Mergers & Acquisitions

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.

 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.

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

i. Increase Market Share.

ii. Economies of scale i. Clash of corporate
cultures
iii. Profit for Research and
development. ii. Increased business
complexity
iv. Benefits on account of
iii. Employees may be
tax shields like carried
resistant to change
forward losses or
unclaimed depreciation.
v. Reduction of
competition.

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 ACQUISITION:WHY & WHY NOT
WHY IS IMPORTANT PROBLEM WITH ACUIQISITION

i. Increased market
share.
ii. Increased speed to i. Inadequate
market valuation of target.
iii. Lower risk comparing ii. Inability to achieve
to develop new synergy.
products.
iii. Finance by taking
iv. Increased
diversification huge debt.
v. Avoid excessive
competition

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REASONS /ADVANTAGES 7

Size and Synergy

Increased revenue/Increased Market Share

Economies of Scale

Helps to face competition

Revival of sick units

Faster growth rate

Taxes Advantages

Finance related advantages

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TYPES OF MERGER

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TYPES OF ACQUISITION

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 Why India?

Dynamic government policies

Corporate investments in industry
Economic stability
Ready to experiment attitude of
Indian industrialists
PROCESS OF MERGER & ACQUISITION IN INDIA:
The process of merger and acquisition has the following steps:
i.Approval of Board of Directors
ii.Information to the stock exchange
iii.Application in the High Court
iv.Shareholders and Creditors meetings
v.Sanction by the High Court
vi.Filing of the court order
vii.Transfer of assets or liabilities
viii.Payment by cash and securities

Maximum Waiting period:180 days from the filing of notice(or the order of
the commission - whichever earlier).
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
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
MAJOR MERGER & ACQUISITION BY INDIAN COMPANIES:
Transaction value (in
Year Purchaser Purchased
mil. USD)
2010 Hindalco Novelis 5,982
2007 Tata Steel Corus Group 12,000
2006 Dr. Reddy's Labs Beta pharm 597
2006 Ranbaxy Labs . Terapia SA 324

2006 Suzlon Energy Hansen Group 565

Daewoo Electronics
2006 Videocon 729
Corp
Kenya Petroleum
2008 HPCL 500
Refinery Ltd
2006 VSNL. Teleglobe 239
2005 Centurion Bank Bank of Punjab 82.1
Centurion Bank of
2008 HDFC Bank 206
Punjab
2008 Tata Motors Jaguar Land Rover 2.3 billion
Reliance Petroleum
2009 Reliance Industries 1.6 billion.
Limited 15
WORLDS BIGGEST M&A :
DATE PURCHASER PURCHASED DEAL VALUE($
mm)
05/03/2009 Liberty DIRECTV Group Inc. 12,735
Entertainment Inc.
22/06/2009 Frontier Airlines Republic Airways 568.0
Holdings Inc Holdings Inc
25/3/2010 Bharti Airtel Zain 10.7 blln
31/12/2008 ONGC Imperial 2.80 billion
26/03/2009 NTT Docomo Tata Teleservices 2.70 billion
2/02/2010 Kraft Cadbury 19.6billion
11/11/2009 Hewlett Packard 3Com 2.70 billion

28/04/2010 Hewlett Packard PALM 1.2blln

Expected in M&M Ssangyong Motor 500

December,
2010
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 January 30, 2007
Largest Indian take-over
After the deal TATAS
became the 5th largest
STEEL co.
100 % stake in CORUS
paying Rs 428/- per share
1. Tata Steel-Corus: $12.2 billion
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
TELECOM sector
11th February 2007
2nd largest
takeover deal
67 % stake holding
in hutch

Image: The then CEO of

Vodafone Arun Sarin visits
Hutchison
Telecommunications head
 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
Image: Malvinder Singh (left), ex-CEO
of Ranbaxy, and Takashi Shoda,
president and CEO of Daiichi Sankyo.
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
15th biggest drugmaker
 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.
 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
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.
 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
8. Tata Motors-Jaguar Land
outside a dealership in
Manchester, England.
 9. Sterlite-Asarco: $1.8
Maybillion
2008
Acquisition deal
Sector copper

Image: Vedanta Group

chairman
Anil Agarwal.
 10. Suzlon-RePower: $1.7
May billion
2007
Acquisition deal
Energy sector
Suzlon is now the
largest wind turbine
maker in Asia
5th largest in the
world.

Image: Tulsi Tanti, chairman

&
M.D of Suzlon Energy
Ltd.
 11. RIL-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.