merger and acquisition


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Mergers and Acquisitions



Over view:

Over view Definition Why & Why not Terminologies Experience of M&A Top 10 M&A Why I ndia Deals in graph Process Conclusion 3


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 Example: Company A+ Company B= Company C.


ACQUISITION A transaction where one firms buys another firm 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.

In Simple:

In Simple 6


DIFFERENCE BETWEEN MERGER AND ACQUISITION: MERGER 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. ACQUISITION 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.


MERGER:WHY & WHY NOT WHY IS IMPORTANT Clash of corporate cultures Increased business complexity Employees may be resistant to change PROBLEM WITH MERGER 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. 8


ACQUISITION:WHY & WHY NOT WHY IS IMPORTANT Inadequate valuation of target. Inability to achieve synergy. Finance by taking huge debt. PROBLEM WITH ACUIQISITION Increased market share. Increased speed to market Lower risk comparing to develop new products. Increased diversification Avoid excessive competition 9


TERMINOLOGIES Asset Stripping Demerger or Spin off Carve - out Poison Pill or Suicide Pill Defense Greenmail (“Goodbye KISS”) Management Buy In Hostile Takeover Management Buy Out


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 desk strong 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 interpreted changes



1. Tata Steel-Corus: $12.2 billion:

1. Tata 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. Vodafone-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. Hindalco-Novelis: $6 billion:

3. Hindalco-Novelis : $6 billion June 2008 Aluminium and copper sector Hindalco Acquired Novelis Hindalco entered the Fortune-500 listing of world's largest companies by sales revenues . Image: Kumar Mangalam Birla (center), chairman of Aditya Birla Group.

4. Ranbaxy-Daiichi Sankyo: $4.5 b :

4. Ranbaxy-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.

5. ONGC-Imperial Energy:$2.8billion:

5. ONGC-Imperial Energy:$2.8billion January 2009 Acquisition deal Imperial energy is a biggest chinese co. ONGC paid 880 per share to the shareholders of imperial energy ONGC wanted to tap the siberian market Image: Imperial Oil CEO Bruce March.

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

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

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

7. HDFC 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.

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

8. Tata 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 .

10. Suzlon-RePower: $1.7 billion:

10. Suzlon-RePower : $1.7 billion May 2007 Acquisition deal Energy sector Suzlon is now the largest wind turbine maker in Asia 5 th largest in the world. Image: Tulsi Tanti, chairman & M.D of Suzlon Energy Ltd.

11. RIL-RPL merger: $1.68 billion:

11. 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 .

Why India?:

Why I ndia? 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


PROCESS OF MERGER & ACQUISITION IN INDIA: The process of merger and acquisition has the following steps : A pproval 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).

  Impact of Mergers and Acquisitions:

Impact of Mergers and Acquisitions

Why Mergers and Acquisitions Fail?:

Why Mergers and Acquisitions Fail ? Cultural Difference Flawed Intention No guiding principles No ground rules No detailed investigating Poor stake holder outreach

How to Prevent the Failure:

How to Prevent the Failure Continuous communication – employees, stakeholders, customers, suppliers and government leaders. T ransparency 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


RECENT M&A HAPPENINGS… 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


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

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

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


MERGER & ACQUISITION(2009-10) : 33

Case :

Case 34




ADVANTAGES FROM THIS MERGER: This amalgamation would substantially enhance ICICI Bank's branch network ( 23 % increase apprx ). 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 .

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