Contribution of mergers and takeovers in indian economy 2

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mergers and takeovers

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  • 1. SUBMITTED BY:SUBMITTED TO: Aakansha Agarwal(7132)Dr. Ranjan Upadhyay Arti Surtaniya(7155)FMS (WISDOM) Jyoti Yadav(7193) MBA 3rd sem
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  • 3.  INTRODUCTION OF MERGER TYPES OF MERGER STRATEGIC PLANNING ACQUISITIONS & TAKEOVERS MERGER & ACQUISITION DEALS CONTRIBUTION OF MERGER & TAKEOVER FIVE STAGES OF MERGER MERGERS IN INDIA ADVANTAGES DISADVANTAGES CONCLUSION 3
  • 4.  whereby at least two companies combine to form one single company . one corporation survives and the merged corporations go out of business. A subsidiary merger is a merger of two companies where the target company becomes a subsidiary or part of a subsidiary of the parent company. X + Y = Z Example X + Y = X 4
  • 5.  Horizontal Mergers- between competing companies Vertical Mergers- Between buyer-seller relation-ship companies Conglomerate Mergers- Neither competitors nor buyer-seller relationship 5
  • 6.  It is a management tool period. To help any organization do a better job. To ensure that members of the organization are working toward the same goals. To assess and adjust the organizations direction in response to a changing environment. 6
  • 7.  An act of acquiring effective control by one company over assets or management of another company. Two or more companies may remain independent. Separate legal entities. When an acquisition is forced or unwilling, it is called a takeover. When managements of acquiring and target companies mutually agree for the takeover, it is called acquisition or friendly takeover. 7
  • 8. Tata Steel buys Corus Plc USD 12.1 billionHindalco acquired Novelis Inc. USD 6 billion Videocon Industries acquiredDaewoo Electronics Corporation USD 730 million Limited Vodafone buys Hutch USD 11 billion 8
  • 9.  Merger and Acquisitions have evolved in five stages . They are triggered by economic factors. The macroeconomic environment, which includes the growth in GDP, interest rates and monetary policies play a key role in designing the process of mergers or acquisitions. 9
  • 10. First Wave Mergers.Second Wave Mergers.Third Wave Mergers.Fourth Wave Mergers.Fifth Wave Mergers. 10
  • 11.  The first wave mergers commenced from 1897 to 1904. During this phase merged companies enjoyed monopoly over their lines of production. The first wave mergers were mostly horizontal mergers. End Of 1st Wave Merger The 1st phase ended in failure since they could not achieve the desired efficiency. The failure was fuelled by the slowdown of the economy. 11
  • 12.  The second wave mergers took place from 1916 to 1929. It focused on the mergers between oligopolies, rather than monopolies . Technological developments provided the necessary infrastructure. They were mainly horizontal or conglomerate in nature. End Of 2nd Wave Mergers They ended with the stock market crash in 1929 and the great depression. 12
  • 13.  The mergers that took place during this period (1965-69) were mainly conglomerate mergers. Mergers were inspired by high stock prices & interest rates. End Of The 3rd Wave Merger The 3rd wave merger ended with the plan to split conglomerates in 1968. 13
  • 14.  The 4th wave merger started from 1981 and ended by 1989. Mergers took place between the oil and gas industries, pharmaceutical industries, banking and airline industries. They ended with anti takeover laws, Financial Institutions Reform and the Gulf War. 14
  • 15.  The 5th Wave Merger (1992-2000) was inspired by globalization, stock market boom and deregulation. It took place mainly in the banking and telecommunications industries. The 5th Wave Merger ended with the burst in the stock market bubble. 15
  • 16.  From 1991 to date, mergers are not regulated from a competition perspective. The Asian Development Outlook 2005 mentions the impact of M&As in India. It indicates for example – Coca Cola re- entered the Indian market in 1993 by acquiring Parle. Pepsi gained a major market presence by acquiring Duke in 1988. 16
  • 17. HLL has succeeded in enhancing its marketshare through a process of Mergers/AcquisitionsProduct 1992-93 1997-98Ice Cream 0.00 74.06Sauces,ketchups,jams 0.00 63.54Dental hygiene product 11.20 41.56Soaps 19.66 26.01Synthetic detergents 33.12 46.72Vanaspati 0.85 13.90 17
  • 18. • Revival in deal activity in the country.• More than double the transactions in first five months as compared to same period last year. Jan – May ‘10 Jan – May ‘09 No of deals 439 179 Value of deals USD 30 bn USD 8 bn • Rebound linked to recovery of Indian and global economy. • Active sectors – Telecom, Pharma, Cement, FMCG. 18
  • 19. •Expansion and growth•Tax Benefits•Financial Synergy•Creating value to stakeholders•Risk reduction•Balancing product cycle•Gain in market share•Increasing EPS•Gaining cost efficiency 19
  • 20. • Costs of mergers and takeovers• Legal expenses• Short-term opportunity cost• Intangible costs• Potentially lowered industry innovation• Decline in equity pricing and investment value 20
  • 21.  Two companies are more valuable, profitable than individual companies. The shareholder value is also over and above that of the sum of the two companies. M&A’s continue to be an important tool behind growth of a company. 21
  • 22. The list of past and anticipated mergers covers everysize and variety of business.The basic reason is: To achieve economies of scale, Widen their reach, Acquire strategic skills, and Gain competitive advantage.Therefore, it is right time for business houses andcorporate to watch the Indian market, and grab theopportunity. 22
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