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Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
Valuation of merger & acquasition in india
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Valuation of merger & acquasition in india

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valuation on merger and acquisition, hypothesis testing on merger & acquisition, t-test on valuation on M/A, mode of financing on M/A, top ten merger and acquisition, merger & acquisition in …

valuation on merger and acquisition, hypothesis testing on merger & acquisition, t-test on valuation on M/A, mode of financing on M/A, top ten merger and acquisition, merger & acquisition in diversified field.

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  • 1. A COMPREHENSIVE STUDY ON “MERGER AND AcquisitiON” PRESENTED BY:-SPECIAL THANKSTO, ANJALI GUPTAPROF. SHYAMSUNDER REHANA MINSARIYASINGH Represented from Laxmi Institute of Management, Sarigam
  • 2. MERGER & ACQUISITON CHANGING INDIAN CORPORATE SECTOR MNCs have actively participated in M&A process : to get market entry or to strengthen their presence to quickly get access to various complementary assets Relatively cheaper access to capital to capture huge Indian market at relatively low cost of capital to improve manufacturing capabilities OTHERS: The reliance of Indian Corporate Sector on Foreign Technology purchase has increased To stand up to transnational with their strong and internationally recognized brands
  • 3. INTRODUCTION
  • 4.  Meanings: MERGER: When two companies become one entity with a new name, and agree upon shared control in the management of the new company, a merger is said to have taken place ACQUISITION: When two companies become one, but with the name and control of the acquirer, and the control goes automatically into the hands of the acquirer. An acquisition, also known as a takeover or a buyout, is the buying of one company by another
  • 5. TYPES OF M&A Horizontal Merger Vertical Merger Conglomerate Merger Congeneric Merger Reverse Merger Accretive Merger Dilutive Merger Triangular Merger Reverse Triangular Merger Cross Border Acquisition
  • 6. PROCESS OF M&A PLANNING PHASE  IMPLEMENTATION PHASE Develop Business Plan  Search companies for Acquisition Develop Acquisition Plan  Screen & prioritize Potential companies  Initiate Contact with Target  Negotiate the deal  Develop Integration plan  Obtain necessary approval & close the deal  Implement Integration
  • 7. MODE OF FINANCING Cash Financing: Leverage or Buyouts Exchange Ratio Internal AccrualFactoringHybrids
  • 8. REASONS FOR FAILURE OF M&A Cultural Diversity leads to Differences Negligence in Due Diligence Process Inefficiency of Management Improper valuation of acquisition deal Difficult to meet with the complexity of rules and regulations
  • 9. RESEARCHMETHODOLOGY
  • 10.  OBJECTIVES: To apply theoretical concept of merger and acquisition in practical manner. To study the impact on Companies’ Financial Position after acquisition or after being acquired. To analyze the effect of going global through merger and acquisition on Investors’ Earnings respectively. To evaluate the worthiness of the company before and after merger and acquisition.
  • 11.  TOOLS Ratio Analysis T- Test HYPOTHESIS:• Ho1: The merged companies did not achieve better liquidity after merger and acquisition. The parameters used are current ratio and quick ratio.• Ho2: The merged companies did not achieve better solvency after merger and acquisition. The parameters used are debt equity ratio, interest coverage ratio, long term debt equity and total assets to owners fund.• Ho3: The merged companies did not achieve better profitability after merger and acquisition.• Ho4: After the merger and acquisition, Management of the focused companies got inefficient The parameter used as dividend per share, operating profit per share:• Ho5: Return on capital employed did not change after merger and acquisition.• Ho6: Operating profit margin did not show any change after merger and acquisition.• Ho7: Average cost of capital did not show any change after merger and acquisition.
  • 12.  LIMITATIONS: The Project emphasis on a limited sample One serious limitation of the study is, that it is quite difficult to analyzes the in-depth study of the financial data, as some acquirer company is cross-bordered based firm so their accounting standard and methods are different There are many tools and methods for evaluating the Merger and Acquisitions but we had used only pre and post analysis
  • 13. SEGMENTOVERVIEW
  • 14. Year Deal ($ mn) Sector Acquirer Target2007 12040 steel Tata steel Corus2008 2600 Metals Sterlite industries Asarco (India) Ltd2008 4600 Pharmaceutical Daiichi sankyo co. Ranbaxy ltd Laboratories Ltd.2009 2591 Oil $ gas ONGC Ltd Imperial energy corp2009 591 IT Tech Mahindra Ltd Mahindra satyam
  • 15. CORPORATE STAKE METHODS OF FINANCING SYNERGY EFFECT HOLDING1. Tata steel 100%  Leveraged Buyout  Low Cost with High-tech  Internal Accrual Production  Strong Culture fit2. Sterlite 100%  Net Cash  Expansion of business Industries  Increase in market share (India) Ltd3. Daiichi sankyo 51%  Net Cash  Competitive Advantage co. Ltd  Cost Benefit  Excellence in R&D  Strong IP4. ONGC Ltd 100%  Loan from Parent Company  Increase in market Share  Help from Government5. Tech 51%  Buyout  Tax Benefit Mahindra Ltd  Exchange Ratio  Right Time at Right Price
  • 16. MARKET SHAREOF COMPANIES
