MERGERS AND ACQUISITIONS

ASSIGNMENT-2
Success and Failure of Mergers and Acquisition

Submitted To: Submitted By:

Dr. Bharti Ahuja Kushagra Arora
Batch: 2014-17
Section- A
PRN: 14021021054

S.NO. CONTENT
1 Abstract
2 Introduction
3 Objectives
4 Analysis and post-merger impact

5 Conclusion

6 References
TABLE OF CONTENT:
MERGER AND ACQUISITION

Abstract

Mergersandacquisitions(M&A)aretransactionsinwhichtheownership
ofcompanies,otherbusinessorganizationsortheiroperatingunitsare
transferredorcombined.Asanaspectofstrategicmanagement,M&A
canallowenterprisestogrow,shrink,andchangethenatureoftheir
businessorcompetitiveposition.

Mergersandacquisitionsaremorecommonthaneverintodaysbusiness
climatedespitecompanyhighestdegreeofstrategyandplanningand
investmentsofhundredsofcrores,somemergersbecomesuccessfuland
somecannotcreateavalueandfailmiserably.In1987,theprofessorof
Harvard,MichaelPorterfoundthataround50%to60%ofthemergers
andacquisitionsendedinafailure.

Thereforethisprojectstudiesthereasonsofsuccessandfailureofmerger
andacquisitionwiththereferenceofthecompaniesthatsuccessfully
merge/acquireorfailed.

Forcompletionofthisstudy,twoliveexamplesofcompanieshasbeen
takenoutofwhichoneistheexampleofsuccessfulmerger/acquiredand
otheristheexampleoffailedmerger.

SuccessfulAcquisitionTATAMOTORSJAGUARLANDROVER
FailedAcquisitioneBayandSkype
INTRODUCTION

Mergersandacquisitions(M&A)aretransactionsinwhichtheownership
ofcompanies,otherbusinessorganizationsortheiroperatingunitsare
transferredorcombined.Asanaspectofstrategicmanagement,M&A
canallowenterprisestogrow,shrink,andchangethenatureoftheir
businessorcompetitiveposition.

Fromalegalpointofview,amergerisalegalconsolidationoftwo
entitiesintooneentity,whereasanacquisitionoccurswhenoneentity
takesownershipofanotherentity'sstock,equityinterestsorassets.From
acommercialandeconomicpointofview,bothtypesoftransactions
generallyresultintheconsolidationofassetsandliabilitiesunderone
entity,andthedistinctionbetweena"merger"andan"acquisition"isless
clear.Atransactionlegallystructuredasamergermayhavetheeffectof
placingoneparty'sbusinessundertheindirectownershipoftheother
party'sshareholders,whileatransactionlegallystructuredasan
acquisitionmaygiveeachparty'sshareholderspartialownershipand
controlofthecombinedenterprise.Adealmaybeeuphemisticallycalled
a"mergerofequals"ifbothCEOsagreethatjoiningtogetherisinthe
bestinterestofbothoftheircompanies,whilewhenthedealisunfriendly
(thatis,whenthemanagementofthetargetcompanyopposesthedeal)it
mayberegardedasan"acquisition".

Examples Merger & Acquisition Deals In India

1. TATA STEEL-CORUS: Tata Steel is one of the biggest ever

Indians steel company and the Corus is Europes second largest
steel company. In 2007, Tata Steels takeover European steel major
Corus for the price of $12.02 billion, making the Indian company,
the worlds fifth-largest steel producer. Tata Sponge iron, which
was a low-cost steel producer in the fast developing region of the
world and Corus, which was a high-value product manufacturer in
the region of the world demanding value products. The acquisition
was intended to give Tata steel access to the European markets and
to achieve potential synergies in the areas of manufacturing,
procurement, R&D, logistics, and back office operations.
2. VODAFONE-HUTCHISON ESSAR: Vodafone India Ltd. is the
second largest mobile network operator in India by subscriber base,
after Airtel. Hutchison Essar Ltd (HEL) was one of the leading
mobile operators in India. In the year 2007, the worlds largest
telecom company in terms of revenue, Vodafone made a major
foray into the Indian telecom market by acquiring a 52 percent
stake in Hutchison Essat Ltd, a deal with the Hong Kong based
Hutchison Telecommunication International Ltd. Vodafone main
motive in going in for the deal was its strategy of expanding into
emerging and high growth markets like India. Vodafones purchase
of 52% stake in Hutch Essar for about $10 billion. Essar group still
holds 32% in the Joint venture.

