Mergers & Acqisitions

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PowerPoint Presentation:

Mergers and Acquisitions

PowerPoint Presentation:

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MEANING:

MEANING MERGER A transaction where two firms agree to integrate their operations on a relatively co-equal basis because they have resources and capabilities that together may create a stronger competitive advantage. The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock Example: Company A+ Company B= Company C.

MERGER: WHY & WHY NOT:

MERGER: WHY & WHY NOT WHY IS IMPORTANT Increase Market Share. Economies of scale Profit for Research and development . Benefits on account of tax shields like carried forward losses or unclaimed depreciation. Reduction of competition. PROBLEM WITH MERGER Clash of corporate cultures Increased business complexity Employees may be resistant to change 4

ACQUISITION:

ACQUISITION A transaction where one firms buys another firm with the intent of more effectively using a core competence by making the acquired firm a subsidiary within its portfolio of business It also known as a takeover or a buyout It is the buying of one company by another. In acquisition two companies are combine together to form a new company altogether. Example: Company A+ Company B= Company A.

ACQUISITION: WHY & WHY NOT:

ACQUISITION: WHY & WHY NOT WHY IS IMPORTANT Increased market share. Increased speed to market Lower risk comparing to develop new products. Increased diversification Avoid excessive competition PROBLEM WITH ACUIQISITION Inadequate valuation of target. Inability to achieve synergy. Finance by taking huge debt. 7

DIFFERENCE BETWEEN :

DIFFERENCE BETWEEN MERGER Merging of two organization in to one. It is the mutual decision. Merger is expensive than acquisition(higher legal cost). Through merger shareholders can increase their net worth. It is time consuming and the company has to maintain so much legal issues. Dilution of ownership occurs in merger. ACQUISITION Buying one organization by another. It can be friendly takeover or hostile takeover. Acquisition is less expensive than merger. Buyers cannot raise their enough capital. It is faster and easier transaction. The acquirer does not experience the dilution of ownership.

MERGERS AND ACQUISITION:

MERGERS AND ACQUISITION 9

1. Tata Steel-Corus: $12.2 billion :

1. T ata Steel-Corus: $12.2 billion January 30, 2007 Largest Indian take-over After the deal TATA’S became the 5 th largest STEEL co. 100 % stake in CORUS paying Rs 428/- per share Image: B Mutharaman , Tata Steel MD; Ratan Tata, Tata chairman; J Leng , Corus chair; and P Varin , Corus CEO.

2. Vodafone-Hutchison Essar: $11.1 billion:

2. V odafone-Hutchison Essar : $11.1 billion TELECOM sector 11 th February 2007 2 nd largest takeover deal 67 % stake holding in hutch Image: The then CEO of Vodafone Arun Sarin visits Hutchison Telecommunications head office in Mumbai.

3. Ranbaxy-Daiichi Sankyo: $4.5 b :

3. R anbaxy-Daiichi Sankyo: $4.5 b Pharmaceuticals sector June 2008 Acquisition deal largest-ever deal in the Indian pharma industry Daiichi Sankyo acquired the majority stake of more than 50 % in Ranbaxy for Rs 15,000 crore 15 th biggest drugmaker Image: Malvinder Singh (left), ex-CEO of Ranbaxy, and Takashi Shoda , president and CEO of Daiichi Sankyo.

4. DoCoMo-Tata Tele: $2.7 b 6. NTT:

4. DoCoMo -Tata Tele: $2.7 b 6. NTT November 2008 Telecom sector Acquisition deal Japanese telecom giant NTT DoCoMo acquired 26 per cent equity stake in Tata Teleservices for about Rs 13,070 cr. Image: A man walks past a signboard of Japan's biggest mobile phone operator NTT Docomo Inc. in Tokyo.

5. HDFC Bank-Centurion Bank of Punjab: $2.4 billion :

5. H DFC Bank-Centurion Bank of Punjab: $2.4 billion February, 2008 Banking sector Acquisition deal CBoP shareholders got one share of HDFC Bank for every 29 shares held by them. 9,510 crore Image: Rana Talwar (rear) Centurion Bank of Punjab chairman, Deepak Parekh, HDFC Bank chairman.

