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Merger _acquisition


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Merger _acquisition

  1. 1. Mergers andacquisitions
  3. 3. MEANINGMerger•A transaction where two firms agree to integrate theiroperations on a relatively co-equal basis because they haveresources and capabilities that together may create astronger competitive advantage.•The combining of two or more companies, generally byoffering the stockholders of one company securities in theacquiring company in exchange for the surrender of theirstock•Example: Company A+ Company B= Company C.
  4. 4. ACQUISITION A transaction where one firms buys another firm with the intent of more effectively using a core competence by making the acquired firm a subsidiary within its portfolio of business It also known as a takeover or a buyout It is the buying of one company by another. In acquisition two companies are combine together to form a new company altogether. Example: Company A+ Company B= Company A.
  5. 5. DIFFERENCE BETWEEN MERGER AND ACQUISITION: MERGER ACQUISITIONi. Merging of two organization in i. Buying one organization by to one. another.ii. It is the mutual decision. ii. It can be friendly takeover oriii. Merger is expensive than hostile takeover. acquisition(higher legal cost). iii. Acquisition is less expensiveiv. Through merger shareholders than merger. can increase their net worth. iv. Buyers cannot raise theirv. It is time consuming and the enough capital. company has to maintain so much legal issues. v. It is faster and easier Dilution of ownership occurs in merger. vi. The acquirer does not experience the dilution of ownership.
  6. 6. MERGER:WHY & WHY NOT WHY IS IMPORTANT PROBLEM WITH MERGERi. Increase Market Share.ii. Economies of scale i. Clash of corporate cultures ii. Increased business complexityiii. Profit for Research and iii. Employees may be resistant to development. changeiv. Benefits on account of tax shields like carried forward losses or unclaimed depreciation.v. Reduction of competition. 6
  7. 7. ACQUISITION:WHY & WHY NOT WHY IS IMPORTANT PROBLEM WITH ACUIQISITIONi. Increased market share.ii. Increased speed to i. Inadequate market valuation of target.iii. Lower risk comparing ii. Inability to achieve to develop new synergy. products. iii. Finance by takingiv. Increased diversification huge debt.v. Avoid excessive competition 7
  8. 8. REASONS /ADVANTAGES 8 Size and Synergy Increased revenue/Increased Market Share Economies of Scale Helps to face competition Revival of sick units Faster growth rate Taxes Advantages Finance related advantages
  9. 9. 9 Horizontal Merger Conglomeration merger Vertical Merger Product-Extension Merger Market-Extension Merger
  10. 10. TOP 5M&A DEALS…
  11. 11. 1. Tata Steel-Corus: $12.2 billion  January 30, 2007  Largest Indian take-over  After the deal TATA’S became the 5th largest STEEL co.  100 % stake in CORUS paying Rs 428/- per shareImage: B Mutharaman, Tata Steel MD; RatanTata, Tata chairman; J Leng, Corus chair; and P Varin, Corus CEO.
  12. 12. 2. Vodafone-Hutchison Essar: $11.1 billion TELECOM sector 11th February 2007 2nd largest takeover deal 67 % stake holding in hutchImage: The then CEO of VodafoneArun Sarin visits HutchisonTelecommunications head office inMumbai.
  13. 13. 3. Ranbaxy-Daiichi Sankyo: $4.5 b  Pharmaceuticals sector  June 2008  Acquisition deal  largest-ever deal in the Indian pharma industry  Daiichi Sankyo acquired the majority stake of more than 50 % in Ranbaxy for Rs 15,000 croreImage: Malvinder Singh (left), ex-CEO  15th biggest drugmakerof Ranbaxy, and Takashi Shoda,president and CEO of Daiichi Sankyo.
  14. 14. 4. Tata Motors-Jaguar Land Rover: $2.3 billion  March 2008 (just a year after acquiring Corus)  Automobile sector  Acquisition deal  Gave tuff competition to M&M after signing the deal with fordImage: A Union flag flies behind aJaguar car emblem outside adealership in Manchester, England.
  15. 15. 5. RIL-RPL merger: $1.68 billion  March 2009  Merger deal  amalgamation of its subsidiary Reliance Petroleum with the parent company Reliance industries ltd.  Rs 8,500 crore  RIL-RPL mergerImage: Reliance Industrieschairman Mukesh Ambani. swap ratio was at 16:1
  16. 16. Why India?Dynamic government policiesCorporate investments in industryEconomic stability“Ready to experiment” attitude of Indian industrialists
  17. 17. Deals in India for first financialquarter 2010 Value in USD Share in per Sector No. of Deals million cent Telecom 3 22732.26 67.19 Pharmaceutical 4 3958.29 11.02 BFSI 6 2651.54 7.84 Metal and Mining 4 1483.15 4.38 Energy 4 1320 3.90 Other sectors 39 1919.00 5.67
  18. 18. PROCESS OF MERGER & ACQUISITION IN INDIA: The process of merger and acquisition has the following steps: ii.Approval of Board of Directors iii.Information to the stock exchange iv.Application in the High Court v.Shareholders and Creditors meetings vi.Sanction by the High Court vii.Filing of the court order viii.Transfer of assets or liabilities ix.Payment by cash and securities Maximum Waiting period:210 days from the filing of notice(or the order of the commission - whichever earlier).
  19. 19. Impact of Mergers and Acquisitions
  20. 20. Why Mergers and Acquisitions Fail? Cultural Difference Flawed Intention No guiding principles No ground rules No detailed investigating Poor stake holder outreach
  21. 21. How to Prevent the Failure  Continuous communication – employees, stakeholders, customers, suppliers and government leaders.  Transparency in managers operations  Capacity to meet new culture higher management professionals must be ready to greet a new or modified culture.  Talent management by the management
  22. 22. MERGER & ACQUISITION(2009-10) : 23