3. HINDALCO-NOVELIS: The Hindalco Novelis merger marks

one of the biggest mergers in the aluminum industry. Hindalco
industries Ltd. is an aluminum manufacturing company and is a
subsidiary of the Aditya Birla Group and Novelis is the world
leader in aluminum rolling, producing an estimated 19percent of
the worlds flat-rolled aluminum products. The Hindalco Company
entered into an agreement to acquire the Canadian company
Novelis for $6 billion, making the combined entity the worlds
largest rolled-aluminum Novelis operates as a subsidiary of
Hindalco.

4. RANBAXY-DAIICHI SANKYO: Ranbaxy Laboratories Limited

is an Indian multinational pharmaceutical company that was
incorporated in India in 1961 and Daiichi Sankyo is a global
pharmaceutical company, the second largest pharmaceutical
company in Japan. In 2008, Daiichi Sankyo Co. Ltd., signed an
agreement to acquire the entire shareholders of the promoters of
Ranbaxy Laboratories Ltd, the largest pharmaceutical company in
India. Ranbaxys sale to Japans Daiichi at the price of $4.5
billion.

5. ONGC-IMPERIAL ENERGY: Oil and Natural Gas Corporation

Limited (ONGC), national oil company of India. Imperial Energy
Group is part of the India National Gas Company, ONGC Videsh
Ltd (OVL). Imperial Energy includes 5 independent enterprises
operating in the territory of Tomsk region, including 2 oil and gas
producing enterprises. Oil and Natural Gas Corp. Ltd (ONGC) took
control of Imperial Energy UK Based firm operating in Russia for
 the price of $1.9 billion in early 2009. This acquisition was the
second largest investment made by ONGC in Russia.
6. MAHINDRA & MAHINDRA- SCHONEWEISS: Mahindra &
Mahindra Limited is an Indian multinational automobile
manufacturing corporation headquarters in Mumbai, India. It is one
of the largest vehicles manufacturer by production in India.
Mahindra & Mahindra acquired 90 percent of Schoneweiss, a
leading company in the forging sector in Germany. The deal took
place in 2007, and consolidated Mahindras position in the global
market.

7. STERLITE- ASARCO: Sterlite is Indias largest non-ferrous

metals and mining company with interests and operations in
aluminum, copper and zinc and lead. Sterlite has a world class
copper smelter and refinery operations in India. Asarco, formerly
known as American Smelting and Refining Company, is currently
the third largest copper producer in the United States of America.
In the year 2009, Sterlite Industries, a part of the Vedanta Group
signed an agreement regarding the acquisition of copper mining
company Asarco for the price of $ 2.6 billion. The deal surpassed
Tatas $2.3 billion deal of acquiring Land Rover and Jaguar. After
the finalization of the deal Sterlite would become third largest
copper mining company in the world.

8. TATA MOTORS-JAGUAR LAND ROVER: Tata Motors

Limited (TELCO), is an Indian multinational automotive
manufacturing company headquartered in Mumbai, India and a
subsidiary of the Tata Group and the Jaguar Land Rover
Automotive PLC is a British multinational automotive company
headquarters in Whitley, Coventry, United Kingdom, and now a
subsidiary of Indian automaker Tata Motors. Tata Motors
acquisition of luxury car maker Jaguar Land Rover was for the
price of $2.3 billion. This could probably the most ambitious deal
after the Ranbaxy won. It certainly landed Tata Motors in a lot of
troubles.

9. SUZLON-REPOWER: Suzlon Energy Limited is a wind turbine

supplier based in Pune, India and RePower systems SE (now
Senvion SE) is a German wind turbine company founded in 2001,
owned by Centerbridge Partners. Wind Energy premier Suzlon
Energys acquisition of RePower for $1.7 billion.
 10. RIL-RPL MERGER: Reliance Industries Limited (RIL) is an
Indian Conglomerate holding company headquartered in Mumbai,
India. Reliance is the most profitable company in India, the
second-largest publicly traded company in India by market
capitalization. Reliance Industries Limited (RIL), one of Indias
largest private sector companies based in Ahmedabad, set up
Reliance Petroleum Limited. Currently, Reliance Industries taking
over Reliance Petroleum Limited (RPL) for the price of 8500
crores or $1.6 billion.

SUCCESSFUL ACQIUSITION:-TATA MOTORS-JAGUAR

LAND ROVER:

HISTORY OF TATA MOTORS:

Tata Motors Limited (formerly TELCO, short for Tata Engineering and
Locomotive Company) is an Indian multinational automotive
manufacturing company headquartered in Mumbai, India, and a member
of the Tata Group. Its products include passenger cars, trucks, vans,
coaches, buses, construction equipment and military vehicles.

