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Capitol Tech U Doctoral Presentation - April 2024.pptx
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QUESTIONS FOR
CASE STUDY ASSIGNMENT
Mergers & Acquisitions and Strategic Alliance
2. Licensed for use by the students of the
Executive MBA Program,
The Icfai University.
Not to be reproduced.
LDEN/EMP/CA/1.0 Page 4 of 4
3. QUESTIONS FOR CASE STUDY ASSIGNMENT
Mergers & Acquisitions and Strategic Alliance
ANSWER THE QUESTIONS FOR ANY TEN CASE STUDIES
Questions for 18 case studies are given below. Each case study assignment has 2 questions.
Students are required to answer questions for any 10 case studies (20 answers). Students
are advised to submit answers for all 10 cases in one go, for results to be adjudged in one
instance.
1. The betapharm Acquisition: DRLâs Inorganic Growth
Strategy in Europe
a. Many experts believed that it was difficult for Dr. Reddyâs Laboratories Limited (DRL) to
establish a strong marketing infrastructure and get instant access to German market through
organic growth. Discuss in general the various advantages and disadvantages of adopting
organic and inorganic growth strategies in organizations. Also, justify the inorganic growth
strategy adopted by DRL in Europe.
Answer: Dr Reddyâs Laboratories (DRL) was promoted in 1984 by Anji Reddy, a pioneering
scientist-entrepreneur, as a manufacturer of bulk drugs or active pharmaceutical ingredients
(APIs). Over the last three decades, DRL has emerged as an integrated global pharmaceutical
company offering a wide range of products including APIs, generics, biosimilars, and
differentiated formulations. Nearly 80% of the companyâs revenues are derived from overseas
markets that include the United States (US), Russia
b. Discuss the rationale behind DRLâs acquisition of betapharm. Critically analyze the pros
and cons of this cross-border acquisition.
Answer: Acquisitions are very, very risky. The execution risk in acquisitions is much higher than in
organic growth because there are very few factors that you can control once an acquisition is
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4. made. First, I think the company should be very clear about why it is acquiring at all. Today, we
spend a lot of time writing down the hypothesis for the acquisition and the rationale for it,
without get carried away by the size. Acquiring for size is a stupid approach, according to me. I
think you need to acquire only when you can take the asset and create much greater value than
before. Two plus two can become six or seven if you have a very strong strategic rationale and
approach for what you will do with the
2. Fortisâs Acquisition of Wockhardt Hospitals
a. Comment on Fortisâs strategy of inorganic growth in the Indian healthcare industry with
a special note on the rationale behind its acquisition of 10 Wockhardt hospitals. Critically
analyze the pros and cons of the acquisition.
Answer: Inorganic growth is typically the result of a deal between two businesses. Sometimes the
two businesses merge, sometimes one buys another outright, and sometimes one business buys
the clients from another business. Whatever the case, this is growth that would not happen as
the result of everyday, organic business operations.
b. Identify the challenges Fortis is going to face in the future, and explore strategies it can
adopt to overcome the challenges.
Answer: Wockhardt Hospitals Ltd, promoted by the founders of pharma major Wockhardt Ltd, on
Friday sold ten of the 17 hospitals it owns to New Delhi-based Fortis Healthcare, Indiaâs biggest
hospital chain by market value, for Rs 909 crore.
It plans to use Rs 500 crore of the money raised to repay debt, making Wockhardt Hospitals
nearly debt-free, and the rest to set up, surprisingly
3. The Adidas â Reebok Merger
a. Examine the circumstances that led Adidas to acquire Reebok. Was it a move driven by
compulsion or by choice? Justify your answer.
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5. Answer: BY now, Madison Avenue has become used to the consolidation of big clients that sell
consumer products in competitive categories: Daimler-Benz buying Chrysler, Coors and Molson
merging, Whirlpool possibly acquiring Maytag. Even so, the announcement yesterday that Adidas-
Salomon would take over Reebok International sent executives scurrying to assess the potential
effects of the deal on the hard-fought
b. Examine the integration efforts planned by Adidas. Assuming that there are no
regulatory pressures, what would be the best strategy for Adidas to employ in order to handle
product overlaps? Give reasons for your answer.
Answer: One of the more pressing issues of subcontracted labour is the non-payment of a legally
mandated terminal compensation (âseveranceâ). In 2011, the PT Kizone factory in Indonesia was
forced to close and 2,700 workers were left immediately without jobs. The factory produced for
Nike, Adidas and the Dallas Cowboys. As indicated in a report by the Workers Rights Consortium
(WRC), Nike and the Cowboys immediately agreed to pay their share of what was owed, ÂŁ1m and
ÂŁ33k respectively.
