Bharat Singh-09 Pankaj Arya-22 Rajat sharma-25 Puninder Bhatia-24 Gaurav Shah-13 Neha Singh-20
Company Brief-Ssangyong
Genesis: 1954 in Korea Headquartered in Seoul Product portfolio includes: -Premium SUVs , RVs, luxury sedans, Pick ups, Vans Started as 2 different companies Ha Dong-hwan Motor Workshop (1954) and Dongbang Motor Co (1962) ;Merged into Ha Dong-hwan Motor Co (1963) Acquired by Ssangyong Business Group in 1986 Technology partnership with Daimler-Benz in 1991 to develop SUVs
Economies of scale Low cost combined component sourcing Economies of scale for global sourcing Reduction in time to market Economies of scope Joint R&D efforts Sharing of product platforms, engines and powertrains Reduction in product development time Mahindra now has greater access to EU, Russia, SA, ME, Asia Ssangyong has access to newer emerging markets Mahindra also access to new products, established distribution channels
The Merger:
A friendly takeover
Ssangyong was bankruptcy protected in 2010 after running into financial losses since 2000 Ssangyong was not new to acquisitions :
A horizontal merger:
Ssangyong had premium SUVs and Sedans. M&M had entry level SUVs and acquisition of Ssangyong completes M&M product range Gave M&M added benefits of network externalities Cost savings through economies of production, sales & distribution, logistics etc
M&M gets 70% stake (US$378 Mn in new shares);M&M assumes US $ 85Mn debt in its B/S
Post-acquisition Strategies
Joint R&D and production strategy: a) Began developing a family of six small engines from 1 litre to 1.6 litres. b) The three and four-cylinder engines will be used by both companies. Joint Sourcing Strategy: a) Finding the right sources at an optimum cost, the right technology and quality for our requirements
Mahindra & Mahindra has appreciated 20.3% CAGR while the benchmark BSE Sensex has increased a mere 5.13%
Recent Happening
India specific happenings: Mahindra started reaping direct benefits from the deal in India Rexton was launched with price of 17.7 Lac for base version and Top model with 19.7 Lac Mahindra invested Rs.630 million at Chakan Plant to assemble Rexton
Learnings:
The way a financially unstable company can be acquired debt free, by using acquisition value to acquire majority stake -Bargain that is only possible when acquiring a distressed company The steps taken by both parties i.e. formulating joint sourcing and product development strategies to actually materialize the synergies estimated. The valuation of the deal will depend not only the standalone value but the potential value created by the joint organization. Here, on standalone basis seems that Mahindra overpaid but on over all analysis the price is okay.
Learnings: Contd.
Sometime it is better not to completely integrate companies from two different cultures. Here, Ssangyong was allowed to operate as a separately listed company with Korean managers as M&M was interested mostly in product portfolios and R&D capabilities only. This approach has saved lot of integration issues. The steps involved in the takeover, right from due diligence, board and shareholder approval to structuring the deal to suits all stakeholder needs. The process of obtaining from the creditors, both secured and unsecured and in the case of a distressed company, from the bankruptcy courts as well.
Thank You!