A PROJECT ON
CORPORATE LEVEL STRATEGIES – TAKEOVER STRATEGY
IN THE SUBJECT
Soumeet D. Sarkar
UNDER THE GUIDANCE OF
Prof. Prerna Sharma
UNIVERSITY OF MUMBAI
MASTER OF COMMERCE PROGRAMME (SEMESTER - II)
NARSEE MONJEE COLLEGE OF COMMERCE &ECONOMICS
VILE PARLE (W), MUMBAI – 400056.
This is to certify that the undersigned have assessed and evaluated the
project on “ CORPORATE LEVEL STRATEGIES – TAKEOVER
STRATEGY ” submitted by Soumeet D. Sarkar student of M.Com. – Part - I
(Semester – II) in Advance Accountancy for the academic year 2013-14. This
project is original to the best of our knowledge and has been accepted for
Name & Signature of Internal Examiner
Name & Signature of External Examiner
Shri. Sunil B. Mantri
DECLARATION BY THE STUDENT
I, Soumeet D. Sarkar student of M.Com.(Part – I) in Advance Accountancy, Roll
No.: A041, hereby declare that the project titled “ CORPORATE LEVEL
STRATEGIES – TAKEOVER STRATEGY ” for the subject Strategic
Management submitted by me for Semester – II of the academic year 2013-14,
is based on actual work carried out by me under the guidance and supervision
of Prof. Prerna Sharma. I further state that this work is original and not
submitted anywhere else for any examination.
Name & Signature of Student
Name : Soumeet D. Sarkar
Signature : _________________
This project was a great learning experience and I take this opportunity to
acknowledge all those who gave me their invaluable guidance and inspiration
provided to me during the course of this project by my guide.
I would like to thank Mr. Prerna Sharma - Professor of Strategic Management
(MCOM – Narsee Monjee College).
I would also thank the M.Com Department of Narsee Monjee College of
Commerce & Economics who gave me this opportunity to work on this project
which provided me with a lot of insight and knowledge of my current curriculum
and industry as well as practical knowledge.
I would also like to thank the library staff of Narsee Monjee College of
Commerce & Economics for equipping me with the books, journals and
magazines for this project.
Sr. No. PARTICULARS Page No.
CHAPTER I – INTRODUCTION
1.1 Meaning & Definition 6
1.2 Financial & Non-financial Benefits 7
1.3 Phases of Strategic Management 7
1.4 Objective of Study 8
1.5 Corporate Level Strategies 9
1.6 Importance of Corporate Strategy 10
1.7 Limitations of Corporate Strategy 11
CHAPTER II – TAKEOVER STRATEGY
2.1 Meaning & Definition 12
2.2 Types of Takeover Strategy 13
CHAPTER III – CASE STUDIES
3.1 Vodafone - Hutch 16
3.2 Mahindra - Satyam 21
3.3 Kraft - Cadbury 27
3.4 Tata - Corpus 30
CHAPTER IV – CONCLUSION
4.1 Conclusion 34
4.2 Bibliography 36
Strategic Management is an ongoing process that evaluates and controls the business and
the industries in which the company is involved; assesses its competitors and sets goals
and strategies to meet all existing and potential competitors; and then re-assesses each
strategy annually or quarterly [i.e. regularly] to determine how it has been implemented
and whether it has succeeded or needs replacement by a new strategy to meet changed
circumstances, new technology, new competitors, a new economic environment, or a new
social, financial, or political environment. Strategic Management can also be defined as
the identification of the purpose of the organization and the plans and actions to achieve
the purpose. It is that set of managerial decisions and actions that determine the long
term performance of a business enterprise. It involves formulating and implementing
strategies that will help in aligning the organization and its environment to achieve
organizational goals. Strategic Management analyzes the major initiatives taken by a
company's top management on behalf of owners, involving resources and performance in
internal and external environments. It entails specifying the organization's mission, vision
and objectives, developing policies and plans, often in terms of projects and programs,
which are designed to achieve these objectives, and then allocating resources to
implement the policies and plans, projects and programs.
Strategic Management allows an organization to be more proactive than reactive in
shaping its own future; it allows an organization to initiate and influence activities and
thus to exert control over its own destiny. Many small business owners, chief executive
officers, presidents and managers of many profit and non-profit organizations have
recognized and realized the benefits of strategic management. Historically, the principle
benefit of strategic management has been to help organization formulate better strategies
through the use of the more systematic, logical and rational approach to strategic choice.
