The document discusses acquisitions, which are when one company buys another to gain control of it. There are two main types: friendly acquisitions, which have agreement from the target company, and hostile acquisitions, which do not. Companies make acquisitions to achieve economies of scale, expand operations, find growth opportunities, or eliminate competition. Acquisitions can be financed through private equity, equity financing, bank loans, or asset-based loans. The document also discusses the impacts, advantages, and disadvantages of acquisitions, as well as examples of Tata Steel acquiring Corus and Bharti Airtel acquiring Zain Africa.

1. MOHIT PANCHAL
RIYA MAJOKA

2. WHAT IS ACQUISITION ?
 An acquisition is a corporate action in which a company buys most,
if not all, of another firm's ownership stakes to assume control of it.
 An acquisition occurs when a buying company obtains more than
50% ownership in a target company.
 As part of the exchange, the acquiring company often purchases the
target company's stock and other assets, which allows the acquiring
company to make decisions regarding the newly acquired assets
without the approval of the target company’s shareholders.
 Acquisitions can be paid for in cash, in the acquiring company's
stock or a combination of both.

3. WHY MAKE AN ACQUISITION ?
 To achieve economies of scale, greater market share,
increased synergy, cost reductions, or new niche offerings.
 To expand their operations to another country.
 Acquisitions are often made as part of a company's growth strategy
when it is more beneficial to take over an existing firm's operations
than it is to expanding on its own.
 To find higher growth and new profits, the large firm may look for
promising young companies to acquire and incorporate into its
revenue stream.
 To reduce excess capacity, eliminate the competition, or focus on
the most productive providers.
 If a new technology emerges that could increase productivity, a
company may decide that it is most cost-efficient to purchase a
competitor that already has the technology.

4. DIFFERENT TYPES OF ACQUISITION
 There are mainly two types of Acquisition:
◦ Friendly
◦ Hostile
FRIENDLY ACQUISITION:
 Friendly acquisitions occur when the target firm expresses its
agreement to be acquired.
 Friendly acquisitions often work towards a mutual benefit for both
the acquiring and the target companies.
 The companies develop strategies to ensure that the acquiring
company purchases the appropriate assets, including the review of
financial statements and other valuations, and that the purchase
accounts for any obligations that may come with the assets.
 Once both parties agree to the terms and meet any legal stipulations,
the purchase moves forward.

5. DIFFERENT TYPES OF ACQUISITION
HOSTILE ACQUISITION:
 Hostile acquisitions don't have the same agreement from the target
firm, and the acquiring firm must actively purchase large stakes of
the target company to gain a majority.
 Hostile takeovers occur when the target company does not consent
to the acquisition.
 In this case, the acquiring company must attempt to gather a
majority stake to force the acquisition to go forward.
 To acquire the necessary stake, the acquiring company can produce
a tender offer designed to encourage current shareholders to sell
their holdings in exchange for an above-market value price.
 To complete, a 30-day acquisition notice must be filed with
the Securities and Exchange Commission (SEC) with a copy
directed to the target company's board of directors.

6. WAYS OF FINANCING AN ACQUISITION
 Private equity financing : It takes the form of venture capital – a
professionally managed pool of funds that invest in high-growth
opportunities – or private equity firms.
 Equity financing : It involves the buyer company selling securities
in order to raise money, then using that money for both the
acquisition transaction and to provide additional cash for the new
company.
 Bank financing : It takes a variety of forms. The most common is
to receive a cash flow-based loan, in which case the bank
scrutinizes the cash flow, debt load and profit margins of the target
company.
 Asset-based financing : It is another option. In an asset-based loan,
the lender looks at the collateral (the inventory, receivables and
fixed assets of the target firm) rather than the cash flow and debt
loan.

7.  Preliminary Assessment or Business Valuation- In this process of
assessment not only the current financial performance of the company is
examined but also the estimated future market value is considered.
 Phase of Proposal- After complete analysis and review of the target
firm's market performance, in the second step, the proposal for merger
or acquisition is given.
 Exit Plan- When a company decides to buy out the target firm and the
target firm agrees, then the latter involves in Exit Planning.
 Structured Marketing- After finalizing the Exit Plan, the target firm
involves in the marketing process and tries to achieve highest selling
price.
 Stage of Integration- In this final stage, two firms are integrated
through acquisition.

8. Preliminary
Assessment
or Business
Valuation
Phase of
Proposal
Exit PlanStructured
Marketing
Stage of
Integration

9. Impact of Acquisitions
● Employees: Acquisitions impact the employees or the workers the
most. It is a well known fact that whenever there is a merger or an
acquisition, there are bound to be lay offs.
● Impact on top level management: Impact of acquisitions on top
level management may actually involve a "clash of the egos". There
might be variations in the cultures of the two organizations.
● Shareholders of the acquired firm: The shareholders of the
acquired company benefit the most. The reason being, it is seen in
majority of the cases that the acquiring company usually pays a
little excess than it what should. Unless a man lives in a house he
has recently bought, he will not be able to know its drawbacks.
● Shareholders of the acquiring firm: They are most affected. If
we measure the benefits enjoyed by the shareholders of the
acquired company in degrees, the degree to which they were
benefited, by the same degree, these shareholders are harmed

10. ADVANTAGES & DISADVANTAGES OF
ACQUISITION
ADVANTAGES
● Increased market share.
● Increased speed to market
● Lower risk comparing to develop new products.
● Increased diversification
● Avoid excessive competition
DISADVANTAGES
● Inadequate valuation of target.
● Inability to achieve synergy.
● Finance by taking huge debt.
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11. DIFFERENCE BETWEEN MERGER
& 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.
vi. Dilution of ownership occurs
in merger.
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.
vi. The acquirer does not
experience the dilution of
ownership.

12. EXAMPLES OF ACQUISITION
Tata Group Acquired Corus, October 2006
Deal size: $12.98 billion, Country: United Kingdom
● Tata Steel is India’s second largest steel company with a
capacity of producing 3.8 million tonnes of crude steel. It
has most of its plant in Jamshedpur, Jharkhand. It is
considered as one of the best companies in producing
steel. In October 2006, Tata Steels acquired Corus with an
outstanding price of $12.98 billion.
● In February, 2010, Bharti Airtlel added 180 million new customers
in its list by acquiring an African Mobile Network provider called
Zain Africa. This acquisition took place against an amount of $10.7
billion.
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Bharti Airtel acquired Zain Africa, February 2010
Deal size: $10.7 billion, Country: Kenya