Founded in 1945 as a manufacturer of locomotives, the company

manufactured its first commercial vehicle in 1954 in a collaboration with
Daimler-Benz AG, which ended in 1969. Tata Motors entered the
passenger vehicle market in 1991 with the launch of the Tata Sierra,
becoming the first Indian manufacturer to achieve the capability of
developing a competitive indigenous automobile. In 1998, Tata launched
the first fully indigenous Indian passenger car, the Indica, and in 2008
launched the Tata Nano, the world's cheapest car. Tata Motors acquired
the South Korean truck manufacturer Daewoo Commercial Vehicles
Company in 2004 and purchased Jaguar Land Rover from Ford in 2008.

Tata entered the commercial vehicle sector in 1954 after forming a joint
venture with Daimler-Benz of Germany. After years of dominating the
commercial vehicle market in India, Tata Motors entered the passenger
vehicle market in 1991 by launching the Tata Sierra, a multi utility
vehicle. Tata subsequently launched the Tata Estate (1992; a station
wagon design based on the earlier 'TataMobile' (1989), a light
commercial vehicle), the Tata Sumo (1994; LCV) and the Tata Safari
(1998; India's first sports utility vehicle).
Tata launched the Indica in 1998, the first fully indigenous Indian
passenger car. Although initially criticized by auto analysts, its excellent
fuel economy, powerful engine, and an aggressive marketing strategy
made it one of the best-selling cars in the history of the Indian automobile
industry. A newer version of the car, named Indica V2, was a major
improvement over the previous version and quickly became a mass
favourite. Tata Motors also successfully exported large numbers of the car
to South Africa. The success of the Indica played a key role in the growth
of Tata Motors.

HISTORY OF JAGUAR LAND ROVER:

Jaguar Land Rover is a company that brings together two much loved,
highly prestigious British car brands. After Tata Motors acquired Jaguar
and Land Rover from Ford in 2008, it merged the two marques into a
single company and its success has flourished, with memorable vehicles
and innovative technologies that add to a long-lasting legacy.

The origins of Jaguar can be traced back to a company that began by

making motorcycle sidecars in 1922.

The Swallow Sidecar Company later started building automobiles and

moved to Coventry, switching its name to Jaguar after the Second World
War. It produced premium saloons and sports cars, including the
legendary XK120.

Around this time, Rover started to develop a new all-terrain vehicle,

inspired by the American Jeep. Lightweight and rustproof, the first Land
Rover was clad in aluminium alloy, due to the post-war steel shortage,
and cost 450. It introduced 4x4 capabilities to road cars and was soon
adopted by the military as well.

Adding to Jaguars reputation was its motorsport success in the 1950s,

winning the Le Mans 24 Hours race twice with a C-type in 1951 and
again in 1953 and then with a D-type in 1955, 1956 and 1957. In 1961,
the company launched what became perhaps the most iconic sports cars
of all time, the E-type. In 1968 it merged with BMC (British Motor
Corporation), which later became part of British Leyland and included
Rover.

With an increasing demand for recreational off-roaders, the Range Rover

made its debut in 1970.
So popular was the new car that British Leyland made Land Rover a
standalone company in 1978. Very little about the first Range Rover was
altered over the years 1981 introduced a four-door, while a diesel
arrived in 1986. As the Range Rover became seen as more upmarket, the
Land Rover Discovery was launched in 1988 as a third model in the
range.

After splitting from British Leyland, Jaguar became independent again in

the 1980s, before being purchased by Ford in 1989. Land Rover,
meanwhile, was bought by BMW in 1994, which expanded the range
further by introducing the Freelander. It then joined Jaguar under Ford in
2000, with the two companies becoming closely linked, sharing
engineering knowledge and facilities.

In 2008, the two were bought by Tata Motors, Indias largest automobile
manufacturer, and officially joined together as one company in 2013.
Sales and profits have risen year on year, with more exciting chapters in
the histories of these two brands still to be written.

With Jaguar Land Rover experiencing global sales growth, it is

increasingly important to expand our global presence. Manufacturing our
vehicles internationally allows the Company to reach markets and
customers, creating a stronger, more sustainable and increasingly agile
business.

Jaguar Land Rover will continue to evaluate opportunities to increase its

manufacturing footprint in the future, primarily in markets with strong
growth potential and customer demand.

The company has made significant progress in building our international

manufacturing footprint. In 2014 Jaguar Land Rover opened its joint
venture in China and commenced construction of the local manufacturing
plant in Brazil.

The 50:50 partnership between Jaguar Land Rover & Chery Automobile
Company Ltd. is the first British-Chinese automotive joint venture.
Located in Changshu (north of Shanghai), the 98 acre facility represents a
total investment of 10.9 billion RMB (circa 1 billion). The Range Rover
Evoque & Land Rover Discovery Sport are both produced in Changshu
for customers in China.

