oA 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.
oThe combining of two or more companies, generally by
offering the stockholders of one company securities in the
acquiring company in exchange for the surrender of their
oExample: Company A+ Company B= Company C.
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.
4. DIFFERENCE BETWEEN MERGER AND
i. 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 or
iii. Merger is expensive than hostile takeover.
acquisition(higher legal cost).
iii. Acquisition is less expensive
iv. Through merger shareholders than merger.
can increase their net worth.
iv. Buyers cannot raise their
v. It is time consuming and the enough capital.
company has to maintain so
much legal issues. v. It is faster and easier
vi. Dilution of ownership occurs
in merger. vi. The acquirer does not
experience the dilution of
5. MERGER:WHY & WHY NOT
WHY IS IMPORTANT PROBLEM WITH MERGER
i. Increase Market Share.
ii. Economies of scale i. Clash of corporate
iii. Profit for Research and cultures
development. ii. Increased business
iv. Benefits on account of complexity
tax shields like carried iii. Employees may be
forward losses or resistant to change
v. Reduction of
6. ACQUISITION:WHY & WHY NOT
WHY IS IMPORTANT PROBLEM WITH ACUIQISITION
i. Increased market
ii. Increased speed to i. Inadequate
market valuation of target.
iii. Lower risk comparing ii. Inability to achieve
to develop new synergy.
iii. Finance by taking
diversification huge debt.
v. Avoid excessive
7. TYPES OF M&A
Two companies that Two companies selling Two companies that
sell the same different but related have no common
products in different products in the same business areas
9. 1. TATA STEEL-CORUS: $12.2 BILLION
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.
10. 2. VODAFONE-HUTCHISON ESSAR: $11.1
11th February 2007
67 % stake holding
Image: The then CEO of Vodafone
Arun Sarin visits Hutchison
Telecommunications head office in
11. 3. HINDALCO-NOVELIS: $6 BILLION
Hindalco entered the
Fortune-500 listing of
companies by sales
Image: Kumar Mangalam Birla
(center), chairman of Aditya Birla
12. 4. RANBAXY-DAIICHI SANKYO: $4.5 B
largest-ever deal in the
Indian pharma industry
Daiichi Sankyo acquired
the majority stake of
more than 50 % in
Ranbaxy for Rs 15,000
15th biggest drugmaker
Image: Malvinder Singh (left), ex-CEO
of Ranbaxy, and Takashi Shoda,
president and CEO of Daiichi Sankyo.
13. 5. ONGC-IMPERIAL ENERGY:$2.8BILLION
Imperial energy is a
biggest chinese co.
ONGC paid 880 per
share to the
ONGC wanted to tap
the siberian market
Image: Imperial Oil
CEO Bruce March.
14. 6. NTT DOCOMO-TATA TELE: $2.7 B
giant NTT DoCoMo
acquired 26 per cent
equity stake in Tata
Teleservices for about
Rs 13,070 cr.
Image: A man walks past a signboard of
Japan's biggest mobile phone operator
NTT Docomo Inc. in Tokyo.
15. 7. HDFC BANK-CENTURION BANK OF PUNJAB:
got one share of
HDFC Bank for every
29 shares held by
Image: Rana Talwar (rear) Centurion
Bank of Punjab chairman, Deepak
Parekh, HDFC Bank chairman.
16. 8. TATA MOTORS-JAGUAR LAND ROVER: $2.3
March 2008 (just a
year after acquiring
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. 9. STERLITE-ASARCO: $1.8 BILLION
Image: Vedanta Group chairman
18. 10. SUZLON-REPOWER: $1.7 BILLION
Suzlon is now the
largest wind turbine
maker in Asia
5th largest in the
Image: Tulsi Tanti, chairman &
M.D of Suzlon Energy Ltd.
19. 11. RIL-RPL MERGER: $1.68 BILLION
amalgamation of its
Petroleum with the
Rs 8,500 crore
Image: Reliance Industries'
chairman Mukesh Ambani. swap ratio was at
20. WHY INDIA?
Dynamic government policies
Corporate investments in industry
“Ready to experiment” attitude of
23. PROCESS OF MERGER & ACQUISITION IN INDIA:
The process of merger and acquisition has the following steps:
i. Approval of Board of Directors
ii. Information to the stock exchange
iii. Application in the High Court
iv. Shareholders and Creditors meetings
v. Sanction by the High Court
vi. Filing of the court order
vii. Transfer of assets or liabilities
viii. Payment by cash and securities
Maximum Waiting period:210 days from the filing of notice(or
the order of the commission - whichever earlier).