1) Improvement in sales.
2) Improvement in profitability.
3) Improvement in productivity.
1) Improved understanding of competitors strategies.
2) Enhanced awareness of threats.
3) Reduced resistance to change.
4) Enhanced problem-prevention capabilities.
Phases of Strategic Management:-
Strategic management is not a static concept, but an ongoing process. The strategic
management process encompasses four distinct phases. In order to succeed, a strategy
must succeed in each phase. It is important, therefore, that anyone planning a business
strategy understands these four phases and the roles that they play.
1. Formulation:- Strategic management begins with the formulation phase, where the
firm’s management develops an overall strategy for achieving the firm's objectives.
Objectives may include, for example, increasing market share or reducing costs.
The top management team typically is saddled with the responsibility of
developing the firm's overall strategy. They may, however, seek the input of line
managers and front-line workers as they develop their strategy.
2. Implementation:- With a clear strategy formulated, managers can then go about
implementing it. Strategies are usually implemented from the top down. To begin
with, the top management team will inform line managers about the strategic
changes, and line managers will, in turn, pass this information on to their
subordinates. Many strategies fail due to poor implementation, but managers can
avoid this by carefully introducing the new strategy and listening to any employee
concerns about the changes.
3. Evaluation:- When a strategy is implemented, it will hopefully be successful, but
managers cannot assume that every strategy will be. They will, therefore, need to
measure the success of a strategy. To measure this success, the strategy must be
evaluated against the firm's goals. A gap analysis is a useful tool for evaluating
the success of a strategy. This measures the gap that exists between the desired
results and a firm's actual results.
4. Modification:- Sometimes, strategies are successful on the first attempt, but more
often than not, there is room for improvement. If the evaluation of the strategy
shows that the firm has not achieved all its desired goals, then it is necessary to
modify the strategy. For example, if the firm used a cost-leadership strategy to
increase sales, but the sales actually decreased, then the firm would need to
modify this strategy, perhaps using a premium-pricing strategy instead.
Objective of Study:-
1. To understand the different corporate strategies.
2. To analyse the takeover strategy.
3. To study the various case studies related to takeover strategy.
Corporate Level Strategy
It is believed that strategic decision making is the responsibility of top management. At
the corporate level, the board of directors and chief executive officers are involved in
strategy making. Corporate planners and consultants may also be involved. Mostly,
corporate level strategies are futuristic, innovative and pervasive in nature. Decision like
spreading the range of business interests, acquisitions, diversification, structural
redesigning, mergers, takeovers, liquidations come under corporate level strategies. There
are four grand strategic alternatives. They are stability, expansion, retrenchment and any
combination of these three. These strategic alternatives are also called as grand strategies.
A brief description about them are as follows:-
1. Stability Strategy:- It is adopted by an organization when it attempts to improve
functional performance. They are further classified as follows:-
i. No change strategy.
ii. Profit strategy.
iii. Pause/Proceed with caution strategy.
2. Expansion Strategy:- It is followed when an organization aims at high growth.
They operate through:-
Mergers, takeovers, joint ventures and strategic alliances come under expansion
through cooperation. International strategies are further classified into global
strategy, transnational strategy, international strategy and multi-domestic strategy.
3. Retrenchment Strategy:- It is followed when an organization aims at a
contraction of its activities. It is done through turnaround, divestment and
liquidation in either of the following three modes:-
i. Compulsory winding up.
ii. Voluntary winding up.
iii. Winding up under supervision of the court.
4. Combination Strategies:- They are followed when an organization adopts a
combination of stability, expansion and retrenchment either at the same time in
different businesses or at different times in the same business. The well-known
companies of the TTK group, based in Southern India, adopted a restructuring
plan in the late 1980s involving following strategies:-
i. Merger of TTK chemicals with TTK pharma.
ii. TT industries & Textiles Ltd. planned for expansion through joint venture.
iii. TTK Ltd. diversified into the field of non-stick cooking utensils.
iv. TTK maps & publications expanded into the general publishing business
after a turnaround.
