Merger and acquisition is a strategy adopted by the corporate sector to consolidate it’s position and improves it’s competitive strength vis-a-versa its competitors. In India The M & A activities got a boost after the announcement of new economic policy in 1991. In Indian industry, the pace for mergers and acquisitions activity picked up in response to various economic reforms introduced by the Government of India since 1991, in its move towards liberalization and globalization.
Dynamic government policies Corporate investments in industry Economic stability “ready to experiment” attitude of Indian industrialists Types of M&A:- Horizontal Merger Vertical Merger Conglomerate Merger De-merger Merger Reverse merger.
Tata Steel acquired 100% stake in Corus Group on January 30, 2007. It was an all cash deal which cumulatively amounted to $12.2 billion. Vodafone purchased administering interest of 67% owned by Hutch-Essar for a total worth of $11.1 billion on February 11, 2007. India Aluminium and copper giant Hindalco Industries purchased Canada-based firm Novelis Inc in February 2007. The total worth of the deal was $6-billion. Indian pharma industry registered its first biggest in 2008 M&A deal through the acquisition of Japanese pharmaceutical company Daiichi Sankyo by Indian major Ranbaxy for $4.5 billion. The Oil and Natural Gas Corp purchased Imperial Energy Plc in January 2009. The deal amounted to $2.8 billion and was considered as one of the biggest takeovers after 96.8% of London based companies shareholders acknowledged the buyout proposal.
In November 2008 NTT DoCoMo, the Japan based telecom firm acquired 26% stake in Tata Teleservices for USD 2.7 billion. Indias financial industry saw the merging of two prominent banks - HDFC Bank and Centurion Bank of Punjab. The deal took place in February 2008 for $2.4 billion. Tata Motors acquired Jaguar and Land Rover brands from Ford Motor in March 2008. The deal amounted to $2.3 billion. 2009 saw the acquisition Asarco LLC by Sterlite Industries Ltds for $1.8 billion making it ninth biggest-ever M&A agreement involving an Indian company. In May 2007, Suzlon Energy obtained the Germany-based wind turbine producer Repower. The 10th largest in India, the M&A deal amounted to $1.7 billion.
DEUTSCHEBANK, 5669 CITIGROUP, 3358 MORGAN ENAM STANLEY, 23540 SECURITIES, 11613 BARCLAY CAPITAL, 13993 STANDARD CHARTERED, 21775
STANDARD CHARTERED, 568 MORGAN EARNST AND STANLEY, 2919DEUTSCHE YOUNG, 4917BANK, 255 ENAM SECURITIES, 2926 CITIGROUP, 3536
Globally ,telecom, media, energy, pharma accounted for 6 of the top 10 deals in first half of this year------- CARSO GLOBAL TELECOM-AMERICA MOVIL ($27.4BN) QWEST COMMUNICATION-CENTURY LINK ($22.2BN) BRITISH SKY-NEWS CORP($13.7BN) SMITH INTERNATIONAL- SCHLUMBERGER($12.2BN) ALCON-NOVERTIS($11.1BN) BHARTI-ZAIN($10BN)
MAJOR COMPANY PERFORMANCE IN POST RECESSION PERIOD
Bhartis ambitions of an African safari have been fulfilled, following the acquisition of Zain Telecoms 15-country Africa operations for a total enterprise value of $10.7 billion. The acquisition is the second largest by an Indian company since Tata Steels $13.6-billion acquisition of Anglo-Dutch steel maker Corus. It will catapult Bharti to the rank of the sixth-largest telecom service provider in the world by number of subscribers. And, in an ironic twist of fate, one of Bhartis major competitors in its new markets will be MTN.
Essar Energy, a holding company for the Essar groups energy business, it will raise $2.5 billion (around Rs 11,250 crore) on the London Stock Exchange (LSE), to finance the expansion of its power and oil verticals. This will be one of the largest overseas initial public offerings by an Indian company. Post-listing, the firm is expected to have a market capitalization of $10 billion (around Rs 45,000 crore), given equity of around $2 billion (around Rs 9,000 crore) and a dilution of 20%-25% on the enlarged capital, vice-chairman Prashant Ruia said. Upon completion, promoters would hold at least 75% in Essar Energy, which would be listed on the LSE . The shares are likely to be listed in early May.
IN RECESSION PERIOD Equity markets were shut Global banks were being shy with their balance sheet Concern over global economic fundamentals meant M&A activity was muted
IN POST RECESSION PERIOD Firm are eager to raise capital to fund expansion The appetite for international acquisition starts to increase The growth in India is attracting global pharma’s interest
Indian promoters, too are willing to cash out, and enter high return realty and hospitals sectors In banking, the entry of new players will have its impact on some of the older entities Globally, telecom, media, energy and pharma accounted for six of the top ten deals in first half this year.
Recent M&A have significantly lower leverage to what was seen in the pre-crises era Companies have become cautious and don’t want to take on very high debt Off- shore funding, though fairly cheap, is not available easily Indian banks nearly doubled their financing interest rates, particularly offshore lending from the UK and CANADA
Wherever acquisition leverage was made available, the equity part from acquirer was increased to twice the level before the crises
DEUTSCHE BANK Sanjay Agarwal –MD and head, global corporate finance India Top deal- Essar energy’s $1.95 bn listing on LSE HSBC SANJAY BAJAJ-DIRECTOR TOP DEAL-ENGINEERS INDIA’S $210 MN follow on public offer
NM Rothschild Sanjay Bhandarkar- managing director Top deal- conducted the 3G spectrum auction BARCLAY CAPITAL Jaideep khanna-managing director Top deal-bharti airtel’s $10 bn deal with zain for the latter’s business in africa
RELIGARE CAPITAL Tarun kataria- CEO TOP DEAL- Fortis health care’s potential buyout of parkway JP MORGAN Rohit chatterji- head, invest banking Top deal- Infrastructure company HDIL’s $250mn QIP
KOTAK MAHINDRA CAPITAL Falguni nayar- MD and CEO Top deal- stanchart $518mn IDR MORGAN STANLEY Aisha de sequiera- Head, investment banking Top deal- Adani Enterprise’s $850mn QIP
After the recession indian company have become cautious and don’t want to take on a very high debt. We can see an increase in participation of Indian companies globally taking part in merger and acquisition which is a good sign as it represents that the indian companies are on a verge of progress in the global corporate world.