Merger and Acquitions


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Merger and Acquitions

  1. 1. Mergers and acquisitions
  3. 3. MEANING 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. •The 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 stock •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. MERGER ACQUISITION DIFFERENCE BETWEEN MERGER AND ACQUISITION: 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. vi. Dilution of ownership occurs in merger. 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. vi. The acquirer does not experience the dilution of ownership.
  6. 6. WHY IS IMPORTANT PROBLEM WITH MERGER MERGER:WHY & WHY NOT 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. v. Reduction of competition. i. Clash of corporate cultures ii. Increased business complexity iii. Employees may be resistant to change 6
  7. 7. WHY IS IMPORTANT PROBLEM WITH ACUIQISITION ACQUISITION:WHY & WHY NOT i. Increased market share. ii. Increased speed to market iii. Lower risk comparing to develop new products. iv. Increased diversification v. Avoid excessive competition i. Inadequate valuation of target. ii. Inability to achieve synergy. iii. Finance by taking huge debt. 7
  8. 8. REASONS /ADVANTAGES  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 8
  9. 9.  Horizontal Merger  Conglomeration merger  Vertical Merger  Product-Extension Merger  Market-Extension Merger 9
  10. 10. TOP 5 M&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 share Image: B Mutharaman, Tata Steel MD; Ratan Tata, 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 hutch Image: The then CEO of Vodafone Arun Sarin visits Hutchison Telecommunications head office in Mumbai.
  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 crore 15th biggest drugmakerImage: Malvinder Singh (left), ex-CEO of 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 ford Image: A Union flag flies behind a Jaguar car emblem outside a dealership 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 merger swap ratio was at 16:1 Image: Reliance Industries' chairman Mukesh Ambani.
  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 financial quarter 2010 Sector No. of Deals Value in USD million Share in per 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: 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).
  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