Tata Strategic Acquisition


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Tata Strategic Acquisition. A case study from CMMU class.

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Tata Strategic Acquisition

  2. 2. Acquisition of British Icons - M&A on June,2008 - US$ 2.3 billion, cash-debt free Ford’s Premier Automotive Group (PAG) High-end luxury cars High-end SUVs - Bought on 1989 - US$ 2.5 billion - Bought on 2000 - US$ 2.7 billion
  3. 3. British Marques under Ford  Ford is a leading automaker and third largest  multinational corporation in the automobile industry In 1989 : Jaguar from British Ley Limited - In 1999 : PAG - In 2000 : Land Rover (from BMW) - In 2001 : Some Jaguar model (targeted young) - In 2002 : Integrating Jaguar and Land Rover  Range Rover MK 3 - In 2004 : Discovery 3 - In 2006 : Freelander 2 - In 2007 : Dismantle the PAG and sell JLR  (Jaguar and Land Rover) Alan Mulally became Ford's President and CEO in September 2006
  4. 4. • The Jaguar gradually became known as basically on old man’s car • The customers of Jaguar and Land Rover were seen as being highly nationalistic and brand loyal • Problem In 2006 : The worst loss in the history of the company(12.7 billion) • Solution : Ford needed to sell JLR in order to salvage the North American business British Marques under Ford (http://www.nytimes.com/2007/07/17/business/17auto.htm)
  5. 5. • The bids for JLR (3 bidders: Tata Motor, M&M and one Equity Partners) • JLR : 3 manufacturing sites, 2 advanced design centers, 16,000 workforce • JLR’s labor union force • Tata Motor => manufacture in UK, employ more people • In 2008 : Ford decided on Tata Motor Jaguar Land Rover ( JLR) Respect for the two brands … - Endeavor to preserve and build on their heritage and competitiveness, keeping their identities intact. - Allowing the management and employee to bring their experience and expertise to bear on the growth of the business. Ratan Tata, Chairman, Tata Group.
  6. 6. TATA Motors’ Acquisition of JLR • JRL’s manufacturing plants • Two advanced design centers in the UK • National sales companies spanning across the world • Licenses of all necessary intellectual property rights Part of the purchase consideration Impact from Acquisition - Tata Motors was greeted with much hope and enthusiasm. - Moody’s downgraded Tata Motors’ credit rating from Ba1 toBa2, citing concerns on company’s finance.
  7. 7. Tata Motors entered into an agreement with Ford for the purchase of JLR. Tata motors acquired the manufacturing plants, 2 advanced design and engineering centers, and a worldwide network of 26 national sales companies. Technologies were to be transferred from Ford to JLR. Ford continues to supply JLR with vehicle components. - supply new engine (period7-9 years) - cooperation (no time end) - financing to dealers & customer (transition period) Tata committed itself to following ford’s business plan for JLR till 2011. The deal….
  8. 8. The Benefits • The vehicles from the Tata would have better technology. • Benefit from JLR’s service and distribution networks. • The deal also included the right to use the Daimler brand which Jaguar had acquired in 1960 • The opportunity to across different geographies.
  9. 9. The Benefits • The opportunity to across different customer segments, planned to place in the super luxury segment that Tata would be able to compete both at the low-end and top-end market. •TATA Nano: US$ 2,500 JaguarXf: US$ 64,000
  10. 10. The Challenges • A huge capital expenditure during the downturn in the global automobile industry. • The lack of synergies, the need of the premium segment did not go well with Tata’s existing line-up. • The difficult economic conditions in the key markets of JLR including The US and Europe
  11. 11. The Challenges • Tata Motor did not have the experience in high-end luxury vehicles market and manufactured. The X-type, emitted around194 grams of CO₂ per kilometer. • Reducing the CO₂ emissions from passenger cars from 160g/km to130g/km • The cost of key components.
  12. 12. The Road Ahead - Setting milestones and long-term goals by forming an integration committee with senior executives from the JLR and Tata Motors. - Concentrating on countries like Russia, China, India and the Middle East. 5th 7th 3th 8th
  13. 13. The Road Ahead • Tata Motors needed to understand how to market to the premium segment to take advantage of the opportunities provided by the acquisition of JRL. • The way to managed these brands and derived synergies from them would hold the key to the success of JLR’s acquisition
  14. 14. Thank You