Jaguar Land Rover is the first British carmaker to build a new local
manufacturing facility in Brazil and is the company's first wholly-owned
overseas local manufacturing facility. The 14 acre site in the state of Rio
de Janeiro represents an investment of R$750m (240m), with the first
vehicles expected off the production line in 2016.

Jaguar Land Rover has had a local assembly presence in India since 2011
and currently assembles the Range Rover Evoque, Jaguar XF and XJ and
most recently the Discovery Sport.

In August 2015, Jaguar Land Rover signed a Letter of Intent with the
Government of the Slovak Republic for the potential development of a
new manufacturing plant in the city of Nitra in western Slovakia. The
feasibility study will explore plans for a factory with an installed capacity
reaching up to 300,000 vehicles over the next decade. Earlier in the year,
Jaguar

Land Rover agreed a manufacturing partnership with Magna Steyr, an

operating unit of Magna International Inc, to build some future vehicles
in Graz, Austria.

TATA MOTORS-JAGUAR LAND ROVER:

Tata Motors Limited (TELCO), is an Indian multinational automotive

manufacturing company headquartered in Mumbai, India and a subsidiary
of the Tata Group and the Jaguar Land Rover Automotive PLC is a
British multinational automotive company headquarters in Whitley,
Coventry, United Kingdom, and now a subsidiary of Indian automaker
Tata Motors. Tata Motors acquisition of luxury car maker Jaguar Land
Rover was for the price of $2.3 billion.

In June 2008, India-based Tata Motors Ltd. announced that

it had completed the acquisition of the two iconic British
brands - Jaguar and Land Rover (JLR) from the US-based
Ford Motors for US$ 2.3 billion. Forming a part of the
purchase consideration were JLR's manufacturing plants,
two advanced design centers in the UK, national sales
companies spanning across the world, and also licenses of
all necessary intellectual property rights.
FAILURE ACQUISITION:- e-BAY SKYPE

HISTORY OF E-BAY:

eBay is The World's Online Marketplace. Founded in 1995, eBay created

a powerful platform for the sale of goods and services by a passionate
community of individuals and businesses. On any given day, there are
millions of items across thousands of categories for sale on eBay. eBay
enables trade on a local, national and international basis with customized
sites in markets around the world. Through an array of services, such as
its payment solution provider PayPal, eBay is enabling global e-
commerce for an ever-growing online community.

Millions of buyers and sellers have made eBay Inc. the world's largest
and most popular Internet site for individuals and businesses to exchange
goods.

eBay was created in September 1995, by a man called Pierre Omidyar,

who was living in San Jose. He wanted his site - then called 'AuctionWeb'
- to be an online marketplace, and wrote the first code for it in one
weekend. It was one of the first websites of its kind in the world. The
name 'eBay' comes from the domain Omidyar used for his site. His
company's name was Echo Bay, and the 'eBay AuctionWeb' was
originally just one part of Echo Bay's website at ebay.com. The first thing
ever sold on the site was Omidyar's broken laser pointer, which he got
$14 for.

The site quickly became massively popular, as sellers came to list all sorts
of odd things and buyers actually bought them. Relying on trust seemed
to work remarkably well, and meant that the site could almost be left
alone to run itself. The site had been designed from the start to collect a
small fee on each sale, and it was this money that Omidyar used to pay
for AuctionWeb's expansion. The fees quickly added up to more than his
current salary, and so he decided to quit his job and work on the site full-
time. It was at this point, in 1996, that he added the feedback facilities, to
let buyers and sellers rate each other and make buying and selling safer.

In 1997, Omidyar changed AuctionWeb's - and his company's - name to

'eBay', which is what people had been calling the site for a long time. He
began to spend a lot of money on advertising, and had the eBay logo
designed. It was in this year that the one-millionth item was sold (it was a
toy version of Big Bird from Sesame Street).

Then, in 1998 - the peak of the dotcom boom - eBay became big
business, and the investment in Internet businesses at the time allowed it
to bring in senior managers and business strategists, who took in public
on the stock market. It started to encourage people to sell more than just
collectibles, and quickly became a massive site where you could sell
anything, large or small. Unlike other sites, though, eBay survived the
end of the boom, and is still going strong today.

1999 saw eBay go worldwide, launching sites in the UK, Australia and
Germany. eBay bought half.com, an Amazon-like online retailer, in the
year 2000 - the same year it introduced Buy it Now - and bought PayPal,
an online payment service, in 2002.

HISTORY OF SKYPE:

Skype is an application that provides video chat and voice call services.
Users may exchange such digital documents as images, text, video and
any others, and may transmit both text and video messages. Skype allows
the creation of video conference calls.