Importance of Corporate Strategy
In the present day competitive environment, no business organization can dream of
survival without formulating appropriate corporate strategy. As the environment is
continuously changing, the need for corporate strategic framework is more specific. The
following areas clearly show the importance of corporate strategy:-
1. Corporate strategy rationalizes allocation of scarce resources.
2. Corporate strategy motivates employees examples to shape their work in the
context of shared corporate goals.
3. Strategy assists management to meet unanticipated future changes.
4. Organizational effectiveness is ensured through implementing and evaluating the
5. Corporate strategy is a powerful tool to management to deal with the future
which is uncertain and hazy in all respects.
6. Corporate strategy improves the capability of management in coping with the
volatile external environmental forces.
7. Corporate strategy encourages the management to choose the best course of action
to realize the objectives.
8. Strategy planning system provides an objective basis for measuring performance.
Limitation of Corporate Strategy
The corporate strategy has the following specific limitations:-
1. The process of strategy formulation is not an easy one. The process of forming
corporate strategy is complex, cumbersome and complicated.
2. Corporate strategies are useful for long range problems. They are not effective to
overcome current exigencies.
3. The corporate strategy formulation process calls for considerable time, money and
effort. Developing appropriate corporate strategy is not a simple and economical
proposition. For financially weak companies, cost becomes a great hindrance.
4. As future is uncertain and cannot be predicted accurately, the strategic planning
system based on hazy and uncertain estimates is not exact.
5. Implementation of corporate strategy is influenced by organizational factors,
behavioral factors and motivational factors. The gap between formulation and
implementation of corporate strategy does not give desired results to the
Takeovers are taking place all over the world. Those companies whose shares are under
quoted on the stock market are under a constant threat of takeover. In fact every
company is vulnerable to a takeover threat. The takeover strategy has been conceived to
improve corporate value, achieve better productivity and profitability by making optimum
use of the available resources in the form of men, materials and machines. Takeover is
one of the most popular strategies followed by the corporate sector all over the world.
The act or an instance of assuming control or management of or responsibility for
something, especially the seizure of power, as in a nation, political organization, or
corporation. Takeovers are often made as part of a company's growth strategy whereby it
is more beneficial to take over an existing firm's operations and niche compared to
expanding on its own. Takeovers are often paid in cash, the acquiring company's stock
or a combination of both.
Takeovers can be either friendly or hostile. Friendly takeover occurs when the target
firm expresses its agreement to be acquired, whereas hostile acquisitions don't have the
same agreement from the target firm and the acquiring firm needs to actively purchase
large stakes of the target company in order to have a majority stake. In either case, the
acquiring company often offers a premium on the market price of the target company's
shares in order to entice shareholders to sell.
Takeover implies acquisition of control of a company through purchase or exchange
of shares with the objective of gaining control over the management of a company. It
can take place either through acquiring majority shares or by obtaining control of the
management of the business & affairs of the target company. Ordinarily a larger
company takes over a smaller company. On the other hand, in a reverse takeover, a
smaller company acquires control over a larger company. When the shares of the
company are closely held by a small number of persons, a takeover may be affected by
agreement with the holders of those shares. However where the shares of a company are
widely held by the general public, it involves the process as set out in the SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
Types of Takeover Strategy
1. Friendly Takeovers:- A friendly takeover is an acquisition which is approved by
the management. Before a bidder makes an offer for another company, it usually
first informs the company's board of directors. In an ideal world, if the board
feels that accepting the offer serves the shareholders better than rejecting it, it
recommends the offer be accepted by the shareholders.
In a private company, because the shareholders and the board are usually the
same people or closely connected with one another, private acquisitions are
usually friendly. If the shareholders agree to sell the company, then the board is
usually of the same mind or sufficiently under the orders of the equity
shareholders to cooperate with the bidder. This point is not relevant to the UK
concept of takeovers, which always involve the acquisition of a public company.
2. Hostile Takeovers:- A hostile takeover allows a suitor to take over a target
company whose management is unwilling to agree to a merger or takeover. A
takeover is considered hostile if the target company's board rejects the offer, but
the bidder continues to pursue it, or the bidder makes the offer directly after
having announced its firm intention to make an offer. Development of the hostile
tender is attributed to Louis Wolfson.