25. WHY MERGERS AND ACQUISITIONS FAIL?
No guiding principles
No ground rules
No detailed investigating
Poor stake holder outreach
26. HOW TO PREVENT THE FAILURE
Continuous communication – employees,
stakeholders, customers, suppliers and
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
27. MERGER BETWEEN AIR INDIA AND
The government of India on 1 march 2007
approved the merger of Air India and Indian airlines.
Consequent to the above a new company called
National Aviation Company of India limited was
incorporated under the companies act 1956 on 30
march 2007 with its registered office at New Delhi.
28. AIM OF THE MERGER
Create the largest airline in India and comparable to other airlines in
Provide an Integrated international/ domestic footprint which will
significantly enhance customer proposition and allow easy entry into
one of the three global airline alliances, mostly Star Alliance with
global consortium of 21 airlines.
Enable optimal utilization of existing resources through improvement
in load factors and yields on commonly serviced routes as well as
deploy „freed up‟ aircraft capacity on alternate routes.
The merger had created a mega company with combined revenue
of Rs 150 billion ($3.7billion) and an estimated fleet size of 150. It
had a diverse mix of aircraft for short and long haul resulting in better
Provide an opportunity to fully leverage strong assets, capabilities
Provide an opportunity to leverage skilled and experienced
manpower available with both the Transferor Companies to the
Provide a larger and growth oriented company for the people and the
same shall be in larger public interest.
29. AIM OF THE MERGER
Potential to launch high growth & profitability businesses (Ground
Handling Services, Maintenance Repair and Overhaul etc.)
Provide maximum flexibility to achieve financial and capital
restructuring through revaluation of assets.
Economies of scale enabled routes rationalization and elimination
of route duplication. This resulted in a saving of Rs1.86 billion,
($0.04 billion) and the new airlines will be offering more
competitive fares, flying seven different types of aircraft and thus
being more versatile and utilizing assets like real estate, human
resources and aircraft better. However the merger had also
brought close to $10 billion (Rs 440 billion) of debt.
The new entity was in a better position to bargain while buying
fuel, spares and other materials. There were also major
Traffic rights - The protectionism enjoyed by the national carriers
with regard to the traffic right entitlements is likely to continue
even after the merger. This will ensure that the merged Airlines
will have enough scope for continued expansion, necessitated
due to their combined fleet strength.
33. POST MERGER SCENAREO
NACIL's employee-to-aircraft ratio: at 222:1 (the global average is
150:1), resulting in a surplus employee strength of almost 10,000.
Fleet Expansion: NACIL's fleet expansion seems out of sync with the
times. Most airlines are actually rounding their fleet and cancelling orders
for new planes. While NACIL plans to induct around 85 more aircrafts
which means their debt going forward.
Mutual Distrust and strong unions: Strong opposition from unions
against management‟s cost-cutting decisions through their salaries have
led to strikes by the employees.
Increased Competition: Air India‟s domestic market share dropped from
19.8% in August 2007, when the merger took place, to 13.9% in January
2008 before rising to 17.2% in February 2009.
Lower load factor: The company‟s load factor is decreasing year by
year, in 2005- 06 load factor is 66.2% which is more than present load
factor. Air India load factor is likely to be low because of the much higher
frequency operated on each route. Lower load factor could decrease the
35. REASONS FOR FAILURE
The merger coincided with a flurry of increased
domestic and international competition.
Weak management and organization structure.
More attention to non-core issues such as long
term fleet acquisitions and establishing subsidiaries
for ground handling and maintenance, than to
addressing the state of the flying business.
Unproductive work practices
Political impediments to shedding staff
37. EXPERIENCES IN M&A
Learn from mistakes of others
Define your objectives clearly
Complete strategy to achieve goal.
SWOT analysis for the merged business - a
Conservative attitude necessary at evaluation
deskstrong arguments to support project
Pick holes in strategy to get the best
Will merged units be able to work at efficient /
Acquire expertise to interpret changes