  • 17. crude oil production10% 9% ONGC Oil 81% Pvt Natural gas production 7% 0 16% ONGC Pvt 77% Oil
  • 18. FINDINGS
  • 19. Findings About Acquisition By TATA Steel Ltd of Corus Plc.Hypothesis Based on Assessment Result RemarkHo1 Liquidity T-test<2tail Reject Better Liquidity critical valueHo2 Solvency T-test<2tail Reject Better Solvency critical valueHo3 Profitability T-test<2tail Reject Better Profitability critical valueHo4 Management T-test<2tail Reject Improve in Management efficiency critical value EfficiencyHo5 Return on T-test<2tail Reject Change in return on capital Capital critical value employed EmployedHo6 Operating Profit T-test<2tail Reject Change in operating profit critical valueHo7 Average Cost of T-test<2tail Reject Change in interest Capital critical value Coverage
  • 20. Findings About Acquisition By Sterlite Industries (India) Findings About Acquisition By Sterlite Industries Ltd of ASARCO (India) Ltd of AsarcoHypothesis Based on Assessment Result RemarkHo1 Liquidity T-test<2tail Reject Better Liquidity critical valueHo2 Solvency T-test<2tail Reject Better Solvency critical valueHo3 Profitability T-test<2tail Reject Better Profitability critical valueHo4 Management T-test<2tail Reject Improve in Management efficiency critical value EfficiencyHo5 Return on T-test<2tail Reject Change in return on capital Capital critical value employed EmployedHo6 Operating Profit T-test<2tail Reject Change in operating profit critical valueHo7 Average Cost of T-test<2tail Reject Change in interest Capital critical value Coverage
  • 21. Findings About Acquisition By Daichii Sankyo of Ranbaxy LabHypothesis Based on Assessment Result RemarkHo1 Liquidity T-test>2tail Accept Need to improve the critical value Liquidity PositionHo2 Solvency T-test<2tail Reject Better Solvency critical valueHo3 Profitability T-test>2tail Accept Low Profitability. Need to critical value improveHo4 Management T-test=2tail Neither At par efficiency critical value accept nor rejectHo5 Return on T-test<2tail Reject Change in return on capital Capital critical value employed EmployedHo6 Operating Profit T-test>2tail Accept No change in operating critical value profitHo7 Average Cost of T-test<2tail Reject Change in interest Capital critical value Coverage
  • 22. Findings About Acquisition By ONGC Ltd of Imperial Energy CorpHypothesis Based on Assessment Result RemarkHo1 Liquidity T-test<2tail Reject Better Liquidity critical valueHo2 Solvency T-test<2tail Reject Better Solvency critical valueHo3 Profitability T-test<2tail Reject Better Profitability critical valueHo4 Management T-test=2tail Neither At Par efficiency critical value accept nor rejectHo5 Return on T-test<2tail Reject Change in return on capital Capital critical value employed EmployedHo6 Operating Profit T-test<2tail Reject Change in operating profit critical valueHo7 Average Cost of T-test<2tail Reject Change in interest Capital critical value Coverage
  • 23. Findings About Acquisition By Tech Mahindra Ltd. Of Mahindra SatyamHypothesis Based on Assessment Result RemarkHo1 Liquidity T-test<2tail Reject Better Liquidity critical valueHo2 Solvency T-test<2tail Reject Better Solvency critical valueHo3 Profitability T-test<2tail Reject Better Profitability critical valueHo4 Management T-test=2tail Neither At Par efficiency critical value accept nor rejectHo5 Return on T-test<2tail Reject Change in return on capital Capital critical value employed EmployedHo6 Operating Profit T-test<2tail Reject Change in operating profit critical valueHo7 Average Cost of T-test<2tail Reject Change in interest Capital critical value Coverage
  • 24. Suggestions
  • 25.  Though it was observed in TATA Steel Ltd before, that its profitability is better than premerger, still it needs to be attentive and careful about its cost reduction system as Gross Profit Margin & Return on Long Term Fund are showing a negative trend The Sterlite unit and Tech Mahindra must reduce the days of credit facility made available to their customers as its credit policy is too liberal during post M&A project The Tech Mahindra and Others should reduce their investment in inventory by using Inventory Control Techniques. These units are required to use the latest Supply Chain Techniques like Just-In- Time, Efficient Customer Response and Quick Response which focus on reducing the inventory level and thereby reducing capital required the inventory. Though it was observed in ONGC Ltd before, that its profitability is better than premerger, still it needs to be attentive and careful about its cost reduction system as Gross Profit Margin & Return on Long Term Fund are showing a negative trend
  • 26. CONCLUSION
  • 27.  So, it is concluded that: Steel Industry is highly capital intensive sector and the whole investment of TATA Steel Ltd cannot be capitalized in a short duration Acquisition of ASARCO Ltd. Is not much effective for Sterlite Industries Ltd. For Daichii Sankyo, M&A benefits the investors at a greater extent For ONGC, the tool of M&A has not proved as effective as it was expected Tech Mahindra can achieve success in long term as company is providing maximum return on investment and also shows a positive sign in various management parameters. Hence, Mergers and Acquisitions comes in all shapes and sizes, investors need to consider the complex issues involved in mergers and acquisitions.

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