Skype, the Global Internet Communications Company, allows people

everywhere to make free, unlimited, superior quality voice calls via its
award-winning innovative peer-to-peer software for Windows, Linux,
Mac OS X, and Pocket PC platforms. Skype is available in 27 languages
and is the fastest growing voice communications offering worldwide.
Since its launch in August 2003, Skype has been downloaded more than
163 million times in 225 countries and territories. Fifty-four million
people are registered to use Skypes free services, with over 3 million
simultaneous users on the network at any one time. Skype Technologies
SA is headquartered in Luxembourg and is growing its offices in London
and Estonia.

One of the fastest growing companies on the Internet, Skype already has
54 million members in 225 countries and territories. Skype is currently
adding approximately 150,000 users a day and has created a thriving
ecosystem of products, services, developers, and affiliates. Skype is
considered the market leader in virtually all countries in which it does
business. In North America alone, Skype has more users and serves more
voice minutes than any other Internet voice communications provider.
First released in August 2003, Skype was created by the Swede Niklas
Zennstrm and the Dane Janus Friis, in cooperation with Ahti Heinla,
Priit Kasesalu, and Jaan Tallinn, Estonians who developed the backend
that was also used in the music-sharing application Kazaa. In September
2005, eBay acquired Skype for $2.6 billion.

In September 2009, Silver Lake, Andreessen Horowitz and the Canada

Pension Plan Investment Board announced the acquisition of 65% of
Skype for $1.9 billion from eBay, which attributed to the enterprise a
market value of $2.92 billion. Microsoft bought Skype in May 2011 for
$8.5 billion. Skype division headquarters are in Luxembourg but most of
the development team and 44% of all the division's employees are still
situated in Tallinn and Tartu, Estonia.

Skype allows users to communicate over the Internet by voice using a

microphone, by video using a webcam, and by instant messaging. Skype-
to-Skype calls to other users are free of charge, while calls to landline
telephones and mobile phones (over traditional telephone networks) are
charged via a debit-based user account system called Skype Credit. Some
network administrators have banned Skype on corporate, government,
home, and education networks, citing such reasons as inappropriate usage
of resources, excessive bandwidth usage and security concerns.[22]
Skype originally featured a hybrid peer-to-peer and clientserver system.
Skype has been powered entirely by Microsoft-operated supernodes since
May 2012. The 2013 mass surveillance disclosures revealed that
Microsoft had granted intelligence agencies unfettered access to
supernodes and Skype communication content.

e-BAY SKYPE:

e-Bay Inc. has acquire Luxembourg-based Skype Technologies SA, the

global Internet communications company, for approximately $2.6 billion
in up-front cash and eBay stock, plus potential performance-based
consideration. The acquisition will strengthen eBays global marketplace
and payments platform, while opening several new lines of business and
creating significant new monetization opportunities for the company. The
deal also represents a major opportunity for Skype to advance its
leadership in Internet voice communications and offer people worldwide
new ways to communicate in a global online era. Skype, eBay and PayPal
will create an unparalleled ecommerce and communications engine for
buyers and sellers around the world.

eBay acquired all of the outstanding shares of privately-held Skype for a

total up-front consideration of approximately 2.1 billion, or
approximately $2.5 billion, plus potential performance-based
consideration. The up-front consideration is comprised of approximately
$1.3 billion in cash and the value of 32.8 million shares of eBay stock,
which are subject to certain restrictions on resale
.

The maximum amount potentially payable under the performance-based

earn-out is approximately 1.2 billion, or approximately $1.4 billion, and
would be payable in cash or eBay stock, at eBay's discretion, with
expected payment to occur in 2008 and/or 2009. Skype shareholders were
offered the choice between several consideration options for their shares.
Shareholders representing approximately 42% of the Skype shares
ultimately chose to receive a single payment in cash and eBay stock at the
close of the transaction. Shareholders representing the remaining
approximate 58% of the Skype shares chose to receive a reduced up-front
payment in cash and eBay stock at the close plus potential future earn-out
payments which are based on performance-based goals for active users,
gross profit and revenue.
OBJECTIVES OF THE STUDY:

To study reasons of Success of acquisition of Jaguar Land Rover

by Tata Motors.
To study the reasons of failure of acquisition of Skype by eBay.
To study Motives of both the companies behind the merger.
Was the merger successful? If not what were the reasons?
ANALYSIS AND POST-MERGER IMPACT:

SUCCESSFUL ACQIUSITION:TATA MOTORS-JAGUAR

LAND ROVER:

WHY DID TATA GO FOR JLR?

