With Nora wanting to improve its technological operations in digital switching and Sakari
wanting to acquire knowledge and gain access to the markets of South-east Asia, there are
two options for the companies – either one of them could acquire the other or they both
could form a joint venture. Since the firms are most likely to derive ‘sequential synergies’
with the specific opportunity (installation of digital switching exchanges per the Telekom
Malaysia Bhd (TMB) project), it is in the best interest of Nora and Sakari to form a joint
venture (JV). A JV will enable Nora to receive valuable technology in the digital switching
manufacturing realm and at the same time, Sakari will gain access to the fast growing
south-east Asian market. However, both the companies need to come to acceptable terms
that will enable them to form the JV and achieve the expected synergies. The existing
negotiations are falling apart due to disagreement in four topics: equity ownership,
technology transfer, royalty payment, and expatriates’ salaries and perks. The issues in
these topics can be resolved as discussed below.
Nora is proposing a 70% Nora and 30% Sakari split. This is based on the old equity
regulations in Malaysia that limited the foreign equity to 30%. However, since Sakari is
concerned about the control of the accessibility of its technology to Nora, it is proposing a
51% Nora and 49% Sakari split. While these are two different approaches and both have
valid reasons for the splits, Nora should soften its stance and negotiate for a 60% Nora and
