BY PARTHA S. PANDA
PURNA B. RAI
SIDDHARTH B. PARASHAR
Merger is a financial tool used for enhancing
long term profitability by expanding their
operation. It occurs when merging
companies have their mutual consent. It is
also referred as “merger of equals”
EXAMPLES OF DIFF. TYPES OF
Merger of Bank of Mathura & ICICI.
Merger of BSES with Orissa power supply.
Merger of Time warner corporation with Turner
Merger of Walt Disney Comp. & American Broad
Market extension merger.
Merger of Eagle Bancshares by the RBC centura .
Product extension Mergers.
Merger of Mobilink Telecom by Broadcom.
Desire to enjoy
BENEFITS OF MERGING…
• Iron out the
• Increase in
• Increase in
of a firm.
An acquisition is the buying of company by
another. It is also known as take over or buyout.
It occurs between the bidding and the target
company. It may be either hostile or friendly
takeovers. Reverse takeovers may occur when
target is larger than bidding firm.
TYPES OF ACQUISITIONS..
Friendly acquisitions - In this type , the target
company’s board negotiates or accept the offer in a
friendly or welcoming manner.
Hostile acquisitions – Within this type the target
company’s board is not willing to be bought or the
target’s company has no prior knowledge of this offer.
STEPS INVOLVED IN ACQUITIONS
Start with an offer…
The target’s response….
Accept the terms of the
Attempt to negotiate.
Execute a poison bill
Find a white knight.
Closing the deal…
HISTORY OF MERGERS &
Tracing back to history, merger & acquisition have
evolved in five stages . As seen from past experience
M&A are triggered by economic factors.
Investors in a company that are aiming to take over one
must determine whether the purchase will be
beneficial to them or not.
Common methods of assessing a target company are..
Discounted cash flow
LARGEST M&A DEALS WORLDWIDE
Rank Year Acquirer Target Trans.
1 2000 American
Time warner 167747 21.83
2 2000 Glaxo wellcome
3 2004 Royal Dutch
4 2006 AT&T inc. Bellsouth
5 2001 Comcast
WHY THEY CAN FAIL…
Historical trends shows that roughly two thirds of big
mergers will disappoint on their own terms, which
means they will lose value on the stock market.
Some common reasons are>>>
THE OBSTACLES TO MAKING IT WORK.
If the merged companies wants to break up , corporate
finance do the reverse and break up companies
M&A IN DIFFERENT SECTORS IN
Banking sector – In this sector , imp. M&A in India in recent
years include the merger b/w IDBI & its own subsidiary .
The deal was worth $ 174.6 million.
Another imp. Merger was that b/w Centurian bank & bank
of punjab worth $ 82.6 million.
Telecom sector – In the Telecom sector , an increase of stakes
by SingTEL from 26.92% to 32.8% in Bharati Telecom was
worth $252 million.
In Foods & FMCG sector, a controlling stake of Shaw Wallace
& co. was aquired by United Breweries Group owned by
Vijay Malya. This deal was worth $ 371.6 million.
STATUS OF THOSE SECTORS…
In 2005 , finance topped the list with 20% of total
value of M&A in India taking place in this sector.
Telecom accounted for 16%.
FMCG & Construction materials for 10%.
CROSS BORDER M&A IN INDIA
1 2 3 4 5 6 7
India has emerged as one of the top countries w.r.t
merger and acquisition deals.
In 2007 , the first 2 months alone accounted for M&A
deals worth $ 40 billion in India. The estimated
figures for the entire year projected a total of more
than $ 150 billion .
This is two fold growth from 2006 & a growth of
almost four times from 2005.
• Arcelor acquired by Mr. Lakshmi Mittal.
• Mahindra & Mahindra's takeover of 90 percent stake in
Schoneweiss, a family-owned German company.
• Tata's takeover of Corus & Tetley Tea Co.
• Swiss cement major, Holcim, which acquired a 67 per cent
stake in Ambuja Cement India Ltd (ACIL).
• Videocon Group's acquisition of Thomson's colour picture
tube business in China, Poland, Mexico, and Italy for a total of
Indian Scenario - Major Deals
The Top 10 Acquisitions made by
Indian Companies Worldwide.
Tata steel Corus groups UK 12000 Steel
Hindalco Novelis Canada 5982 Steel
Korea 729 Electronics
Betapharm Germany 597 Pharamaceuti
Suzlon Energy Hansen group Belgium 565 Energy
Kenya 500 Oil and gas
Ranbaxy labs Terapia SA Romania 324 Pharmaceutic
Tata steel Natsteel Singapore 293 Steel
Videocon Thomson SA France 290 Electronics
BSNL Teleglobe Canada 239 Telecom