Tata Motors had several major international acquisitions to its credit. It
had acquired Tetley, International luxury hotels, South Korea-based
Daewoo's commercial vehicle unit, and Anglo-Dutch Steel maker Corus.

Tata Motors' long-term strategy included consolidating its position in the

domestic Indian market and expanding its international footprint by
leveraging on in-house capabilities and products and also through
acquisitions and strategic collaborations.

On acquiring JLR, Ratan Tata, Chairman, Tata Group, said, "We are very
pleased at the prospect of Jaguar and Land Rover being a significant part
of our automotive business. We have enormous respect for the two brands
and will endeavor to preserve and build on their heritage and
competitiveness, keeping their identities intact. We aim to support their
growth, while holding true to our principles of allowing the management
and employees to bring their experience and expertise to bear on the
growth of the business."

Tata Motors stood to gain on several fronts from the deal.

1) The acquisition would help the company acquire a global footprint and
enter the high-end premier segment of the global automobile market.
After the acquisition, Tata Motors would own the world's cheapest car -
the US$ 2,500 Nano, and luxury marquees like the Jaguar and Land
Rover.

2) Tata also got two advance design studios and technology as part of the
deal. This would provide Tata Motors access to latest technology, which
would also allow Tata to improve their core products in India, for eg,
Indica and Safari suffered from internal noise and vibration problems.
3) This deal provided Tata an instant recognition and credibility across
globe which would have otherwise have taken years.

4) The cost competitive advantage was as Corus was the main supplier of
automotive high-grade steel to JLR and other automobile industry in US
and Europe. This would have provided a synergy for TATA Group on a
whole.

5) In the long run TATA Motors will surely diversify its present
dependence on Indian markets (which contributed to 90% of TATAs
revenue). Along with it due to TATAs footprints in South East Asia will
help JLR do diversify its geographic dependence from US (30% of
volumes) and Western Europe (55% of volumes).

Analysts were of the view that the acquisition of JLR, which had a global
presence and a repertoire of well-established brands, would help Tata
Motors become one of the major players in the global automobile
industry.
DISADVANTAGES IF TATA NOT GOING FOR THIS
ACQUISITION?
There was immense pressure from the shareholders, analysts community
etc. to abort the deal as they unanimously agreed that it was over priced
and the balance sheet of TATA was not in a position to absorb more loan
(as discussed in the previous section). Ford purchased JLR at $5 bn and
sold at almost half the price to TAMO after operating it for losses for few
years. As the market would have recovered from recession the valuation
would have increased since there would have been growth in the demand
of JLR thus creating more problems for TAMO. Tata would not have
been able enter into the premium segment (>10 lakhs) in India. TAMO
would have lacked in robust designing capabilities. Above all, at that time
no other major automobile brand was available for acquisition with such
designing and R&D capabilities.

STRATEGIC ADVANTAGE TATA MOTORS GOT WITH

THE ACQUISITION OF JLR?

After the acquisition of the British Jaguar Land Rover (JLR)

business,
Tata Motors had obtained numerous benefits and
advantages. Below are the reasons behind Tata Motorss
decision to acquire JLR:
1) Long term strategic commitment to automotive sector,
which Tata Motors want to become a major player in the
international automobile market.

2) Opportunity to participate in two fast growing auto

segments to fulfill part of Tata Groups ongoing strategy of
internationalization.

3) Increased business diversity across markets and

products.

4) Land Rover provides a natural fit for Tata Motorss Sport

Utility Vehicle (SUV) segment which attracted Tata Motor.

5) Jaguar offers a range of performance/luxury vehicles

to broaden the brand portfolio internationally.

6) Benefits from component sourcing, design services and

low cost engineering by obtaining intellectual property
rights related to the technologies.

7) Improve corporations image and increased its public

reputation.

Subsequent to the acquisition of JLR, Tata Motors benefited:

Tata Motors has acquired the

100% stake in Jaguar & land business & initially they will be
Rover Business operated independently of the
partner.

Three plants in UK Tata Motors will directly own

these two well invested plants
by Ford.

Two advanced design & 4000-5000 engineers engaged

engineering center in testing, prototype design &
power train engineering,
development & integration.
 Both existing national sales
companies of JLR and also
Twenty six National sales those that are carved out of
company current Ford operation would
be owned by Tata Motors.

Intellectual property rights These covers all key

technologies to be transferred
to JLR & perpetual royalty free
license on technologies shared
with Ford.

Capital Allowance Capital allowance with a

minimum guaranteed amount
of US $1.1 billion to be carried
forward for future tax savings.

