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Mergers and acquistion

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Mergers and acquistion

  1. 1. Mergers and Acquisitions
  2. 2. Khushboo Dattani Harshita Agrawal Mohit Talreja Baneet Singh Kohli Presented by:
  3. 3. 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 advantage. • Example: Company A+ Company B= Company C.
  4. 4. MERGER Case study- NTT DoCoMo and Tata
  5. 5. • 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. What is ACQUISITION?
  6. 6. ACQUISITION Case study- Tata Steel and Corus
  7. 7. THE FIRST CLASSIFICATION ACQUISITION PUBLIC (IF ACQUIREE LISTED IN PUBLIC MARKETS) PRIVATE (IF ACQUIREE NOT LISTED IN PUBLIC MARKETS
  8. 8. THE SECOND CLASSIFICATION ACQUISITION FRIENDLY HOSTILE
  9. 9. Why Mergers And Acquistion are done?? • Mergers and Acquisitions are pursued for a variety of reasons: 1.Economies of scale in operations 2.Consolidation in saturated markets 3.Improving competitive position through larger asset base
  10. 10. ACQUISITION i. Buying one organization by another. ii. It can be friendly takeover or hostile takeover. iii. Acquisition is less expensive than merger. iv. Buyers cannot raise their enough capital. v. It is faster and easier transaction. DIFFERENCE BETWEEN MERGER AND ACQUISITION MERGER i. Merging of two organization in to one. 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.
  11. 11. • Cultural Difference • Flawed Intention • No guiding principles • No ground rules • No detailed investigating • Poor stake holder outreach Why Mergers and Acquisitions Fail?
  12. 12. PROBLEM WITH MERGER i. Clash of corporate cultures ii. Increased business complexity 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 development. iv. Benefits on account of tax shields like carried forward losses or unclaimed depreciation. 12
  13. 13. PROBLEM WITH ACUIQISITION i. Inadequate valuation of target. ii. Inability to achieve synergy. iii. Finance by taking huge debt. 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 competition ACQUISITION:WHY & WHY NOT
  14. 14. 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 share Image: B Mutharaman, Tata Steel MD; Ratan Tata, Tata chairman; J Leng, Corus chair; and P Varin, Corus CEO.
  15. 15. 2. Vodafone-Hutchison Essar: $11.1 billion • TELECOM sector • 11th February 2007 • 2nd largest takeover deal • 67 % stake holding in hutch Image: The then CEO of Vodafone Arun Sarin visits Hutchison Telecommunications head office in Mumbai.
  16. 16. 3. 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 ford Image: A Union flag flies behind a Jaguar car emblem outside a dealership in Manchester, England.
  17. 17. Impact of Mergers and Acquisitions Impact Employees Competition ManagementPublic Shareholders
  18. 18. 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. Synergy: 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.
  19. 19. • 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 How to Prevent the Failure
  20. 20. THANK YOU 

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