Alternatively way to achieve growth is resort to external arrangements like M&A
Daily transaction now a days
Important area of capital market activity in restructuring a corporation
Restructuring the corporation to meet global competition
Main objective –gain profits
M&A has a great scope in different sectors
India is one of the leading nations in the world in terms of M&A
85 % are using M& A as a core growth strategy.
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 the fusion of two or more existing companies
An acquisition , also known as a takeover or a buyout , is the buying of one company (the ‘target’) by another. An acquisition may be friendly or hostile. In the former case, the companies cooperate in negotiations; in the latter case, the takeover target is unwilling to be bought or the target's board has no prior knowledge of the offer. Acquisition usually refers to a purchase of a smaller firm by a larger one.
Increased market power
Learning and Developing new capabilities
Overcoming entry barriers
Cost of new product development
Increase speed to market
Lower risk than developing new products
W hen one company takes over another and clearly establishes itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded
In the pure sense of the term, a merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals". Both companies' stocks are surrendered and new company stock is issued in its place.
In 2007, there were a total of 676 M&A deals and 405 private equity deals, in 2007, the total value of M&A and PE deals was USD 70 billion, Total M&A deal value was close to USD 51 billion, Private equity deals value increased to USD 19 billion.
In year 2008..
• M&A deals in India in 2008 totaled worth USD 19.8 bn
• Less compared to last year which stood at 33.1 bn $.
• Decline of M&A activity was in line with the global activity.
Acquirer Target Company Country targeted Deal value ($ ml) Industry Tata Steel Corus Group plc UK 12,000 Steel Hidalgo Novelist Canada 5,982 Steel Videocon Daewoo Electronics Corp. Korea 729 Electronics Dr. Reddy’s Labs Beta harm Germany 597 Pharmaceutical Suzlon Energy Hansen Group Belgium 565 Energy HPCL Kenya Petroleum Refinery Ltd. Kenya 500 Oil and Gas Ranbaxy Labs Terapia SA Romania 324 Pharmaceutical Tata Steel NatSteel Singapore 293 Steel Videocon Thomson SA France 290 Electronics VSNL Teleglobe Canada 239 Telecom
Tata steel buys Corus Plc : 12.1$ billion
Hindalco acquired novelis: 6$ billion
Tata buy jaguar and land rover : 2.3$ billion
Essar steel buys Algoma Steel: 1.58$ billion
Vodafone buys hutch : 11$ billion
POSCO to invest in building steel manufacturing plants and facilities in India by 2016
Goldman Sachs Plans investment in private equity, real estate, and private wealth management
Net Value Asset (NAV) Method
Yield Value Method
Market Value Method
Daiichi Sankyo Co. Ltd. signed an agreement to acquire 34.8% of Ranbaxy Laboratories Ltd. from its promoters
The main benefit for Daiichi Sankyo from the merger is Ranbaxy’s low-cost manufacturing infrastructure and supply chain strengths
Ranbaxy’s addition is said to elevate Daiichi Sankyo’s position from #22 to #15 by market capitalization in the global pharmaceutical market.
Respective presence in the developed and emerged markets
To tap the potential of the generics business
Introduce generic versions
POST ACQUISITION OBJECTIVES:
Develop new drugs and fill gaps
Managing the different working cultures
Undertaking minimal and essential integration
Consolidate their intellectual capital and acquire an edge over their foreign counterparts
Size Issues :
Poor Organization Fit :
Poor Strategic Fit:
Striving for Bigness Poor Cultural Fit :
Limited Focus :
Failure to Examine the Financial Position:
Failure to Take Immediate Control :
Failure of Top Management to follow Up:
Failure of Leadership Role
It is widely accepted, for instance, that the 'human factor' is a major cause of difficulty in making the integration between two companies work successfully. If the transition is carried out without sensitivity towards the employees who may suffer as a result of it, and without awareness of the vast differences that may exist between corporate cultures, the result is a stressed, unhappy and uncooperative workforce - and consequently a drop in productivity.