Allianz AG, the leading German insurance conglomerate, acquired Pimco Advisors LP for $3.3 billion, boosting assets under management from $400 billion to $650 billion and making it the sixth largest money manager in the world. The cultural divide separating the two firms represented a potentially daunting challenge. Allianz’s management was well aware that firms distracted by culture clashes and the morale problems and mistrust they breed are less likely to realize the synergies and savings that caused them to acquire the company in the first place. A major motivation for the acquisition was to obtain the well-known skills of the elite Pimco money managers to broaden Allianz’s financial services product offering. Although retention bonuses can buy loyalty in the short run, employees of the acquired firm generally need much more than money in the long term. Pimco’s money managers stated publicly that they wanted Allianz to let them operate independently, the way Pimco existed under their former parent, Pacific Mutual Life Insurance Company. Allianz had decided not only to run Pimco as an independent subsidiary but also to move $100 billion of Allianz’s assets to Pimco. Bill Gross, Pimco’s Legendary bond trader, and other top Pimco money managers, now collect about one-fourth of their compensation in the form of Allianz stock. Moreover, most of the top managers have been asked to sign long-term employment contracts and have received retention bonuses. Joachim Faber, chief of money management at Allianz, played an essential role in smoothing over cultural differences. Led by Faber, top Allianz executives had been visiting Pimco for months and having quiet dinners with top Pimco fixed income investment officials and their families. The intent of these intimate meetings was to reassure these officials that their operation would remain independent under Allianz’s ownership. Discussion Questions: 1. How did Allianz attempt to retain key employees? In the short run? In the long run? 2.How did the potential for culture clash affect the way Alliance acquired Pimco? 3. What else could Allianz have done to minimize the culture clash?
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Allianz AG, the leading German insurance conglomerate, acquired Pimco Advisors LP for $3.3 billion,
boosting assets under management from $400 billion to $650 billion and making it the sixth largest money
manager in the world. The cultural divide separating the two firms represented a potentially daunting
challenge. Allianz’s management was well aware that firms distracted by culture clashes and the morale
problems and mistrust they breed are less likely to realize the synergies and savings that caused them to
acquire the company in the first place. A major motivation for the acquisition was to obtain the well-known
skills of the elite Pimco money managers to broaden Allianz’s financial services product offering. Although
retention bonuses can buy loyalty in the short run, employees of the acquired firm generally need much
more than money in the long term. Pimco’s money managers stated publicly that they wanted Allianz to let
them operate independently, the way Pimco existed under their former parent, Pacific Mutual Life Insurance
Company. Allianz had decided not only to run Pimco as an independent subsidiary but also to move $100
billion of Allianz’s assets to Pimco. Bill Gross, Pimco’s Legendary bond trader, and other top Pimco money
managers, now collect about one-fourth of their compensation in the form of Allianz stock. Moreover, most of
the top managers have been asked to sign long-term employment contracts and have received retention
bonuses. Joachim Faber, chief of money management at Allianz, played an essential role in smoothing over
cultural differences. Led by Faber, top Allianz executives had been visiting Pimco for months and having
quiet dinners with top Pimco fixed income investment officials and their families. The intent of these intimate
meetings was to reassure these officials that their operation would remain independent under Allianz’s
ownership.
Discussion Questions:
1. How did Allianz attempt to retain key employees? In the short run? In the long run?
2.How did the potential for culture clash affect the way Alliance acquired Pimco?
3. What else could Allianz have done to minimize the culture clash?
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