A hostile takeover can be conducted in several ways. A tender offer can be made
where the acquiring company makes a public offer at a fixed price above the
current market price. Tender offers in the United States are regulated by
the Williams Act. An acquiring company can also engage in a proxy fight,
whereby it tries to persuade enough shareholders, usually a simple majority, to
replace the management with a new one which will approve the takeover. Another
method involves quietly purchasing enough stock on the open market, known as a
creeping tender offer, to effect a change in management. In all of these ways,
management resists the acquisition, but it is carried out anyway.
The main consequence of a bid being considered hostile is practical rather than
legal. If the board of the target cooperates, the bidder can conduct extensive due
diligence into the affairs of the target company, providing the bidder with a
comprehensive analysis of the target company's finances. In contrast, a hostile
bidder will only have more limited, publicly available information about the target
company available, rendering the bidder vulnerable to hidden risks regarding the
target company's finances. An additional problem is that takeovers often require
loans provided by banks in order to service the offer, but banks are often less
willing to back a hostile bidder because of the relative lack of target information
which is available to them.
3. Reverse Takeovers:- A reverse takeover is a type of takeover where a private
company acquires a public company. This is usually done at the instigation of the
larger, private company, the purpose being for the private company to
effectively float itself while avoiding some of the expense and time involved in a
conventional IPO. However, in the UK under AIM rules, a reverse take-over is
an acquisition or acquisitions in a twelve month period which for an AIM
Exceed 100% in any of the class tests; or
Result in a fundamental change in its business, board or voting control; or
In the case of an investing company, depart substantially from the
investing strategy stated in its admission document; or
where no admission document was produced on admission, depart
substantially from the investing strategy stated in its pre-admission
depart substantially from the investing strategy.
An individual or organization, sometimes known as corporate raider, can purchase
a large fraction of the company's stock and, in doing so, get enough votes to
replace the board of directors and the CEO. With a new agreeable management
team, the stock is a much more attractive investment, which would likely result in
a price rise and a profit for the corporate raider and the other shareholders.
4. Backflip Takeovers:- A backflip takeover is any sort of takeover in which the
acquiring company turns itself into a subsidiary of the purchased company. This
type of takeover can occur when a larger but less well-known company purchases
a struggling company with a very well-known brand such as Texas Air
Corporation takeover of Continental Airlines but taking the Continental name as it
was better known.
5. Financing a Takeover:-
a) Funding:- Often a company acquiring another pays a specified amount for
it. This money can be raised in a number of ways. Although the company
may have sufficient funds available in its account, remitting payment
entirely from the acquiring company's cash on hand is unusual. More often,
it will be borrowed from a bank, or raised by an issue of bonds.
Acquisitions financed through debt are known as leveraged buyouts, and
the debt will often be moved down onto the balance sheet of the acquired
company. The acquired company then has to pay back the debt. This is a
technique often used by private equity companies. The debt ratio of
financing can go as high as 80% in some cases. In such a case, the
acquiring company would only need to raise 20% of the purchase price.
b) Loan Note Alternatives:- Cash offers for public companies often include a
loan note alternative that allows shareholders to take a part or all of their
consideration in loan notes rather than cash. This is done primarily to
make the offer more attractive in terms of taxation. A conversion of shares
into cash is counted as a disposal that triggers a payment of capital gains
tax, whereas if the shares are converted into other securities, such as loan
notes, the tax is rolled over.
c) All Share Deals:- A takeover, particularly a reverse takeover, may be
financed by an all share deal. The bidder does not pay money, but instead
issues new shares in itself to the shareholders of the company being
acquired. In a reverse takeover the shareholders of the company being
acquired end up with a majority of the shares in, and so control of, the
company making the bid. The company has managerial rights.
Examples of Takeovers
Vodafone Group is a British multinational telecommunications company headquartered
in London and with its registered office in Newbury, Berkshire. It is the world's third
largest mobile telecommunications company measured by both subscribers and 2013
revenues (in each case behind China Mobile), and had 550 million subscribers as of
Vodafone owns and operates networks in about 30 countries and has partner networks in
over 40 additional countries. Its Vodafone Global Enterprise division provides
telecommunications and IT services to corporate clients in over 70 countries.
