SOURCES OF VALUE CREATION IN MERGER & ACQUISITION
Members of group -A1-SOUMYALIN SANTY2-HINA SULTANA3-SUMIT PARIDA4-SRADHANJALI BEHERA
INTRODUCTIONWHAT IS VALUE?Value: Originated from a French word: “valoir” which means ‘be worth’.WHAT IS VALUE CREATION?Value creation means performing activities thatIncreases the value to customers and also to theShareholders.
Value Creation through M&A – What it means? • Synergies & Economies of Scale • Gain access to new markets, customers, products • Diversification of Risks • Access to New Technology and Knowledge • Ability to limit competition / gain market share
Value Creation Through M&A – Case Study Company B Company A Primarily North India Focussed Strong in Western India
What benefits will potentially accrue if Company A and B were to merge? Ability to sell bundled product (inverters & batteries) Organic Expansion – Access to newer markets for Battery Manufacturing in different products (North & North India West) Product Use of common diversification / distribution network Season neutral Value Creation Through Mergers &PwC 20116 April Slide 6 Acquisitions
“Value Creation” through this transaction..... Company A+B = Enhanced revenue & customer base + product diversification + cost savings + production efficiencies + new markets ultimately leading to… ‘Improved shareholders wealth’ Value Creation Through Mergers &PwC Slide 7 Acquisitions
SOURCES OF VALUE CREATION IN M&AThere are four sources or models which create values- 1- ANSOFF’S PRODUCT MARKET MATRIX MODEL 2- BCG MATRIX MODEL 3- GRAND MATRIX MODEL 4- INDUSTRY/PRODUCT LIFE CYCLE Value Creation Through Mergers &PwC 20116 April Slide 8 Acquisitions
ANSOFF’S PRODUCT MATRIX Value Creation Through Mergers &PwC 20116 April Slide 9 Acquisitions
Market Guru Phillip Kotler divided this into 3 stages:• 1st stage is Intensive Growth Strategy:A. MARKET PENETRATIONB. MARKET DEVELOPMENTC. PRODUCT DEVELOPMENT• 2nd stage is Integrative Growth Strategy:A. BACKWARD INTEGRATIONB. FORWARD INTEGRATIONC. HORIZONTAL INTEGRATION• 3rd stage is diversification growth strategy:A. CONCENTRIC DIVERSIFICATIONB. HORIZONTAL DIVERSIFICATIONC. CONGLOMETRIC DIVERSIFICATION Value Creation Through Mergers &PwC 20116 April Slide 10 Acquisitions
Value Creation Through Mergers &6 April 2011 Slide 11 Acquisitions
1.STAR- STRATEGIES APPLIED ARE INTENSIVE STRATEGY, INTEGRATIVESTRATEGY AND CONCENTRIC.2.QUESTION MARK-STRATEGIES APPLIED ARE INTENSIVE GROWTHSTRATEGY3.DOG- STRATEGIES APPLIED ARE DIVESTURE AND LIQUIDATION.4.CASH COW- CONCENTRIC CONGLOMETRIC & HORIZONTALDIVERSIFICATION.
GRAND MATRIX• THERE ARE 4 STAGES OF GRAND MATRIX1. STAGE 1-STAR IN BCG MATRIX2. STAGE 2-QUESTION MARK3. STAGE 3-DOG4. STAGE 4-CASH COW Value Creation Through Mergers &PwC 20116 April Slide 13 Acquisitions
Value Creation Through Mergers &6 April 2011 Slide 14 Acquisitions
CONCLUSIONFrom the above discussion we come to aconclusion that for creating values for theAcquirer’s they remain an important part ofany company’s long term value creationStrategy. The benefits of a well thought outM&A strategy can be a source of competitive advantage. Value Creation Through Mergers &PwC 20116 April Slide 16 Acquisitions
THANK YOUANY QUESTIONS………….? Value Creation Through Mergers &PwC 20116 April Slide 17 Acquisitions