Introduction to Merger & Aquisition

1. MERGERS &
ACQUISITIONS
An instrument of
growth

2. Microsoft - Nokia
 September 3, 2013 Microsoft announced its
interest to acquire Nokia
 Microsoft will purchase the Nokia’s devices
and services business
 Mobile phones, smart devices and industry
leading design team

3. Microsoft - Nokia
 Operations including all Nokia devices and
service relates production facilities
 Devices and service related sales and
marketing activities
 Related support functions and would license
Nokia’s patents and use Nokia’s mapping
services

4. Microsoft - Nokia
 The deal was completed and closed by April
2014
 The total consideration paid to Nokia
amounted to USD 7.2 billion/ Eur 5.44 billion
 Eur 3.79 billion for acquisition and Eur 1.65
billion for patents

5. Microsoft - Nokia
 In the acquisitions arrangement, Microsoft
made an immediate payment of Eur 1.5 billion
of financing in the form of three Eur 500 million
tranches of convertible notes
 Microsoft funded from overseas market
 Around 32000 people were transferred from
Nokia to Microsoft

6. Microsoft - Nokia
 Microsoft-Nokia deal witnessed two major
declarations
 In 2013, lot of synergy post acquisition and put
7.2 billion USD
 In 2015, it will write off USD 7.2 billion in
assets acquired from Nokia

7. Microsoft – Nokia
 The two announcement and a basic question?
 Why did Microsoft not perform a realistic due
diligence before initiating the acquisition of
Nokia devices

8. Mergers and Acquisitions
 Mergers – the integration of two previously
independent organizations into a completely
new organization
 Acquisitions – the purchase of one
organization by another for integration into the
acquiring organization

9. M & A
 “Ultimate change management challenge”
Cummings and Worley
 Change about –
 Structure
 Resources
 Value chain
 Competition
 Revenue stream

10. Why M & A?
 Growth is the law of market………..
 Inorganic or organic……..
 To be on growth path……..
 SPAC is new buzzword…….

11. Why M & A
 Related and unrelated diversification
 Zomato acquired Uber Eats India for Rs. 2492
crores
 Tata steel bought Corus for $8.1 billion and
later renamed it as Tata Steel Europe
 Disney buy Pixar Animation Studios for
approximately $7.4 billion

12. M & A in India
 Related and unrelated diversification
 Zee and Sony pictures, Sony will have 50.86 %
stake in the merged entity
 Tata sons signed share purchase agreement of
18000 crore to acquire Air India
 Tata digital acquired Big basket and 1mg
 Wipro acquired Capco

13. Why M & A
 Horizontal integration
https://dealroom.net/faq/guide-to-horizontal-mergers

14. Why M & A
 Vertical integration
https://dealroom.net/blog/definition-of-vertical-mergers-and-examples-of-vertical-m-a-deals

15. Why M & A
 Vertical integration
https://dealroom.net/blog/definition-of-vertical-mergers-and-examples-of-vertical-m-a-deals

16. Why M & A
 Vertical integration
 Time Warner Inc, a large cable company and the
Turner Corporation, a major media company
which owns like CNN, TNT in 1996
 Dell acquired EMC, a data storage company in a
$67 billion deal in 2015
 Google acquired Android for $50 million in 2005

17. Why M & A
 Global markets access, technology
 Microsoft-Skype
 BYJU acquired OSMO a US based
educational gaming company for $120 million
and WhiteHat Jr. for $ 300million
 OYO acquired European rental brand Leisure
group

18. Why M & A
 Resource sharing, innovation, operational
efficiencies
 Hindalco-Novelis
 Ikea buys Romanian Baltic Forests to control
its raw materials

19. M & A: important considerations
 The rationale behind the M&A and how does it
fit
 People are prepared to respond for the
disruption
 Diversification and capability building
 How to retain and protect people
https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/demystifying-deal-making-lessons-from-m-and-a-veterans

20. Process of M & A
 Develop an acquisition strategy
 Set the M&A search criteria
 Search for potential acquisition targets
 Begin acquisition planning

21. Process of MA
 Perform valuation analysis
 Negotiations
 M&A due diligence
 Purchase and sale contracts

22. Process of MA
 Financing strategy for the financing
 Closing and integration of the acquisition

23. Motives for M & A
 Economies of scale
 Adoption of modern technology
 Desire to elimination of competition
 Lack of technical and managerial talent

24. Motives for M & A
 Greater value generation
 Gaining cost efficiency
 Increase in the market share
 Gain higher competitiveness

25. Problems of M & A
 Integration difficulties
 Large or extraordinary debt
 Managers overly focused on acquisition
 Over diversified

26. Some big deals
 Tata Steel – Corus
 Vodafone – Hutchison Essar
 Hindalco – Novelis
 Ranbaxy – Daiichi Sankyo
 ONGC – Imperial Energy

27. Reasons for success & failure in M
& A
 Trust between the parties
 Due diligence and good valuations
 Experience from past mergers and
acquisitions
 Communication before the execution of the M
& A

28. Reasons for success and failure
 Quality of plan
 Execution of the plan
 Cultural fit
 Synergy
 State of the economy

29. Successful M & A
 L&T and Mindtree
 Unilever and Blueair
 Dell and EMC corporation
 Idea and Vodafone

30. Some failures in M & A
 eBay and Skype
 Daimler-Benz and Chrysler
 Volvo and Renault

31. Regulatory Compliances
 Companies Act, 2013
 Income-tax Act, 1961
 SEBI Act, 1992
 FEMA Act, 1999
 Insolvency and Bankruptcy Code, 2016

32. Due Diligence
 “ An investigation in to affairs of an entity prior
to its acquisition, floatation, restructuring or
other similar transactions.”
 The process by which information is gathered
about:- a target company – its business; and
the environment in which a target company
operates.

33. Thank You