The document discusses mergers and acquisitions. It defines mergers as a transaction where two firms integrate operations to create a stronger competitive advantage. It describes different types of mergers such as horizontal, vertical, conglomerate, market extension, and product extension mergers. Acquisitions are defined as one company purchasing another. The key difference between mergers and acquisitions is that mergers form a new company while acquisitions do not. Synergy effects are cited as a driving force behind M&A deals. The regulatory framework around M&As in India is also summarized.

1. Mergers &
Acquisitions
By
Ayushi Madan
Juhi Garg
Simran Sakshi
(MBM Integrated, MBM 455)

2. CONTENTS
• Meaning of mergers
• Types of mergers
• Meaning of acquisition
• Synergy Effect
• Difference between mergers and acquisition

4. MERGERS
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.
Company A+ Company B = Company C

5. Growth
Expansion
Of
Business
Maximizi-
ng Profits
Eliminate
Competiti
on
Diversific-
ation Of
Risk
Increase
market
share
Reducing
Risk

6. TYPES OF MERGERS

7. HORIZONTAL MERGER
This kind of merger takes place between entities engaged in competing businesses which are at
the same stage of the industrial process. Example- Brooke Bond & Lipton (1996)
VERTICAL MERGER
Vertical mergers refer to the combination of two entities at different stages of the industrial or
production process. Example- Merger of The Walt Disney Company & Pixar Animation Studios
(2012)

8. Conglomerate Merger
A conglomerate merger is a merger between two entities in unrelated
industries. Example- Walt Disney Company and the American Broadcasting
Company (1995)
Market Extension Merger
This includes the merger of two companies that sell the same products in
different markets. Example- Alibaba & Amazon (2016)
Product Extension Merger
A product extension merger takes place between two business organizations
that deal in products that are related to each other and operate in the same
market. Example- The merger of Mobilink Telecom Inc. & Broadcom (2002)

9. MEANING OF ACQUISITIONS

10. An acquisition is quite
similar to a takeover in
which one company will
purchase the other. It is
usually on a pre-planned
and orderly manner in
which both parties strongly
agree if beneficial to both
firms.
Company A + Company B
= Company A

11. SYNERGY
EFFECT
2 + 2 = 5
Value and performance of two
companies combined will be
greater than the sum of separate
individual parts. It is driving
force behind a merger and
acquisition.

12. DIFFERENCE BETWEEN MERGERS AND ACQUISITIONS
BASIS MERGERS ACQUISITIONS
Meaning The merger means the fusion
of two or more than two
companies voluntarily to form a
new company.
When one entity purchases the
business of another entity, it is
known as Acquisition.
Formation of a new company Yes No
Minimum number of
companies involved
2-3 2
Purpose To decrease competition and
increase operational efficiency.
For instantaneous growth
Size of Business Generally, the size of merging
companies is more or less
same.
The size of the acquiring
company will be more than the
size of acquired company.

13. MERGER AND ACQUISITION
PROCESS
DEFINING
ACQUISITION
CRITERIA
COMPETITIVE
ANALYSIS
TARGET
CONTACT AND
NEGOTIATION
FINANCIAL
EVALUATION
POST MERGER
INTEGRATION
FINANCING
THE
ACQUISION
DUE
DILIGENCE
STRATEGY
DEVELOPMENT
SEARCH AND
SCREEN

14. Annual revenue Annual profit
Geographical
expansion
Customers expansion
Market and product
expansion
DEFINING ACQUISITION
CRITERIA WHY??

15. “VISION AND MISSION OF MY ORGANIZATION
OR ACQUIRER SHOULD MATCH ACQISITION
STRATEGY”

16. Buyer analyses target business
opportunity
COMPETITIVE ANALYSIS

17. Acquiring and gathering
company’s information
➜Doing market study
➜Initial market research
➜Data collection
Identify pros and cons of the
company
SEARCH AND SCREEN

18. “EXCEUTION
FOR
ACQUISITION”
HOW?
STRATEGY DEVELOPMENT

19. STRATEGY SHOULD BE AS AN
INTEGRATED PLAN
NEW
EMPLOYEE
S
NEW
SUPPLIER
S
NEW
ORGANIZ
ATION
NEW
CUSTOME
RS

20. FINANCIAL
EVALUATION
➜What is the maximum or
minimum price target
company should be paid?
➜Implications on cash-
flows and balance sheet.
➜Financial alternative.
➜What are areas of risk?

