Acquisition •When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition. •Acquisition is generally considered negative in nature
SYNERGIES RELATED TO ACQUISITION Staff reductions Acquiring new technology Improved market reach and industry visibility
Takeovers A corporate action where an acquiring company makes a bid for an acquiree . If the target company is publicly traded, the acquiring company will make an offer for the outstanding shares.
Takeover might be : Takeover Friendly Hostile Takeover Target companysA takeover attempt that is management and board of strongly resisted by the directors agree to a merger or target firm acquisition by another company.
WHY SHOULD FIRMS TAKEOVER? To gain opportunities of market growth more quickly. To seek to gain a more dominant position in a national or global market To acquire the skills or strengths of another firm. To acquire a speedy access to revenue To diversify its product or service range to protect itself against downturns in its core markets
Major M&A Deals Undertaken Abroad by India Inc. USD 12.1 Tata Steel buys Corus Plc billion Hindalco acquired Novelis USD 6 Inc. billion USD 2.3 Tata buys Jaguar and Land Rover billion USD 1.58 Essar Steel acquired Algoma Steel billion Suzlon Energy Ltd. acquires USD 1.6 REpower billion 7
•Location: Dearborn,Michigan•Founded: 1903 by HenryFord•Competitors: GeneralMotors, Toyota•Brand names: Lincoln,Mercury, Volvo, Mazda,Jaguar and Land Rover Henry Ford and his Model T•CEO: Alan Mulally
Jaguar: The ups and downs 1922 - Founded in in Blackpool as Swallow Sidecar company 1960 - Jaguar name first appeared in 1935 1975 - Nationalized in due to financial difficulties 1984 - Floated off as a separate co in the stock market 1990 - Taken over by Ford
Jaguar: The ups and downs A statement of ultra luxury Holds Royal warrants Rarely advertised Ford’s formula one entry since 1990s
Why acquire Jaguar Long term strategic commitment to automotive sector 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 Increased business diversity across markets and product segments Unique opportunity to move into premium segment with access to world class iconic brands. Jaguar offers a range of “Performance/Luxury” vehicles to broaden the brand portfolio. Sharing of best practices between Jaguar, Land Rover and Tata Motors in the future
The Deal Process July 2007- Announcement from Ford that it plans to sell Land Rover and Jaguar. August 2007 - Major bidders are identified
The Deal ProcessLikely buyers Tata Motors M&M Ceribrus capital Management TPG Capital Apollo Management
The Deal Process India’s Tata Motors and M&M arrive as top bidders ($ 2.05b & $ 1.9b) Jan 2008 – Ford announces Tata as the preferred bidders March 2008 - Ford agreed to sell their Jaguar Land Rover operations to Tata Motors. June 2008 – The acquisition is complete
TATA MOTORS – A SNAPSHOT TATA GROUP – 150 YEAR OLD Previously Tata Engineering and Locomotive Company, Telco Tata Motors’s break-even point for capacity utilization is one of the best in the industry worldwide listed on the New York Stock Exchange in 2004
Ratan tata says• We have enormous respect for the two brands and will endeavor to preserve and build on their heritage and competitiveness, keeping their identities intact, he said in a statement.
Why acquire JLR?Is TATA catching a falling knife…or Long term strategic commitment to automotive sector. Opportunity to participate in two fast growing auto segments. Increased business diversity across markets and products. Land rover provides a natural fit for TML’s suv segment. Jaguar offers a range of “performance/luxury” vehicles to broaden the brand portfolio. Benefits from component sourcing,design services and low cost engineering.
Tata and the dream… NEED FOR GROWTH In the past few years, the Tata group has led the growing appetite among Indian companies to acquire businesses overseas in Europe, the United States, Australia and Africa - some even several times larger - in a bid to consolidate operations and emerge as the new age multinationals. Tata Motors is Indias largest automobile company, with revenues of $7.2 billion in 2006-07. With over 4 million Tata vehicles plying in India, it is the leader in commercial vehicles and the second largest in passenger vehicles.
Result ACTUAL 2.3 BILLION $ VALUATION 2.80 BILLION $