Mergers and Acquisitions: IS ITRIGHT STRATEGIC MOVE FORBUSINESS? Presented by Ashok Gupta Daljinder Singh Vishesh Vij Anmol Thaman
MERGER A merger is when you integrate the business with another and share control of the combined businesses with other owner. A merger involves the mutual decision of two companies to combine and become one entity. i.e. a + b = cMerger: 2 firms combine all Assets and LiabilitiesAcquirer TargetUsually take a new name
ACQUISITIONAcquisition may be defined as an act ofacquiring effective control over assets ormanagement of a company by anothercompany without any combination ofbusinesses or companies. i.e. a + b = a
Distinction between mergers and acquisitions Mergers Acquisitions• Both firms share the • One firm acquires the liabilities. liabilities of the other firm completely• Both firms together • Business continues create a new firm under under the buyer firm a new name. name.• Both firms have a say in • The target firm has no the transactions of the say in the transaction new firm
Regulations governing Merger and Acquisition in India• The provision of the Companies Act,1956.• The Competition Act ,2002 • The Foreign Exchange Management Act,1999.• The Income Tax Act,1961• SEBI take over code,1994
Legal procedures• Permission for merger: The amalgamation of two companies should be permitted under their memorandum of association. The acquiring company should have the permission in its object clause to carry on the business of the acquired company.• Information to the stock exchange: The acquiring and the acquired companies should inform the stock exchanges (where they are listed) about the merger.
• Approval of board of directors: The board of directors of the individual companies should approve the draft proposal.• Application in the High Court: The draft proposal approved by the board of directors should be made to the high court.• Shareholders and creditors meetings: The individual companies should hold separate meetings of their shareholders and creditors for approving the amalgamation scheme.• Sanction by the High Court: The amalgamation is sanctioned after it is satisfied that the scheme is fair and by the high court.
Vodafone-Hutchison Essar: $11.1 billion• On February 11, 2007, Vodafone agreed to buy out the controlling interest of 67% held by Li Ka Shin• Holdings in Hutch-Essar for $11.1 billion.• This is the second-largest M&A deal ever involving an Indian company.• Vodafone Essar is owned by Vodafone 52%, Essar Group 33% and other Indian nationals 15%.
About HUTCH• Hutchison Whampoa and its Max Group, established a company 1994• Later in 2000 Essar acquired its 33% share• In February 2007, Hutchison Telecom announced agreement with a Vodafone Group to sell 67% shares for $11.1 billion.• Later in 2011 Vodafone Group buys out its partner Essar for $5.46 billion
About VODAFONE• Vodafone Group is a British multinational telecommunications company• It has headquartered in London, United Kingdom.• It is world’s second largest telecommunication company in the world.
Why Merged?• Vodafone wanted to expand into the Asian markets.• Hutch was Fourth largest mobile operator in India with 24.41million subscribers• Hutch wanted to sell –mutual distrust.• Li Ka-Shing thought it the right time to quit Indian operations to finance other operations.
About Air Deccan• It is a low cost subsidiary of Deccan Aviation.• It was started by Captain G R Gopinath.• The company operates only on domestic routes in India.• In August 2008, Air Deccan has merged with another Indian airline, Kingfisher Airlines for Rs.550 crores.
About Kingfisher• Kingfisher Airlines, through its parent company UB Group.• The airline started commercial operations on 9 May 2005 .• Kingfisher Airlines serves 25 domestic destinations within India .
Why Merged?• Kingfisher’s merged with Air Deccan to get entity rights to fly international.• Any Indian airline requires five years of domestic flying experience and a fleet of 20 aircraft to get permission to fly international.• Kingfisher Airlines was only two years old in 2007, when it acquired over four-year-old Air Deccan.
Tata Steel-Corus: $12.2 billion• On January 30, 2007, Tata Steel purchased a 100% stake in the Corus Group at 608 pence per share in an all cash deal, cumulatively valued at $12.2 billion.• The deal is the largest Indian takeover of a foreign company till date and made Tata Steel the worlds fifth-largest steel group.
Google bought YouTube ($1.65B in 2006)• Google bought a rival. Why??• YouTube had four times as many hits as Google Video• YouTube streamed nine times as many clips as Google Video.• YouTube = 53% of video users in the world.
Few Mergers, Acquisitions, Take over• New Bank Of India merged with Punjab National bankBank• Global Trust Bank Taken over by OBC• Western United Bank taken over by IDBI• India Aluminium and copper giant Hindalco Industries purchased Canada-based firm Novelis Inc• Suzlon Energy obtained the Germany-based wind turbine producer Repower.• Ashok Leyland By Hindujas• Spensers By Goenkas• Tata Fertilizers Merged With Tata Chemicals• Mittal Steel’s acquistion of Arcelor
Motives & Benefits of M&A• Economies of large scale• Reducing competition• Increased Revenue/ Increased Market Share• Expansion and Growth• Surplus Resources• Wider customer base and increase in market share• Product , services and business diversification• Developing new product mixes