Mergers and Acquisitions Strategy Dr. Sandeep Kulshrestha
Philosophy behind mergers and acquisitions Part of the overall concept of “integration” A merger capitalizes on “mutual synergy” of the Strengths of the merging entities Acquiring an existing company is better strategy than scaling up on its own It is also an strategy to showcase an organisation on a broader scale
Merger defined A merger is unification of two or more firms into one entity, with an objective of better profitability and high value to the stakeholders” In nutshell merger usually happens within companies who are in the similar line of business, with an objective to scale-up the operations Example: IDBI bank merged with United Western Bank
Acquisition defined Acquisition normally signifies acquiring/buying of a smaller company by a large company in the similar line of business. Acquisition can be either normal (by consent) or forced (by acquiring large amount of shares in a company) Example: United Breweries acquired Shaw Wallace’s liquor business.
The need of mergers and acquisitions A well thought of corporate strategy to have substantial market share Synergy of mutual expertise and experience, which helps in scaling up the market potential Better reach of products and services Acquiring another company or merging with another company gives a better leverage Can lead to better Earning per share and shareholders’ expectations
Strategic Parameters Synergy within corporations Capitalization of the Strengths of merging companies/acquired company and nullification of weaknesses The opportunity which the market may provide post merger/acquisitions How the merger/acquisition will help the company’s long term vision In short, what will be the value addition for a company!
Strategic Exercises Financial modeling Governance issues Shareholding Patterns Human Resources Strategy Management of investments Fund allocation for new activities Re-framing of vision/mission Marketing strategy Fresh Branding exercises