•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
•Example: 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.
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.
vi. Dilution of ownership occurs
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
vi. The acquirer does not
experience the dilution of
WHY IS IMPORTANT PROBLEM WITH MERGER
MERGER:WHY & WHY NOT
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
v. Reduction of
i. Clash of corporate cultures
ii. Increased business complexity
iii. Employees may be resistant to
WHY IS IMPORTANT PROBLEM WITH ACUIQISITION
ACQUISITION:WHY & WHY NOT
i. Increased market
ii. Increased speed to
iii. Lower risk comparing
to develop new
v. Avoid excessive
valuation of target.
ii. Inability to achieve
iii. Finance by taking
Size and Synergy
Increased revenue/Increased Market Share
Economies of Scale
Helps to face competition
Revival of sick units
Faster growth rate
Finance related advantages
1. Tata Steel-Corus: $12.2 billion
January 30, 2007
Largest Indian take-over
After the deal TATA’S
became the 5th
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.
2. Vodafone-Hutchison Essar:
67 % stake holding
Image: The then CEO of Vodafone
Arun Sarin visits Hutchison
Telecommunications head office in
3. 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
biggest drugmakerImage: Malvinder Singh (left), ex-CEO
of Ranbaxy, and Takashi Shoda,
president and CEO of Daiichi Sankyo.
4. Tata Motors-Jaguar Land
Rover: $2.3 billion
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.
5. RIL-RPL merger: $1.68 billion
amalgamation of its
Petroleum with the
Rs 8,500 crore
swap ratio was at
Image: Reliance Industries'
chairman Mukesh Ambani.
Dynamic government policies
Corporate investments in industry
“Ready to experiment” attitude of
Deals in India for first financial
Sector No. of Deals
Value in USD
Share in per
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
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).
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