Mergers and Acquisitions

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Mergers and Acquisitions

  1. 1. Mergers & AcquisitionsPresented by: Group - 4SuhaibPrathibaPooja SinghNirajRaghuram BhandhariNitin G. Mahendrakar
  2. 2. M & A –An Overview* Mergers and Acquisitions M&A have become verypopular all over the world in last 3 decades.* India born Laxmi Nivas Mittal has taken over Arcelorin Europe, to form a largest Steel making Company inEurope-”Arcelor-Mittal.”(130 Mtons/Year-Global) .* Tata Steel-Corus(UK) Acquisition by Tata Steel for$12 Billion is very significant and a landmark for theIndian Corporate World. (28 Mtons/Annum-2006)2
  3. 3. Types of Mergers1. Horizontal2. vertical3. Conglomerate4. concentric3
  4. 4. M & A ProcessPre acquisition reviewSearch and screen targetsInvestigate and value the targetAcquire through negotiationPost merger integration4
  5. 5. Reasons for M & A• Increased Market Power• Overcome Barriers to Entry• Lower Cost and Risk of New ProductDevelopment• Increased Speed to Market• Reshaping Competitive Scope5
  6. 6. Advantages of M & A• Drives growth• Enhance profitability• Mitigates risk• Cut down competiton• Reduces tax liability6
  7. 7. Example of Merger7
  8. 8. EXAMPLE OF MERGER8
  9. 9. ABOUT BOR AND MERGER• ICICI OFFERED TO BOR9
  10. 10. WHY MERGER OF BOR WITH ICICI ???10
  11. 11. ICICI AFTER MERGER• PE RATIO 22.97 10/06/10• EPS(RS)36.10 MAR 2010• SALES(RS crore)5826.98 MAR 2010• FACE VALUE RS 10• NET PROFITMARGIN(%)9074 MAR 2009• ROAE (%)7.58 MAR200911
  12. 12. AcquisitionAn acquisition may be defined as an act ofacquiring effective control by one companyover the assets or management of anothercompany without any combination ofcompanies12
  13. 13. Legal procedure*Sec 391 – 394 of Indian companies act coversM & A.*Examination of object clause*Approval from the board*Intimation to share holders and creditors.*Approval from share holders and creditors.- 75% of SHand creditors to approval*Application to National Company Law Tribunal (NCLT)• Petition to NCLT for approval• Transfer of assets and Liabilities• Issuance of shares13
  14. 14. Example of Acquisition14
  15. 15. TATA acquiring CORUS15
  16. 16. Former Name : Tata Iron and Steel CompanyType : Public BSE (500470)Founded : 1907Chairman : Ratan TataIndustry : SteelOverview of the AcquirerFounder : Jamshedji Tata12345678Headquarter : Jamshedpur, Jharkhand, India16
  17. 17. Name : CorusParent : Tata Steel, member of Tata GroupType : SubsidiaryFounded : 1999CEO : Kirby AdamsIndustry : SteelCourse : SML730Organisation ManagementDMS. IIT DelhiOverview of the AcquiredFormation : Merger of British Steel Corporation & Koninklijke Hoogovens N.V.12345678Headquarter : London, England, UK17
  18. 18. Reasons for bid from TATA Group To tap European mature market Cost of acquisition is lower than setting up greenfield plant and marketing and distribution channel Acquisition would help Tata to feature in top 10players in the world of steel industry Technology benefit Economies of scale Corus held a number of patents and R&D facilities
  19. 19. Reasons for CORUS to accept bid Saturated market of Europe Decline in market share and profit Total debt of Corus was 1.6 Bn GBP High cost of production, as there was a scarcity of rawmaterials19
  20. 20. Counter Bid• Nov 18, 06 : The Brazilian Steel Group CSNapproaches Corus With an offer of 475 pence/share• Nov 27, 06 : Board of Corus decides to give moretime for shareholders to decide whether it issueforward a formal offer• Dec 18,06 : Tata increases its original bid for Corus500 pence/share, then CSN made its counter bid at515 pence/share in cash• Jan 29, 07 : CSN raised its bid to 603 pence/share• Jan 31, 07 : Tata had agreed to offer Corus investors608 pence per share in cash• Apr 02, 07 : Tata won over CSN, to acquire Corus 20
  21. 21. How the deal was funded.???21
  22. 22. Effect on stock price of CORUS Corus Stock Price moved upwards as the bids moved upward22
  23. 23. Effect on stock price of TATA Tata steel stock moved downwards showing some volatility23
  24. 24. Effect on stock price of both TATA and CORUS From the announcement date till the deal completion, Corusstock gained 67% and Tata Steel stock lost around 12%24
  25. 25. Result of the deal On July 23, 2007, Tata Steel stock reached 721.00 onthe Bombay Stock Exchange’s (BSE) stock Sensex afterhitting a lowest of 399.00 on March 8, 2007. Tata Steelwas one of the market leaders for the BSE Sensex up 27%in 2007. Currently TATA’s are the 7th largest producer ofsteel in the world. TATA’s credit ratting moved up from BBB to BB.
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