4. CEMEXâs Acquisition Strategy â The Acquisition of Rinker
Group
a. As most of CEMEXâs growth came from acquisitions, the company had developed strong
post-merger expertise. What, according to you, are the advantages that a company gains from
such an expertise? Discuss with special emphasis on deals leading to geographical
diversification.
Answer: CEMEX S.A.B. de C.V., known as Cemex, is a Mexican multinational building materials
company headquartered in San Pedro, near Monterrey, Mexico. It manufactures and distributes
cement, ready-mix concrete and aggregates in more than 50 countries. It is the second largest
building materials company worldwide, only after LafargeHolcim.
Lorenzo Zambrano was the chairman and chief executive officer until his death on May 12, 2014.
About one-third of the company's sales come from its
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6. b. Analysts said that CEMEX was refinancing debt payment rather than paying it. Give
suggestions on how CEMEX can overcome its excessive debt problems.
Answer: CEMEX was founded with the opening of Cementos Hidalgo, in 1906. Meanwhile,
Cementos Portland Monterrey began operations in 1920, and in 1931, the two companies
merged, becoming Cementos Mexicanos, now CEMEX. In the 1960s, CEMEX grew significantly
when it acquired several more plants throughout Mexico. In 1976, the company went public on
the Mexican stock exchange, and that same year, became the largest cement producer in Mexico
with the purchase of three plants from
5. The Polaris â OrbiTech Merger
a. Discuss the reasons for the Polaris-OrbiTech merger. Also, discuss the different
problems associated with the merger of cross-border IT software companies.
Answer: Under the terms of the merger, the shareholders of OrbiTech were to receive 14 newly
issued equity shares of Polaris (face value of Rs 5) each, for every 25 OrbiTech shares (face value
of Rs 2) held by them.
The swap ratio was arrived at on the basis of the enterprise value of the two companies, valued
by Ernst & Young. While Polaris was valued at $210 mn, OrbiTech was valued at $246.75 mn, 17.5
percent higher than Polaris. Polaris
b. Polaris reported revenues of Rs. 4017 mn in 2003. The companyâs earnings before
interest and tax (EBIT) are Rs. 768 mn and depreciation is Rs. 180 mn. The capital expenditure
amounts to Rs. 250 mn and working capital is 40% of the revenues. The firm has outstanding
debt yielding a pre-tax interest rate of 7.5%. The tax rate for the firm is 35% and the Treasury
bill rate is 5.5%. The most recent beta for the firm is 1.20. The debt equity ratio of the firm is
0.25. The firm expects revenues, earnings, capital expenditure, and depreciation to grow at 8%
a year from 2004 to 2008, after which the growth rate is expected to drop to 4% (capital
spending will offset depreciation in the steady state period). The company also plans to lower
its debt/equity ratio to 0.13 for the steady state resulting in the pre-tax interest rate drop to
6.5%. The annual market premium of the firm is 5%. Calculate the value of the firm according to
Free Cash Flow to Firm (FCFF) model.
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7. Answer: Polaris Consulting and Services Ltd (BSE: 532254 ; NSE: POLARIS) is a provider of financial
technology products, legacy modernization services and consulting for core banking, corporate
banking, wealth & asset management and insurance. Adrenalin eSystems Limited (AeSys) is a
subsidiary of Polaris Financial Technology Limited.
Polaris Consulting & Services Limited was
6. Valuing Sifyâs Acquisition of IndiaWorld
a. IndiaWorld was acquired for Rs. 4.99 billion by Sify in November 1999. Using page views
multiplier model to value dotcoms, calculate the fair market value of IndiaWorld in October
1999. Determine the Price/Revenue multiple in terms of page views for Rediff.com as in
October 1999. The market value of Sify on NASDAQ in October 1999 can be used as a proxy for
the market capitalization of Rediff.com. The page views of Rediff.com for the second quarter of
1999-2000 was 70 million and the portal advertising revenues for the quarter was $0.28 million.
Answer: In economics, valuation using multiples is a process that consists of:
⢠Identifying comparable assets (the peer group) and obtaining market values for these
assets.
⢠Converting these market values into standardized values relative to a key statistic, since
the absolute prices cannot be compared. This process of standardizing creates valuation
multiples.
⢠b. Study the performance of Sify and IndiaWorld over the years as per the data
given in the case. Discuss whether the price paid for the acquisition was justified by
comparing the perceived synergies to the actual performance of Sify and IndiaWorld.
What are the future prospects of Sify after the acquisition of IndiaWorld?
Answer: The growth of cyber cafes, which are the largest source of Internet access in India, is
declining sharply. According to a CII-IMRB Broadband report, the number of cyber cafes, which
was growing at almost 60% in 2004 and 2005, has fallen to almost 20% in 2008.
There are 1,80,000 cyber cafes in the country. Large industry players attribute the decline to lack
of subsidy and support provided by the government coupled with increased security concerns and
harassment of cyber cafe owners.
