mergers and acquisitions
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This document discusses mergers and acquisitions (M&A) and the role of advisory firms in the M&A process. It notes that global M&A deal value decreased in the first quarter of 2012 compared to 2011, while Europe was the only region to increase. It also provides an overview of M&A activity and deals in India. The document outlines the services advisory firms provide, such as valuation, due diligence, and negotiations support. It discusses the key success factors and challenges for M&A advisory firms.
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mergers and acquisitions
- 1. Service Management Mergers & Acquisitions Vivek Jeyakumar Ashish Dixit Anuradha Hardikar
- 2. Definition • Merger-the combination of two or more companies in creation of a new entity or formation of a holding company • Acquisition-the purchase of shares or assets on another company to achieve a managerial influence
- 3. Global M&A Overview • US$ 415.4bn in global M&A, down 31.2% on Q1 2011 • Europe the only region to show a quarter-on- quarter increase • Goldman Sachs tops global advisory league table with deals of $125.4bn • Private equity buyouts account for 10.3% of global M&A • Energy, Mining & Utilities top sector so far this year
- 4. M&A in India • Total M&A deal value was US$ 62 billion (971 deals) in 2010, it was US$ 54 billion (1026 deals) in 2011 and 1st 4 months of 2012 witnessed deal value of US$ 23 billion (396 deals). • Witnessed some large domestic mergers like Tech Mahindra with Satyam and Sesa Goa with Sterlite. • Private Equity playing a key role in the Indian M&A landscape
- 5. Advisory firms • Include investment banks, corporate lawyers, accountants, stockbrokers, strategy consultants • investment banks are among the first to offer M&A services and remain dominant players in this business • investment banks have increasing competition in the M&A advisory market from commercial banks and prominent accounting firms
- 7. Role of advisory firms • M&A advisory firms provide the match making service of bringing together buyers and sellers of businesses. • Also include the following services – valuation of the business – Conducting initial interviews and discussions with prospective acquirers – Handling the confidentiality contracts on behalf of the client – Providing strategic insights and negotiations skills on behalf of the client – Assisting with due diligence – Resolving transaction issues throughout the process
- 8. Services offered • Financial advice • Project management • Due diligence • Research and valuation • Producing a prospectus or information Memorandum • Contact and analysis of possible buyers/sellers • Providing support to management &Owners • Rules and regulations expertise • Marketing
- 9. CSF of Advisory firms • Complete and clear objectives, goals and scope of the project • Client consultation and acceptance • Communication and information sharing and exchange • Project plan development • Resource planning • Time management, tight secrecy • Price evaluation and financing scheme • Risk management
- 10. Revenues for the services • contingent fee -payable upon the consummation of the M&A transaction. • non-contingent fee -M&A advisory firm receives this fee as a retained fee or an opinion fee whether the transaction is consummated or not.
- 11. Challenges • Uncertain global economy • Introduction of GAAR • Political Scenario • Interaction between different laws and regulators
- 12. Thank You
Editor's Notes
- Among different types of M&A advisory firms, investment bankers have evolved into dominant independent agents in the marketplace. They are taking a more aggressive role often as the “principle architects of business combinations”. More particularly, three key functions played by this major player in the M&A advisory business, namely searching for potential targets (bidders) for the bidder (target); determining the target’s and bidder’s stand-alone values as well as the gains from synergy; and engaging in strategic activities, a function) add the function of raising the requisite financing to complete the transaction or financial support role.
- The contingent fee paid by the acquirer is normally fixed in monetary value rather than being proportional to the deal value as the latter may encourage the investment bank to motivate overpriced deals. On the other hand, the contingent fee paid by the target is calculated as a proportion of deal value normally in terms of a constant percentage of the transaction value, which serves to reward the M&A advisory firm for obtaining better deals for target clients