International Business Assignment on Mergers &AcquisitionSubmitted to:- Submitted by:-Mahek Goreja Vipul Pirodia
Mergers• Merger is defined as combination of two or more companies into a single company where one survives and the others lose their corporate existence.• Merger is also defined as amalgamation i.e. it is the fusion of two or more existing companies.• The amalgamating companies loose their identity and the shareholders of the amalgamating companies become shareholders of the amalgamated company.
Acquisitions• Acquisition in general sense is acquiring the ownership in the property. In the context of business combinations, an acquisition is the purchase by one company of a controlling interest in the share capital of another existing company.
Ways to takeover Friendly Takeover:-The acquiring firm makes a financial proposal to the target firm’smanagement and board. This proposal might involve the merger of the twofirms, the consolidation of two firms, or the creation of parent/subsidiaryrelationship. Hostile Takeover:-A hostile takeover may not follow a preliminary attempt at a friendlytakeover. For example, it is not uncommon for an acquiring firm to embracethe target firm’s management in what is colloquially called a bear hug
Leveraged Buyouts.These are a form of takeovers where the acquisition is fundedby borrowed money. Oftenthe assets of the target company are used as collateral for theloan. This is a common structure when acquirerswish to make large acquisitions without having to commit toomuch capital, and hope to make the acquiredbusiness service the debt so raised. Bailout Takeovers.Another form of takeover is a ‘bail out takeover’ in which aprofit making company acquiresa sick company. This kind of takeover is usually pursuant to ascheme of reconstruction/rehabilitation with theapproval of lender banks/financial institutions. One of theprimary motives for a profit making company toacquire a sick/loss making company would be to set off of thelosses of the sick company against the profits ofthe acquirer, thereby reducing the tax payable by theacquirer. This would be true in the case of a mergerbetween such companies as well.
Its USP… Gaining Cost EfficiencyWhen two companies come together by merger or acquisition, the joint company benefits in termsofcost efficiency. A merger or acquisition is able to create economies of scale which in turn generates cost efficiency. When a firm wants to enter a new market When a firm wants to introduce new products through research and development
Cont..When a forms wants achieve administrative benefits To increased market shareTo lower cost of operation and/or production To gain higher competitiveness For Financial leveraging To improve profitability and EPS
Its faliures…• There are several reasons merger or an acquisition failures. Some of the prominent causes are summarized below:If a merger or acquisition is planned depending on the (bullish) conditions prevailing in the stock market, it may be risky. • There are times when a merger or an acquisition may be effected for the purpose of "seeking glory," rather than viewing it as a corporate strategy to fulfill the needs of the company. Regardless of the organizational goal, these top level executives are more interested in satisfying their "executive ego.“ • Cont..
In addition to the above, failure may alsooccur if a merger takes place as a defensivemeasure to neutralize the adverse effects of globalization and a dynamic corporate environment. Failures may result if the two unifying companies embrace different "corporate cultures.“ It cuts the job s of employee for examplewhen P&G merge with GILLETTE 6000 jobs were cut .
Tata Steel’s mega takeover of European steelmajor Corus for $12.2 billion. The biggest ever foran Indian company. This is the first big thingwhich marked the arrival of India Inc on theglobal stage.
Vodafone’s purchase of 52% stake in Hutch Essar forabout $10 billion. Essar group still holds 32% in the Jointventure.Hindalco of Aditya Birla group’s acquisitionof Novellis for $6 billion.Ranbaxy’s sale to Japan’s Daiichi for $4.5 billion. Sing brothers soldthe company to Daiichi and since then there is no real good newscoming out of Ranbaxy.ONGC acquisition of Russia based Imperial Energy for$2.8 billion. This marked the turn around of India’shunt for natural reserves to compete with China.
P&G to acquire Gillette for $57bnProcter & Gamble is to buy Gillette for $57bn(£30.2bn) and create the worlds largest stable ofconsumer brands. Tata Motors acquisition of luxury carmaker Jaguar Land Rover for $2.3 billion. Thiscould probably the most ambitious deal after theRanbaxy one. It certainly landed Tata Motors into lotof trouble.
Reliance Industries taking over ReliancePetroleum Limited (RPL) for 8500 croresor $1.6 billion.HDFC Bank acquisition of CenturionBank of Punjab for $2.4 billion.