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8. 7. Hindalcoâs Acquisition of Novelis
a. Comment on the financing pattern of the deal. What could be the rationale for Hindalco
opting to pay the entire deal amount in cash and not opting a share swap deal?
Answer: Mergers and Acquisitions have been the part of inorganic growth strategy of corporate
worldwide. Post 1991 era witnessed growing appetite for takeovers by Indian corporate also
across the globe as a part of their growth strategy. This series of acquisitions in metal industry
was initiated by acquisition of Arcelor by Mittal followed by Corus by Tataâs. Indian aluminium
giant Hindalco extended this process by acquiring Atlanta based company Novelis Inc, a world
leader in aluminium rolling and flat-rolled aluminium products. Hindalco Industries Ltd., acquired
Novelis Inc. to gain sheet mills that supply can makers and car companies. Strategically, the
acquisition of Novelis takes Hindalco onto the
b. What challenges does Hindalco face in integrating the operations of Novelis and
achieving its strategic objective of becoming a leader in the global aluminum industry? Suggest
measures to overcome those challenges.
Answer: The Indian aluminium sector is characterized by large integrated players like Hindalco
and National Aluminium Company (Nalco). The other producers of primary aluminium include
Indian Aluminium (Indal), now merged with
8. Tata Motors â Financing the Acquisition of Jaguar and Land
Rover
a. Explain how Tata Motors financed the acquisition of Jaguar and Land Rover. Tata
Motors started a new trend in the Indian markets by opting for shares with differential voting
rights. What are the advantages of such shares for the shareholders and the company?
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9. Answer: The only thing most of us want from stocks is returns . That's why many companies
nowadays offer investors the option to earn a little more from a stock in exchange for sacrificing a
few rights they rarely exercise. These shares, called differential voting right, or DVR, shares are
catching the fancy of more and more stock investors.
b. In the context of JLR deal, discuss the rationale for this acquisition. Do you think that
acquisition of JLR is a good example of Tata Motorsâ inorganic growth strategy? Justify with
lucid explanations. Also, discuss the impact of macroeconomic factors on the global automobile
industry.
Answer: Indiaâs largest auto maker by sales revenue informed the BSE that it will go for a postal
ballot to seek shareholdersâ approval for the plan. Both ordinary shares and shares with
differential voting rights (DVR) will be issued.
Tata Motorsâ DVR shares, first issued in 2008, carry less voting rights but fetch higher dividend.
Analysts attributed the move to insufficient revenues from the companyâs domestic operations in
the last three years due to poor car, truck and bus sales.
9. Tata Steelâs Acquisition of Corus
a. Critically examine Tata Steelâs acquisition of Corus and comment on the expected
synergies between the post-merger. How would this deal benefit both Tata Steel and Corus in
the long term? Explain. Point out the possible integration related issues that could arise, going
forward.
Answer: Tata Steel Europe Ltd. (formerly Corus Group plc) is a steelmaking company
headquartered in London, United Kingdom, with its main operations in the United Kingdom and
the Netherlands.
Corus Group was formed through the merger of Koninklijke Hoogovens and British Steel in 1999
and was a constituent of the FTSE 100 Index. It was acquired by Tata of India in 2007, and
renamed Tata Steel Europe in September 2010.
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10. b. Many experts were of the opinion that the acquisition of Corus was rather expensive
for the Tatas. In this regard, critically analyze the financing of the Corus deal. As an analyst on
mergers and acquisitions, do you think Tata Steelâs decision to enter an all-cash deal was the
right one? Take a stand and justify your answer.
Answer: Tata Steelâs stated argument, however, is rooted in its captive iron ore and coal
resources. The distribution of the worldâs iron ore resources strengthens that case. The worldâs
top five iron ore producers control an overwhelming 90% of the market, according to a Tata Steel
presentation. In contrast, the top five steel producers command less than 20% of the world
market. Whatâs clear in those numbers is the relatively low
10. The Delta and Northwest Airlines Merger
a. The merger between Delta and Northwest took place in the background of severe
financial problems faced by both the firms. In this context, examine the pros and cons of the
use of merger as a strategy to deal with financial problems. Also, comment on the synergies
derived by Delta after the merger integration process.
Answer: In 2008 this Subcommittee also held a hearing on the merger of Delta Airlines and
Northwest Airlines. At that time there was speculation that other carriers within the industry
would merge to create a U.S. airline industry dominated by just a few mega-carriers. Just 2 years
later, as many predicted, we are meeting here again today to discuss another proposed
combination that would surpass Delta as the world's
b. Some analysts believed that Delta-Northwest merger may not benefit the consumers
and employees of the merged entity. Critically discuss.