21. TARGET CONTACT
AND NEGOTIATION
➜Beginning of the merger
and acquisition process
➜Evaluate target company
response and expectations
➜Non-disclosure
agreement

22. AREAS TO
EVALUAUTE
MANAG
EMENT
EMPLO
YEES
IT
CULTU
RE
INNOV
ATION
ETHICS
CORPO
RATE
GOVER
NANCE
RISK
FINANC
E
LEGAL
DUE-DILIGENCE

23. GO / NO GO
 Different due-diligence
with different purpose.
 In depth knowledge of the
target result in identifying
unknown or undisclosed
flaws or cons.

24. FINANCING THE
ACQUISION
CASH STOCK
PARTLY

25. ➜Integrate the business into
one unit.
➜Integrate and retain the
best personnel.
➜Support for new
employees, customer, etc.
POST MERGER INTEGRATION

26. REGULATORY
FRAMEWORK➜Company law
An acquisition of shares is permissible with prior approval of the audit
committee and board of directors. Recently, with effect from 15
December 2016, sections 230-240 of the Companies Act, 2013.
Procedurally, any scheme is first approved by the audit committee,
the board of directors, stock exchanges (if shares are listed) and
then by the shareholders/creditors of the company with a requisite
majority (i.e. majority in number and 3/4th in value of
shareholders/creditors voting in person, by proxy or by postal ballot).
➜ Income-tax Act, 1961
In case of a slump sale/sale of shares of an unlisted company,
capital gains tax is chargeable at the rate of 20% or 30% on the
resultant capital gains depending upon the period for which the
undertaking/shares are held.
In case of a sale of shares of a listed company, the capital gains
arising on transfer of such shares on the stock exchanges would be
exempt from capital gains tax or would be chargeable at the rate of
15% depending on the period for which such listed shares are held.

27. ➜ Securities laws
Any acquisition of shares of more than 25% of a listed
company by an acquirer would trigger an open offer to the
public shareholders. Any merger or demerger involving a
listed company would require prior approval of the stock
exchanges and SEBI before approaching NCLT.
➜ Foreign exchange regulations
A typical merger/demerger involving any issuance of shares
to a non-resident shareholders of the transferor company
does not require prior RBI/government approval provided that
the transferee company does not exceed the foreign
exchange sectoral caps and the merger/demerger is
approved by the Indian courts. Issuance of any instrument
other than equity shares/compulsorily convertible preference
shares/ compulsorily convertible debentures to the non-
resident would require prior RBI approval as they are
considered as debt.

28. ➜ Competition regulations
Any acquisition requires prior approval of CCI if such
acquisition exceeds certain financial thresholds and
is not within a common group. While evaluating an
acquisition, CCI would mainly scrutinise if the
acquisition would lead to a dominant market
position, resulting in an adverse effect on competition
in the concerned sector.
➜ Stamp duty
The Indian Stamp Act, 1899, provides for stamp duty
on transfer/issue of shares at the rate of 0.25%. In
case the shares are in dematerialised form, there
would be no stamp duty on transfer of shares.

29. Ebay’s purchase of Skype for USD 2.6
billion, later to be sold at just USD 1.9
billion after four years, was a failure due
to challenges in technical integration and
over-expectations from customers. Ebay
expected synergy coming from Skype
being established as the communication
medium between buyers & sellers on its
marketplace platform, which unfortunately
did not become popular among its market
participants.
Failure of Mergers and
Acquisitions - Case

30. Failure of Mergers and Acquisition
➜Limited or no involvement from the owners
➜Theoretical valuation vs. the practical proposition of
future benefits
➜Lack of clarity and execution of the integration process
➜Cultural integration issues
➜Required capacity potential vs. current bandwidth
➜Actual cost of a difficult integration & high cost of
recovery
➜ Negotiations errors
➜External factors and changes to the business
environment
➜Assessment of alternatives
➜The backup plan
➜The Bottom Line

31. Company name: Avendus Capital Private Limited
(subsidiary of Avendus group)
Founded: 1999
Based in Mumbai with an additional office in
Bangalore.

32.  Avendus Group (Avendus) is a leading provider of financial services that relies on extensive
experience, in-depth domain understanding and knowledge of the regulatory environment.
 Avendus Capital Private Limited is a boutique investment banking firm that offers financial
and strategic advisory services.
 The firm offers mergers and acquisition, due diligence, private placement, restructuring,
recapitalization, turnaround, and valuation advisory services.
 Additionally, it provides target identification, transaction negotiation, debt syndication, and
capital structure assessment services.
 The firm caters to technology, business process outsourcing, pharmaceutical, consumer
goods, media and entertainment, and healthcare sectors.

33. According to a Thomson Reuters report, Avendus earned
$7.8 million or 14 per cent of the $45.2 mn earned in fees by
the top 15 investment banks in India in the first half of
2015. This was only slightly below the 15 per cent share
of Morgan Stanley in this period.