6. Tata Motors-Jaguar Land Rover: $2.3 billion :

6. T ata Motors-Jaguar Land Rover: $2.3 billion March 2008 (just a year after acquiring Corus) Automobile sector Acquisition deal Gave tuff competition to M&M after signing the deal with ford Image: A Union flag flies behind a Jaguar car emblem outside a dealership in Manchester, England .

7. RIL-RPL merger: $1.68 billion :

7. R IL-RPL merger: $1.68 billion March 2009 Merger deal amalgamation of its subsidiary Reliance Petroleum with the parent company Reliance industries ltd. Rs 8,500 crore RIL-RPL merger swap ratio was at 16:1 Image: Reliance Industries' chairman Mukesh Ambani .

RECENT M&A HAPPENINGS…:

RECENT M&A HAPPENINGS… India Inc runs up an M&A bill of Rs 1.8 lakh cr in H1 M&A deals touch $14 billion in June Value of telecom M&A deals touched USD 23 billion in Q1: Assocham . Godrej acquires Argentine firm Oil India eyes shale gas acquisition overseas RIL acquires Pioneer stake for $1.32 bn Indian hunger for new technology fuels foreign acquisitions

contd…:

contd … Dabur completes merger of Fem Care Ebay India ties up with Adidas for FIFA World Cup. Abbott buys Piramal unit, tops table Eurocopter signs two joint ventures with Pawan Hans Mahindra to buy out Renault’s stake in India, revive Logan sales.

ICICI BANK & BANK OF RAJASTHAN(19th MAY,2010)::

ICICI BANK & BANK OF RAJASTHAN(19 th MAY,2010):

ADVANTAGES FROM THIS MERGER:

ADVANTAGES FROM THIS MERGER This amalgamation would substantially enhance ICICI Bank's branch network ( 23 % increase approx). Strengthen ICICI bank’s presence in northern and western India. ICICI has now moved to a branch-led business model. The acquisition will help ICICI increase CASA (current and savings account) flows, as also help in cross-selling products. Both banks working on the same platform, integration will also be less taxing.

RECENT IN NOV…:

RECENT IN NOV… WORD FILE 22

Why India?:

Why India? Dynamic government policies Corporate investments in industry Economic stability “Ready to experiment” attitude of Indian industrialists

Deals in India for first financial quarter 2010 :

Deals in India for first financial quarter 2010 Sector No. of Deals Value in USD million Share in per cent Telecom 3 22732.26 67.19 Pharmaceutical 4 3958.29 11.02 BFSI 6 2651.54 7.84 Metal and Mining 4 1483.15 4.38 Energy 4 1320 3.90 Other sectors 39 1919.00 5.67

Amongst BRIC Nations, India second most targeted country for Mergers & Acquisitions(2010):

Amongst BRIC Nations, India second most targeted country for Mergers & Acquisitions(2010)

  Impact of Mergers and Acquisitions :

Impact of Mergers and Acquisitions

PROCESS OF M & A IN INDIA:

PROCESS OF M & A IN INDIA Approval of Board of Directors Information to the stock exchange Application in the High Court Shareholders and Creditors meetings Sanction by the High Court Filing of the court order Transfer of assets or liabilities Payment by cash and securities Maximum Waiting period:210 days from the filing of notice(or the order of the commission - whichever earlier).

EXPERIENCES IN M&A:

EXPERIENCES IN M&A Learn from mistakes of others Define your objectives clearly Complete strategy to achieve goal. SWOT analysis for the merged business - a must Conservative attitude necessary at evaluation deskstrong arguments to support project Pick holes in strategy to get the best Will merged units be able to work at efficient / ideal level? Acquire expertise to interprete changes

PowerPoint Presentation:

Cultural Difference Flawed Intention No guiding principles No ground rules No detailed investigating Poor stake holder outreach 29 Why M & A Fail?

PowerPoint Presentation:

Continuous communication – employees, stakeholders, customers, suppliers and government leaders. Transparency in managers operations Capacity to meet new culture higher management professionals must be ready to greet a new or modified culture. Talent management by the management 30 How to Prevent the Failure

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