Answer: I am very concerned about how this merger, if approved, will affect ticket prices for
passengers, how the merger will affect pilots, flight attendants, mechanics and employees of both
airlines, how many employees will lose their jobs or receive reduced benefits and wages, and
what will happen with existing union contracts.
11. HP-Compaq â A Failed Merger?
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11. a. HP and Compaq merger deal was worth US$ 24 billion, the biggest ever deal in the
history of computer industry during that time. Why was the HP-Compaq merger termed by
many analysts as a bad deal? Do you think it was a failure? Explain.
Answer:
b. What were the post-merger contributions of Fiorina? Did she fail as a leader in
managing the merger? Take a stance and justify.
Answer:
12. Oracleâs Acquisition of PeopleSoft
a. Examine the various attempts made by Oracle to acquire PeopleSoft. What were the
key factors that were preventing Oracle from acquiring PeopleSoft? And what factors helped
Oracle? Explain.
Answer:
b. Analyze the role played by PeopleSoftâs board in the takeover battle. Was the board
justified in using the poison pill defense strategy to thwart the hostile takeover? Explain. Why
do you think the board acquiesced to being taken over later?
Answer:
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12. 13. SABMiller vs. Anheuser-Busch: The Takeover Battle for
Harbin Brewery
a. Examine the circumstances that led SABMiller to launch a hostile takeover bid for
control of Harbin. What strategies could the board have adopted to avoid the hostile takeover
launched by SABMiller?
Answer:
b. How did the acquisition of Harbin by AB affect the different parties involved in the
takeover battle, including AB, SABMiller, the Harbin board and its shareholders? Who do you
think benefited the most from the deal? Give reasons to justify your answer.
Answer:
14. The Aventis-Sanofi Merger: Role of French Government?
a. Compare and contrast the potential synergies in the Sanofi-Aventis merger and the
Novartis-Aventis (assuming that it had been approved) merger. Do you think Aventis lost a
lucrative opportunity by not merging with Novartis? Given a choice, which merger deal would
you have favored, and why?
Answer:
b. Discuss the role of the French Government in preventing the possible merger of
Novartis and Aventis, and ensuring a Sanofi-Aventis merger. Do you think the government was
right in interfering in the merger processes? Justify your stand giving reasons.
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13. Answer:
15. The Gucci â LVMH Battle
a. Why was LVMH interested in acquiring Gucci? Was Gucci justified in claiming that there
would be no synergies from the Gucci-LVMH alliance? Discuss.
Answer:
b. Comment on the defense strategies adopted by Gucci. Wasnât the PPR stake acquisition
also a form of takeover, even if it had Gucciâs approval?
Answer:
16. Citigroupâs Sale of Phibro: Ending the US$ 100 Million Pay
Controversy
a. What were the reasons that prompted Citigroup to sell-off Phibro, its profit-making
unit?
Answer:
b. Explain the consequences of this sell-off on Citigroup and on the other US-based
financial services companies.
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14. Answer:
17. Tata Motors and Fiat Auto: Joining Forces
a. What, in your opinion, were the key reasons for Fiatâs poor performance in India? What
are the factors that made TM an attractive alliance partner for Fiat?
Answer:
b. What could be the possible disadvantages from the alliance? What can the partners do
to minimize the potential impact of these threats?
Answer:
18. Disneyâs Acquisition of Pixar
a. Critically examine the events that happened during the partnership between Disney
and Pixar.
Answer:
b. Do you think partnership mode was the only option available to Disney? Justify.
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15. Answer:
19. TCL-Thomson Electronics Corporation: A Failed Joint
Venture?
a. Comment on the reasons that could have prompted TCL to expand globally. Do you
agree with the approach adopted by TCL for its global expansion? Why or why not?
Answer:
b. TTE was a joint venture formed in late 2003 between TCL Corporation (TCL) and France
based Thomson SA. What factors led to the failure of TTE? Discuss.
Answer:
20. Orange and T-Mobile Merger in the UK
a. The merger between Orange UK and T-Mobile UK is considered by experts to be a bid to
combat the increasing competition in the crowded telecom market in the UK. In this regard,
analyze the use of merger to deal with competition, especially in the telecom industry.
Answer:
b. Identify the challenges faced by the merged entity. How can these challenges be
overcome?
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16. Answer:
21. Comcast-NBC Universal Joint Venture Deal
a. Examine the proposed joint venture deal between Comcast and NBCU and comment on
its rationale. Do you think the potential synergies derived from the deal will help the new
company emerge as a leading media and entertainment company in the US? Substantiate.
Answer:
b. In the light of the criticisms regarding the proposed joint venture deal, do you think the
deal would be approved by the concerned regulatory authorities? Elaborate. Assuming that the
joint venture deal gets the regulatory approvals, what challenges will the New NBCU face in the
near future?
Answer:
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