The evolution of Vodafone brand started in 1982 with the establishment of Racal
Strategic Radio Ltd subsidiary of Racal Electronics Plc. – UK's largest maker of military
radio technology. By initiative of Jan Stenbeck Racal Strategic Radio Ltd. formed a joint
venture with Millicom called Racal Vodafone, which would later evolve into the present
Vodafone was launched on 1st
January 1985 under the new name, Racal-Vodafone
(Holdings) Ltd, with its first office based in the Courtyard in Newbury, Berkshire, and
shortly thereafter Racal Strategic Radio was renamed Racal Telecommunications Group
Limited. On 29th
December 1986, Racal Electronics bought out the minority shareholders
of Vodafone for £110 million; and Vodafone became a fully owned brand of Racal.
In September 1988, the company was again renamed Racal Telecom. On 26th
1988, Racal Telecom, majority held by Racal Electronics; went public on the London
Stock Exchange with 20% of its stock floated. The successful flotation led to a situation
where the Racal's stake in Racal Telecom was valued more than the whole of Racal
Electronics. Under stock market pressure to realise full value for shareholders of Racal,
Harrison decides in 1991 to demerge Racal Telecom.
Hutch was a mobile telecommunication brand under the company Hutchison
Whampoa that offers a range of GSM and HSPA services throughout Sri Lanka.
Hutchison launched its services in 2004 with the aim of being a nationwide operator
in Sri-Lanka. As of April 2010, Hutch had network coverage of approximate 70% of the
entire island. Initially it was called Call Link.
Hutchison Telecom Lanka is a member of Hutchison Asia Telecom which comprises
mobile telecommunications operations in the emerging markets of Indonesia, Vietnam and
Sri-Lanka. Hutchison Asia Telecom is a key part of Hutchison Whampoa Group’s
telecommunications division which includes the 3 Group comprising 3G operations
in Australia, Austria, Denmark, Hong-Kong, Indonesia, Ireland, Italy, Macau, Sweden and
Transition from Hutch to Vodafone in India
The Turkish Vodafone migration set the bar high for India. The Indian team raised the
bar and the migration process to Vodafone from Hutch was again a great collaboration
between global and local teams. Ogilvy India have driven the 360-degree integration,
working with the Vodafone Global team very effectively to produce great work with
great results. A very tough act for the next country to follow.
The simplicity and comprehensive nature of the Hutch to Vodafone transition campaign
was a perfect example of the successful entry of a new brand into a market.
Hutch, the second largest GSM brand in the Indian telecom market had been bought by
Vodafone. A leading player in the high growth Indian market, Hutch enjoyed
considerable brand equity. It was also a well-loved brand in terms of its unique imagery
and award-winning communication. In making the transition to Vodafone, it was
important to carry forward this equity and exceed expectations.
The objectives for the exercise were to carry along 35 million customers, 400,000 trade
partners and 10,000 employees through the transition and, even more importantly, to
enthuse existing stakeholders and potential customers with the possibilities offered by
The entire project including positioning, retail identity, campaign development and
implementation was carried out in less than four months, from June to September 2007.
In order to meet this tight time frame, a large amount of work was carried out in
parallel, effectively leveraging the strengths of the network agencies. Ogilvy, Added
Value and Team Vodafone worked in conjunction to develop the India positioning for
Vodafone by July. The briefing for the campaign took place in July. Working with
Team Vodafone and Maxus, Ogilvy arrived at and developed the idea, launch campaign
and launch strategy by August. The touch point list alone, for this project, included over
3,000 different elements. Working in conjunction with the Ogilvy One team and Fitch,
the Ogilvy team developed and executed the entire list in just 45 days so that from Day
One – 21st
September 2007, the consumer would experience a whole new brand.
Getting India to love Vodafone – the transition demanded an intensive engagement with
every arm of the WPP teams and the network responded with its very best. Five WPP
agencies came together to help create magic on 21st
September 2007. The Ogilvy team
played the role of Brand Team Leader. Their first task was to internalise the new brand
and its tone of voice, which required intensive training across offices. The Ogilvy team
took this task forward and cascaded the new brand to 16 circle teams across six cities.
This helped develop work that spoke the Vodafone tone of voice from day one.
A comprehensive research campaign study led by Added Value was followed by
intensive workshops involving the key stakeholders at Ogilvy and Maxus. Fitch was
briefed not to just redesign the store signage but to create a whole new store experience
for the Vodafone customer. At every interaction point with the consumer, the brand
required a new look in line with the new brand promise. That meant changing
everything from the internal forms to the uniform of the security guard.