34. In e-commerce, mergers and acquisitions (M&A) are based on
existing investors or entrepreneurs identifying synergy with other
companies, and then driving the transaction based on a business
rationale or common vision of evolution. Avendus stood out when
it advised TaxiForSure in its $200-mn merger with Ola.
“We have a strong understanding of ground realities, which helps
us find the trends early and we build on it quickly,” says Gaurav
Deepak, co-founder and managing director at Avendus.

37. TechProcess Ingenico Group
February 23, 2017
TechProcess Payment Services Ltd., India’s leading online and mobile payment services provider has been 100%
acquired by Ingenico Group, a USD 5 billion global payments leader. With this transaction, all existing shareholders
of TechProcess (major global and Indian investors) will exit the company.
A leading electronic payments firm, service
offerings cover the entire gamut of non-cash
modes of electronic payments such as card
payments, Net-banking, NACH, NEFT/RTGS,
IMPS, e-wallets and the like.
Global leader in seamless payment, providing
smart, trusted and secure solutions to empower
commerce across all channels, instore, online
and mobile.
Avendus Capital was the exclusive financial advisor to TechProcess and its
shareholders for this transaction.

38. Philippe Lazare, the Chairman and Chief
Executive Officer of Ingenico Group, had
said: “Based on its already leading
position in terminal market, Ingenico
Group is making, with the acquisition of
TechProcess, a major step in India, the
fastest growing country in Asia. The
combination of our assets places us in a
unique position to benefit from India’s
shift towards electronic payment
transactions and to strengthen our
leadership in Indian instore and online
payment acceptance.”
The acquisition of TechProcess will
support the strategy of Ingenico
Group in India, where it is the leader
on the terminal market with c.50%
market share and a player in online
payments through EBS, an Ingenico
ePayments entity. As a result,
Ingenico Group will further expand
its footprint in the country, and,
ultimately, offer cross-border
capabilities.

39. SVG Media
Dentsu Aegis
Network
April 18, 2017
London-headquartered media agency Dentsu Aegis Network has acquired Gurgaon-based SVG Media
Pvt Ltd from Smile Group.
Avendus Capital was the exclusive financial
advisor to SVG Media on this transaction.
Smile is Asia’s leading internet group. SVG
Media operates several businesses, including
mobile and digital advertising, in-app video
platform and data targeting through its units—
Tyroo, DGM, Seventynine and Komli.
It provides marketing and communications
strategies through digital creative execution,
media planning and buying, mobile
applications, SEO, content creation, brand
tracking and marketing analytics.

40. As part of the deal, Dentsu will acquire DGM, Seventynine and Komli brands, while Smile
Group will retain Tyroo. SVG Media will become part of Dentsu’s Asia Pacific digital
marketing agency Columbus, and will be renamed as SVG Columbus. Harish Bahl and
Manish Vij of Smile Group will exit as chairman and CEO, respectively, of SVG Media.
Ashish Bhasin, Chairman and CEO of Dentsu Aegis Network South Asia, said: “India is a
significant market with rapid growth potential in its mobile and performance marketing
business, and Dentsu Aegis Network India has a strong track record in the search and
performance space to deliver this. Given its capabilities in data led search, performance
marketing and mobile, SVG Columbus is ideally positioned to capture the fragmented
long tail publisher market in India using technology and data. As a Group we have
leading position in digital in India, particularly in search and performance and this gives
us a clear leadership position in this area. We will now have over 1,300 digital
professionals, accounting for over 35% of our revenues, well ahead of our competitors.”

41. The firm advised Ujjivan Financial Services and some of its shareholders on its
₹600-crore fund raising.
Advised TaxiForSure on its $200-million merger with Ola.
ShopClues.com on its $100-million fund raising led by Tiger Global.
During the quarter, the company also advised Tech Mahindra’s on its
acquisition of SOFGEN Group.
Monarch Catalyst on its sale to Evonik Industries.
Freecharge on its $80-million fund raising.
Some other deals…

42. REFERENCES
• http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Mergers___Acquisitions_in_India.pdf
• http://www.investinganswers.com/financial-dictionary/economics/mergers-acquisitions-ma-366
• http://study.com/academy/lesson/what-are-mergers-and-acquisitions-definition-examples-quiz.html
• http://www.edupristine.com/blog/mergers-acquisitions
• https://youtu.be/2WWG38DZakI
• http://www.investopedia.com/articles/investing/111014/top-reasons-why-ma-deals-fail.asp
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115071600110_1.html
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award-113092800669_1.html
• http://www.vccedge.com/league_tables_manda.php
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