Support from Ford Motor Credit Ford Motor Credit will continue
to support the sales of JLR for
the next 12 months

Pension Contributed by Ford Ford will contribute US$ 600

million of the Pension Fund to
the workers in United Kingdom

THE DIFFERENT INSTRUMENT USED IN FINANCING

THE DEAL?
Behind acquisition of Jaguar Land Rover, Tata Motors had following
strategic considerations:

1. Long term strategic commitment to automotive sector.

2. Opportunity to participate in two fast growing auto segments (premium

and small cars) and to build a comprehensive product portfolio with a
global footprint immediately.
3. Increased business diversity across markets and product segments.

4. Unique opportunity to move into premium segment with access to

world class iconic brands since:

a) Land Rover provides a natural fit above TMLs Utility

Vehicles/SUV/Crossover offerings for the 4x4 premium category

b) Jaguar offers a range of Performance/Luxury vehicles to broaden

the brand portfolio

5. Sharing of best practises between Jaguar, Land Rover and Tata Motors
in the future

6. Long-term benefits from component sourcing, low cost engineering

and design services.

Tata motors meticulously planned its refinancing strategy as follows:

1-TML raised a 15 month bridge loan of $3bn to finance the acquisition

2-TML also planned to raise about Rs.92bn ($2,300mn) and Rs.96bn

($2,400mn) (through issue of equity / equity linked instruments to
refinance bridge loan

3- Three simultaneous but unlinked Rights Issues of about Rs.72bn

($1,800mn) of the following securities (Price range to be determined in
due course):

Equity shares upto Rs.22bn ($550mn) A Equity shares carrying

differential voting rights upto Rs.20bn ($500mn)

Optionally convertible into A Equity Shares after 3 years but

before 5 years from the date of allotment (upto $750mn)

Approx USD 500/600mn to be raised through issue of securities in

the foreign markets

Above equity issues were estimated to increase the then existing equity
capital by about 30%-35% in FY09. In the event of CCP conversions
between 2011 and 2013, additional increase of about 12% was also
estimated

REASONS OF SUCCESS OF ACQUISITION OF JAGUAR

LAND ROVER BY TATA MOTORS

The beginning was not smooth, when TATA acquired JLR, world was
entering recession and the worst recession of them all. There was a bad
sentiment everywhere. JLR was a failing brand and TATA paid $2.3
billion. Analysts feared that TATA has made a mistake and that they will
not be able to handle what they have entered.

Also, JLR being a British powerhouse brand, the deal was not very well
perceived due to the coming Indian ownership and the fears of
outsourcing of jobs, technology and the brand to India. On the other hand,
Indian analysts feared that this whole acquisition may bring the almighty
TATAs down.

The most important things which TATA prioritize to start the change
were:

1) Cost Management: The most important task on hand for TATAs was
the reduction in the costs. Consultants from Roland Berger Strategy
Consultants and KPMG were hired for this. Strategy plans were made for
cross functional teams and the management was shaken at the top.

Also one major cut down was done on the IT front. The systems and
software for managing operations were now handled by Tatas own IT
firm Tata technologies saving JLR millions of dollars.

2) Cash Management: At the time of acquisition, Cash management was

one of the areas where lot of work had to be done, KPMG and TATA
combined to devise a cash management system which when combined
with the cost management worked wonders.

3) Brand Image Makeover: JLR was always considered to be top end

high end luxury brand but TATA added new products like Evoque which
actually made the brand image a bit soft targeted towards urban people
still keeping the luxury branding intact. Also new products were designed
for specific targets like women looking for luxury SUV etc. Being what
JLR was, it was getting difficult to survive so this brand image changes
by TATA worked in favor of JLR as a brand. It not only survived but is
back to becoming an international powerhouse once again.

4) Innovation and New Product Development: As discussed in the last

point, TATA infused a new breeze of fresh air into the JLR product team
and it resulted in refreshing the old JLR brands which revived them in the
market and also introduction of new brands like Evoque which single
handedly is turning the fortunes of JLR and hence TATA Motors. This
quality is inherent to the TATAs. The best example is <TATA Nano>.

5) Manpower Management: After TATA acquired JLR; the workforce

was reduced by approximately 10000 from the figure of 27000. It was a
bit unlike TATAs but was necessary to revive the JLR.

FAILURE ACQUISITION:- e-BAY SKYPE

In 2005, eBay Inc. purchased Skype for $2.6 billion. The purchase price
was extremely high considering that Skype had only $7 million in
revenues. Meg Whitman, eBay's CEO, justified the acquisition by arguing
that Skype would improve the auction site by giving its users a better
platform for communicating. Ultimately eBay's users rejected Skype's
technology as unnecessary for conducting auctions, and the rationale for
the purchase dissipated. Two years after the acquisition, eBay informed
its shareholders that it would write down the value of Skype by $900
million. In 2011, eBay was fortunate to find a higher bidder for Skype. It
sold Skype to Microsoft and realized a $1.4 billion profit.

