M&A are complex, involving many parties. Mergers and acquisitions involve many issues, including Corporate governance. Form of payment. Legal issues. Contractual issues. Regulatory approval. M&A analysis requires the application of valuation tools to evaluate the M&A decision.

1. Mergers &
Acquisitions
By Zil Shah

2. • M&Aare complex,involvingmany parties.
• Mergers andacquisitionsinvolvemanyissues,including
Corporategovernance.
Formofpayment.
Legalissues.
Contractualissues.
Regulatoryapproval.
• M&Aanalysisrequirestheapplication
ofvaluationtoolstoevaluatetheM&A
decision.
INTRODUCTION

3. WHATIS MERGER& ACQUISITION?

4. Amerger isa combinationoftwoor morefirmsin
whichonlyonefirmwouldsurviveandtheother
wouldceasetoexist,itsassets/ liabilitiesbeing
takenoverbythesurvivingfirm.
Example: Inthe1999merger ofGlaxoWellcome
andSmithKlineBeecham,bothfirmsceasedto
existwhentheymerged, anda newcompany,
GlaxoSmithKline,wascreated
MERGER

5. Acompany+B company=C company
In1998Chryslermerged withDaimler-Benz to
formDaimlerChryslerAG.

6. Acquisitionistheprocessthroughwhichonecompanytakes overthe
controllinginterestofanothercompany”.Italsoknownas atakeover or a
buyout.
Itisthebuyingofonecompanybyanother.
Example:VodafonegroupAcquiresControlOfHutchisonEssarLimitedin
2007
ACQUISITION

7. Acompany+B company=Acompany

8. StatutoryMerger
Theacquirer companyacquiresallofthe
target’sassetandliabilities.Asa result,the
target companyceasestoexistas a separate
entity.Usuallythetarget companyissmaller
thanthepurchaser,butthisisnotalwaysthe
case.
Example: Kraft’s2009acquisitionofCadbury
Forms of Integration

9. Electronic Arts (EA) Bought PopCap Games in
2011

10. SubsidiaryMerger
Thetarget companybecomesa subsidiaryofthepurchaser.
Mostsubsidiarymergers typicallyoccurwhenthetarget hasa
well-knownbrandthat theacquirerwants toretain(e.g.
ProctorandGamblebuyingGillette)
Example: Textron’sacquisitionofCessnaAircraftCompanyin
1989

11. Jaguar Land RoverPLCisa Britishpremiumautomakerheadquarteredin
Whitley,Coventry,UnitedKingdom,andhasbeena whollyownedsubsidiaryof
TataMotorssinceJune 2008,whenitwas acquiredfromFordMotorCompany.

12. Consolidation
Bothcompaniescease toexistintheirprior form,andtheycometogether toform a
completelynewcompany.Consolidationsare commoninmergers whenboth
companiesare of similarsize.
Example: HeroHondastartedin1984as a jointventurebetweenHeroCyclesof
India andHondaofJapan.

13. TYPESOF MERGER
TYPESOF MERGER
HORIZONTAL VERTICAL CONGLOMERATE

14. Horizontal mergers arethose mergers where the companies manufacturing similar kinds of
commodities or running similar type of businesses merge with each other. This type of merger
occurs frequently as a result of largercompanies attempting to createmore effective
economies of scale.
Examples :Bengaluru basedonline cab aggregatorOla Cabs acquires Taxi for Sure.
HorizontalMerger

15. New Delhi based online marketplaceSnapdeal acquires Exclusively.com in
2015

16. Amerger betweentwocompaniesproducingdifferent
goodsorservices.Themerger ofthefirmthathaveactualor potentialbuyer-
sellerrelationship.
Example: GoogleacquiredMotorolaMobilityHoldingsinJune 2012
VERTICALMERGER

17. DisneyandPixarmerger in 2006

18. A mergerbetween firms that areinvolved in totally unrelated business activities.
Example :Berkshire Hathaway acquiresLubrizol (2011).
CONGOLOMERATEMERGER

19. Walt DisneyCompanyandtheAmerican Broadcasting
Companymerger

20.  Synergies
 Achieving more rapid growth
 Increased marketpower
 Gaining accessto unique capabilities
 Diversification
 Bootstrapping EPS
 Personal benefits for managers
 Tax benefits
 Unlocking hidden value
 Achieving international business goals
Motivationsfor Synergy

22. Synergy
Theconceptthat the value andperformance of two companies combined
will begreater than the sum of the separate individual parts. Synergy is a
term that is mostcommonly used in the context of mergers and
acquisitions. Synergy, or the potential financial benefit achieved through
the combining of companies, is often a driving force behind a merger.
Shareholders will benefit if a company's post-merger share price increases
due to the synergistic effect of the deal.The expected synergy achieved
through the mergercan beattributed tovarious factors, such as increased
revenues, combined talent and technology, or cost reduction.

23. Synergy Merge
Mergers and acquisitions are made with the goal of improving the company's
financial performance for the shareholders. Two businesses canmerge to
form one company that is capable of producing more revenuethan either
could have been able to independently, or to createone company that is able
toeliminate orstreamline redundant processes, resulting in significant cost
reduction. Because of this principle, the potential synergy is examinedduring
the mergerand acquisition process. Iftwo companies can mergetocreate
greater efficiency or scale,the result is what is sometimes referred to as a
synergy merge.

24. Driversof Synergy

25. Types of synergy
Operational
synergy
Revenue
Enhancements
Cost Reduction
Financial Synergy

26. Thank You