The launch campaign, one-on-one communication with existing customers and customer
touch-point elements were developed by Ogilvy and Ogilvy One. Unlike most re-branding
exercises, which are phased over time, Maxus had to execute the transition overnight
across the country. There was a first of its kind alliance with Star (India’s largest TV
network) where the entire advertising was bought for Vodafone for 24 hours across all
the network’s 13 channels – the world’s first 24 hour TV roadblock.
Ogilvy Action put up over 20,000 high visibility outdoor sites overnight, using over 2
million square feet of vinyl.
The launch was the most talked about event in Indian media, with over 450 articles. An
entire episode of CNBC covered the transition as a case study. Day after brand recall
for Vodafone was 80% – proclaimed by the industry and media as one of the best
brand launches the country has ever seen. Thirty-five million customers transitioned
seamlessly into brand Vodafone and within six months of launch, it became the brand of
choice for over 44 million subscribers. It was the fastest, most comprehensive and most
effective launch witnessed within the Vodafone network and has today been proclaimed
as the benchmark for all forthcoming launches for Vodafone.
Vodafone Acquires Essar's Stake
In 2007, Vodafone granted options to Essar that would enable the conglomerate to sell
its entire stake for US$5 billion, or to dispose of part of the 33% shareholding at an
independently appraised fair market value. In January 2011, Vodafone objected to Essar’s
plans to place part of its 33% stake in India Securities, a small public company.
Vodafone feared the move would give an inflated market value to Vodafone Essar. It
had approached the market regulator SEBI and also filed a petition in the Madras High
The final shareholding pattern post this deal was not provided by the company as it was
not clear whether Vodafone's stake would exceed the 74% FDI limit. Indian laws don't
allow foreign companies to own more than 74% in a local mobile phone operator.
Vodafone has assured it will comply with local rules. Vodafone will have to sell that
1% to some Indian entity, or they will have to consider an Initial Public Offering.
Vodafone also said that final settlement is anticipated to be completed by November
2011. The completion of the deal would be subject to meeting certain conditions which
include Reserve Bank of India's permission as well as valuation of the deal.
On March 31, 2011, Vodafone Group Plc. announced that it would buy an additional
33% stake in its Indian joint venture for US$5 billion after partner Essar
Group exercised an option to sell the holding in the mobile phone operator. The deal
raised Vodafone’s stake to 75%. Essar left the company after it implemented a put
option over 22% of the venture. Vodafone exercised its call option to buy an 11% stake.
Satyam Computers Services Limited (SCSL) was incorporated in the year 1987 as a
private limited company at Andhra Pradesh. Later at 1991 Satyam recognized as a public
limited company. SCSL was fourth largest provider of Information Technology services
in India. In the year 1995 company awarded ISO 9001 certification. Twenty years ago,
Satyam has consistently innovated across various aspects of the enterprise processes,
technology, business and engagement models, and service offerings. Satyam offered a
range of expertise that included:- Software Development Services, Embedded Systems,
Engineering Services (CAD/CAM/CAE), Systems Integration, Enterprise Resource Planning
Solutions, Enterprise Application Integration, Customer Relationship Management, Supply
Chain Management, Product Development, Electronic Commerce, and Consulting. As IT
services became more and more technology-centric and generic, hence Satyam started
offering services to enhance the customer business needs. Satyam starting with deeper
focus on customized IT solution on insurance, financial services, telecom, manufacturing,
transportation, health care, Bioinformatics and Retail sectors. In 2001, the company was
awarded IMC Ramkrishna Bajaj National Award Trophy in the service category. In 2002
the company announced the launch of its operation in China. Satyam cited as 'Top
choice for SAP Support' by Giga Research group in the year 2002. In the year 2003
company announced business continuity centre in Singapore, the first of its kind outside
the India and in the same year Global Solution centre in Malaysia launched. Satyam and
Microsoft signed Memorandum of Understanding to provide world class IT outsourcing
services in Asia-Pacific region. Company was awarded IBM Lotus award in knowledge
& content management solution category in the 10th
annual IBM Lotus award at 2003.
The World Bank had awarded the Outsourcing Contract to Satyam Computer Services
worth of $10-$15 million at 2003. New development centre was inaugurated in
Mississauga, Canada in the year of 2004. Satyam acquired two different companies in
2005. In the fiscal of 2006 Satyam received the CNBC best performing stock of the
year and Excellence in cost management from the Institute of Cost and Works
Accountants of India. Satyam had been ranked the No.1 ITO: Global Process Consulting
vendor by the 2007 Black Book of Outsourcing and had won the Asian Corporate Social
Responsibility Award under the poverty alleviation category. As of 2008 Satyam
Computer Services Ltd. became the first Indian company to list its American Depository
Shares (ADS) on Euronext in Amsterdam.
