proposal to either company, several people familiar with the situation said.

Icahn, who has amassed 10 percent stakes in each of the companies, is currently in discussions with Navistar about getting one or more seats on the board of the U.S. truck and engine maker, these people said.

Icahn reported his stake in Navistar last week and said at the time he has held talks with management to discuss its business strategies and will seek additional conversations.

A deal, however, is far from certain. It’s not clear whether either of the companies would be open to the idea and it remains to be seen how effective Icahn would be in getting what he wants at these companies.

Shares of Oshkosh, which have nearly halved this year as the company struggles with a declining defense business and an expensive 2006 acquisition of JLG Industries, jumped 6.6 percent to $19.61 on the New York Stock Exchange on Friday, valuing the firm at nearly $1.8 billion.

Navistar shares rose 3.6 percent to $41.53 in early trading, valuing the company at about $3 billion. The stock has fallen some 30 percent this year.

A Navistar-Oshkosh combination has long been talked about as a possibility in the industry as the two companies can wring out costs and excess capacity. There are also some complementary units such as Navistar’s finance and engine making businesses that could benefit from a merger.

Oshkosh investors have been concerned about the company’s exposure to defense contracts due to government-spending cutbacks and increased competition, including the threat posed by Navistar’s own plan to grow in the sector.

Tying up with another player in the heavy-vehicle industry could protect Oshkosh from a secular downturn in the defense sector that many analysts are predicting.

Icahn did not return a request for comment. Oshkosh declined to comment on relationships with Icahn and other shareholders.

A Navistar spokesperson referred to remarks its chief executive Dan Ustian made in an interview with Fox Business on Tuesday. In that interview, Ustian said Icahn “is into (Navistar) to make some money … We have to deliver to him and all our other investors.”

USA Truck snubs larger rival Celadon Group on merger talks

INDIANAPOLIS ― USA Truck Inc refused to meet with larger rival Celadon Group to discuss a possible merger even as it reported a quarterly loss and announced a host of restructuring actions.

Earlier this month, Celadon reported a 6.29 percent stake in USA Truck and requested a meeting with the target company’s management to discuss a possible association.

In a statement on Friday, USA Truck said its board declined to meet with Celadon executives after considering recent management changes and the board’s desire to remain focused on increasing value through operational improvements.

Celadon Chief Executive Steve Russell told Reuters he was surprised by USA Truck’s decision and that his company will evaluate what to do next.

He declined to comment on whether the company would go directly to shareholders with an offer.

The top two shareholders of USA Truck are insiders Robert Powell and James Speed, who own about 10 percent each.

Powell and Speed were part of an investment group that bought USA Truck in the late 1980s from its then-parent Arkansas Best Corp.

USA Truck posted a third-quarter loss, hurt by soft freight volumes and a high number of unmanned tractors.

“Our business environment was softer than in the second quarter,” said its CEO Cliff Beckham. “We felt a modest step-down in overall freight demand in our markets, which we attribute to slower growth in the U.S. economy.”

The trucking company had warned of a weak third quarter late August, which prompted a sharp fall in its stock price.

The decline in USA Truck’s stock value was one of the reasons cited by Celadon when it expressed an interest in buying the company. It bought USA Truck shares at about 55 percent of USA Truck’s book value per share.

USA Truck, which has operations in the United States, Mexico and Canada, said it reduced its fleet size by 49 tractors on a low utilization rate.

The Arkansas-based company cuts its expected tractor purchases for the second half of 2011 to 155 from 250.

It has also reduced its executive management team to five members from nine at the beginning of the second quarter.

USA Truck shares fell as much as 6 percent to $7.38 on Friday on Nasdaq. Celadon rose 4 percent to $10.78.

Sprint offers AT&T spectrum solution to FCC without merger

WASHINGTON ― AT&T Inc. could greatly expand its network capacity for a fraction of the cost it plans to shell out to buy T-Mobile USA, Sprint Nextel said Monday.

Sprint, a vocal opponent of the deal, said it would present the Federal Communications Commission with a technical analysis detailing the actions AT&T could take to improve its network without acquiring T-Mobile USA.

The proposed merger, which requires FCC and Department of Justice approval, would concentrate 80 percent of U.S. wireless contract customers in just two companies ― AT&T/T-Mobile and Verizon Wireless.

Sprint said its filing to the FCC will assert that AT&T could forgo the T-Mobile takeover and increase its network capacity by more than 600 percent by 2015 by simply putting its current resources to better, more efficient use.

AT&T argues that it needs the spectrum of Deutsche Telekom AG’s T-Mobile USA to expand high-speed services faster and improve its network performance, criticized by consumers for dropped calls and slow data speeds.

Sprint, considered the carrier with the most to lose from the AT&T deal, as it would put it in a distant third place in the U.S. market, called this rationale unfounded.

“AT&T could increase its capacity by developing its warehoused spectrum, accelerating its 4G network buildout, and implementing a more efficient network architecture,” Sprint said in a statement.

A 600 percent boost in capacity could handle AT&T’s projected data demands and would cost far less than the $39 billion AT&T would spend to take over T-Mobile, Sprint said.

An AT&T spokesman responded by criticizing Sprint’s transfer of its network management to Ericsson. “A company that has outsourced the management of its own network shouldn’t be giving advice to others.”

The public interest group Public Knowledge also said on Monday it would file a preliminary economic and technical report questioning both AT&T’s spectrum constraint claims and T-Mobile USA’s financial hardships.

“The report argues both companies have many options to increasing their high-speed data networks,” a spokesman for the group said in a statement.