WHY DID e-BAY BUY SKYPE?

There were several motives of eBay behind acquisition of

Skype:

1-A young Skype was growing much faster than mature eBay . It still is,
five years later.

2-Skype was much more international, so Skype might bring new

customers to eBays markets in Europe, Asia, and Latin America. That
didnt pan out.

3-The deal looked good on paper, since the founders/executives would

only get their full payout ($ billions) if they met astronomical sales and
activity numbers three years later. They missed their goals and settled for
millions.

4-Synergy between eBay markets, and Skype held promise too:

eBay (product) sellers could engage prospective buyers to boost

sales and prices, especially for collectibles and high ticket items.

Skype (product) video could let sellers demonstrate products.

eBay (product) buyers could chat with each other during bidding
wars.

eBay (product) buyers might bid across national borders if they

could develop trust in a foreign buyer through a chat or a call.

Skype (product) users could wire money to each other via PayPal
(product) and top off their Skype Out accounts through PayPal
(product).
1

VISION OF e-Bay:
eBay vision for Skype has always been to build the worlds largest
communications business and revolutionize the ease with which people
can communicate through the Internet.

Company cant think of any better platform to fulfill this vision to

become the voice of the Internet than with eBay.

TRANSACTION AND FINANCIAL INFORMATION

eBay will acquire all of the outstanding shares of privately-held Skype for
a total up-front consideration of approximately 2.1 billion, or
approximately $2.6 billion, which is comprised of $1.3 billion in cash and
the value of 32.4 million shares of eBay stock, which are subject to
certain restrictions on resale.

The maximum amount potentially payable under the performance-based

earn-out is approximately 1.2 billion, or approximately $1.5 billion, and
would be payable in cash or eBay stock, at eBays discretion, with an
expected payment date in 2008 or 2009. Skype shareholders were offered
the choice between several consideration options for their shares.
Shareholders representing approximately 40% of the Skype shares chose
to receive a single payment in cash and eBay stock at the close of the
transaction. Shareholders representing the remaining 60% of the Skype
shares chose to receive a reduced up-front payment in cash and eBay
stock at the close plus potential future earn-out payments which are based
on performance-based goals for active users, gross profit and revenue.

WHY DID e-BAY SELL SKYPE?

1) eBay failed to integrate Skype into the company's mission. EBay
bought Skype hoping to take advantage of its promise of online
phone service and its innovative P2P -- peer-to-peer -- technology.

2) eBay thought Skype would improve the auction site by giving its
users a better platform for communicating. Ultimately eBay's users
rejected Skype's technology as unnecessary for conducting
auctions, and the rationale for the purchase dissipated.

3) The culture clash between the two companies was too great to
overcome. EBays conservative, bank-like culture didnt mesh
well with Skypes democratic mission to level the field for voice
technologies.

4) eBay and Skype merger failed because eBay miscalculated its

customers' demand for Skype's product.
CONCLUSION:-

Many companies looks mergers and acquisitions as the solution to their

problems. But before going for merger and acquisition, they do not
introspect themselves. Before an organization can go for mergers and
acquisitions, it needs to consider a lot. Both the parties, viz. buyer and
seller need to do proper research and analysis before going for mergers
and acquisitions. Otherwise it will all lead to a way of failure.

Several initiatives can be undertaken in order to prevent the failure of

mergers and acquisitions. Following are those:
Continuous communication is of utmost necessary across all levels
employees, stakeholders, customers, suppliers and government leaders.

Managers have to be transparent and should always tell the truth. By this
way, they can win the trust of the employees and others and maintain a
healthy environment.

During the merger process, higher management professionals must be

ready to greet a new or modified culture. They need to be very patient in
hearing the concerns of other people and employees.

Management needs to identify the talents in both the organizations who

may play major roles in the restructuring of the organization.
Management must retain those talents.
REFERENCES:-

https://blog.ipleaders.in/10-biggest-ever-merger-
acquisition-deals-in-india/
http://www.globoforce.com/gfblog/2012/6-big-mergers-
that-were-killed-by-culture/
http://www.jaguarlandrover.com/gl/en/about-
us/international-manufacturing/
https://www.ebayinc.com/our-company/our-history/
http://www.ebay.com/gds/History-of-
Ebay-/10000000008868464/g.html
http://www.mbaskool.com/business-
articles/marketing/1737-tata-motors-jaguar-land-
rover-jlr-the-success-story.html
www.tatamotors.com/press/tata-motors-completes-
acquisition-of-jaguar-land-rover/