ALL ABOUT MERGERS & ACQUISITION

1. Merger &
Acquisition
DIPANJAN ROY

2. Merger
• A strategy through which two firms agree to integrate
their operations on a relatively coequal basis.
• Types of mergers
1) Conglomerate - L&T and Voltas Ltd.
2) Congeneric – Citigroup and Travellers Insurance.
3) Horizontal - Bank of Mathura with ICICI Bank
4) Vertical - Reliance and FLAG Telecom group.
5) Reverse - Godrej Soaps Ltd. with Gujarat Godrej
Innovative Chemicals Ltd.

3. Acquisition
• A strategy through which one firm buys other firm or one
company is taken over by the other.
• Reasons for acquisition
1) Increased Market power
2) Overcoming Entry barriers
3) Cost of new product development and increased
speed to market
4) Lower risk compared to developing new products
5) Increased Diversification
6) Reshaping the firm’s competitive scope

4. Advantages
• To merge their power and control over the markets.
• Synergy- Increased value efficiencies of the new entity,
shapes the returns and cost savings.
• Economies of scale is formed by sharing the resources
and services.
• Decrease of risk using innovative techniques of
managing financial risk.
• Use of tax- shields, increase monetary leverage and
utilize alternative tax benefits

5. Disadvantages
• Loss of experienced workers aside from workers in
leadership positions.
• Employees of the small merging firm may require
exhaustive re-skilling.
• Two firms that are doing similar activities may mean
duplication and over capability within the company that
may need retrenchments.
• It reduces flexibility among the firms.

6. Vodafone Idea Merger –
July 2018

7. Vodafone Idea Merger
Vodafone Idea Airtel Jio
Market share 2017 17.68% 16.20% 24.21% 12.39%
Market share 2018 35.61% 28.93% 20.50%

8. Vodafone Idea Merger
• Advantage
o 15 year market leader airtel has been pushed back
o Sustain in the market in spite of heavy competition, not to be lost as network
such as Aircel.
o Benefits all stakeholders.
• Disadvantage
o Difference in organisational culture.
Other aspects such as financial and strategic fits between companies can be clearly
discussed after completion of one year.
Type of merger - Horizontal and related merger.

9. Mahindra & Mahindra-
Schoneweis

10. Mahindra & Mahindra-
Schoneweis
• Type of M&A :
o Cross-Border Acquisition
o Vertical Acquisition
o Related Acquisition
• Merge date: January’07
• Acquisition
o Acquirer: Mahindra forging global limiter (subsidiary of M&M)
o Acquired: Schoneweiss & Co.

11. Mahindra & Mahindra-
Schoneweis
• Advantage
o Established as a strong player in the European market.
o Technology transfer between companies.
o Backward integration with respect to axle beam, suspension, power train and
engine parts.

12. Questions
• Should Cross border acquisition be encouraged? Give
your perspectives?
• What is the CCI’s role on mergers?
• NCLT – defaulting a single payment to creditor can lead
to acquisition of the company.
o Your view on this NCLT?
o Why should not the judgement of NCLT to be re examined in other higher judicial
body such as supreme court?
o View on Essar steel case (higher bid of essar steel is rejected over ArcelorMittal’s
low claim) ?