What is MERGER?
• A transaction where two firms agree to integrate
their operations on a relatively co-equal basis
because they have resources and capabilities that
together may create a stronger competitive
Company A+ Company B= Company C.
• 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.
Company A+ Company B= Company A.
What is ACQUISITION?
THE FIRST CLASSIFICATION
PUBLIC (IF ACQUIREE
LISTED IN PUBLIC
PRIVATE (IF ACQUIREE
NOT LISTED IN PUBLIC
THE SECOND CLASSIFICATION
Why Mergers And Acquistion are
• Mergers and Acquisitions are pursued for a variety
1.Economies of scale in operations
2.Consolidation in saturated markets
3.Improving competitive position through larger asset base
i. Buying one organization by
ii. It can be friendly takeover or
iii. Acquisition is less expensive
iv. Buyers cannot raise their
v. It is faster and easier
DIFFERENCE BETWEEN MERGER AND
i. Merging of two organization in
ii. It is the mutual decision.
iii. Merger is expensive than
acquisition(higher legal cost).
iv. Through merger shareholders can
increase their net worth.
v. It is time consuming and the
company has to maintain so
much legal issues.
• Cultural Difference
• Flawed Intention
• No guiding principles
• No ground rules
• No detailed investigating
• Poor stake holder outreach
Why Mergers and Acquisitions Fail?
PROBLEM WITH MERGER
i. Clash of corporate
ii. Increased business
iii. Employees may be
resistant to change
MERGER:WHY & WHY NOT
WHY IS IT IMPORTANT
i. Increase Market Share.
ii. Economies of scale
iii. Profit for Research and
iv. Benefits on account of tax
shields like carried forward
losses or unclaimed
PROBLEM WITH ACUIQISITION
i. Inadequate valuation of
ii. Inability to achieve
iii. Finance by taking huge
WHY IS IMPORTANT
i. Increased market share.
ii. Increased speed to market
iii. Lower risk comparing to
develop new products.
iv. Increased diversification
v. Avoid excessive
ACQUISITION:WHY & WHY NOT
1. Tata Steel-Corus: $12.2
• January 30, 2007
• Largest Indian take-over
• After the deal TATA’S
became the 5th largest
• 100 % stake in CORUS
paying Rs 428/- per
Image: B Mutharaman, Tata Steel MD; Ratan
Tata, Tata chairman; J Leng, Corus chair;
and P Varin, Corus CEO.
Essar: $11.1 billion
• TELECOM sector
• 11th February 2007
• 2nd largest
• 67 % stake holding
Image: The then CEO of Vodafone
Arun Sarin visits Hutchison
Telecommunications head office in
3. Tata Motors-Jaguar Land
Rover: $2.3 billion
• March 2008 (just a
year after acquiring
• Automobile sector
• Acquisition deal
• Gave tuff competition
to M&M after signing
the deal with ford
Image: A Union flag flies behind a
Jaguar car emblem outside a
dealership in Manchester, England.
Impact of Mergers and Acquisitions
MOTIVES OF MERGERS AND ACQUISITIONS
Economy of scale:
This refers to the fact that the combined company can often reduce its fixed costs
by removing duplicate departments or operations, lowering the costs of the
company relative to the same revenue stream, thus increasing profit margins.
Economy of scope:
This refers to the efficiencies primarily associated with demand-side changes,
such as increasing or decreasing the scope of marketing and distribution, of
different types of products.
For example, managerial economies such as the increased opportunity of
managerial specialization. Another example are purchasing economies due to
increased order size and associated bulk-buying discounts.
• 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
• Talent management by the management
How to Prevent the Failure