The Satyam Scandal
The Satyam Computer Services Scandal was a corporate scandal that occurred in India
in 2009 where chairman Ramalinga Raju confessed that the company's accounts had been
falsified. The Global Corporate Community was shocked and scandalised when the
Chairman of Satyam, Ramalinga Raju resigned on 7th
January 2009 and confessed that
he had manipulated the accounts by US$1.47 billion.
Pricewaterhouse Coopers was the statutory auditor of Satyam Computer Services when
the report of scandal in the account books of Satyam Computer Services broke. The
Indian arm of PWC was fined US$6 million by the US SEC(Securities and Exchange
Commission) for not following the code of conduct and auditing standards.
Ramalingam Raju along with 2 other accused of the scandal, had been granted bail from
Supreme Court on 4th
November 2011 as the investigation agency CBI failed to file the
charge sheet even after more than 33 months Raju being arrested.
On the same day, the Crime Investigation Department(CID) team picked up Vadlamani
Srinivas, Satyam's then CFO, for questioning. He was arrested later and kept in judicial
January 2009, the government nominated noted banker Deepak Parekh,
former NASSCOM chief Kiran Karnik and former SEBI member C Achuthan to
Analysts in India have termed the Satyam scandal India's own Enron scandal. Some
social commentators see it more as a part of a broader problem relating to India's caste-
based, family-owned corporate environment.
The Indian Government has stated that it may provide temporary direct or indirect
liquidity support to the company. However, whether employment will continue at pre-
crisis levels, particularly for new recruits, is questionable.
January 2009, Pricewaterhouse, the Indian division of Pricewaterhouse Coopers,
announced that its reliance on potentially false information provided by the management
of Satyam may have rendered its audit reports "inaccurate and unreliable".
January 2009, CID told in court that the actual number of employees is only
40,000 and not 53,000 as reported earlier and that Mr.Raju had been allegedly
withdrawing Rs.200 million (US$3 million) every month for paying these 13,000 non-
Acquisition by Mahindra Group
April 2009, via a formal public auction process, a 46% stake in Satyam was
taken over by Mahindra & Mahindra owned company Tech Mahindra, as part of its
diversification strategy. Effective July 2009, Satyam rebranded its services under the new
Mahindra management as "Mahindra Satyam". After a delay due to tax issues Tech
Mahindra announced its merger with Mahindra Satyam on 21st
March 2012, after the
board of two companies gave the approval. The companies merged legally on 25th
Mahindra Satyam (formerly Satyam Computer Services Limited) was an Indian IT
services company based in Hyderabad, India. It was founded in 1987 by B Ramalinga
Raju. The company was listed on the Pink Sheets, the National Stock
Exchange and Bombay Stock Exchange. It offered a range of services, including software
development, system maintenance, packaged software integration and engineering
design services. In June 2009, the company unveiled its new brand identity Mahindra
Satyam subsequent to its takeover by the US$14 billion Mahindra Group's IT arm on
April 2009. Tech Mahindra took over on June 24th
Takeover by Mahindra
Mahindra Satyam's proposed merger with Tech Mahindra may be delayed all because of
legal issues, and ambiguity over jurisdiction between investigating agencies and the
government. The merger has been delayed due to two tax cases pending with the
Income Tax claiming over Rs.27 billion for both. Tech Mahindra announced
its merger with Mahindra Satyam on 21st
March 2012, after the board of two companies
gave the approval. The two firms have received the go-ahead for merger from the
Bombay Stock Exchange and the National Stock Exchange. Competition Commission of
India(CCI) approved the proposed merger of Mahindra Satyam and other companies
with Tech Mahindra. Mahindra Satyam will hold its Annual General Meeting(AGM) on
June 2012 to consider the proposal to merge the company with Tech Mahindra. It is
mandatory for the firm to get the AGM nod. The shareholders of both Tech Mahindra
and Mahindra Satyam have unanimously approved the scheme of takeover of Satyam
Computer Services Ltd., Venturbay Consultants, C&S System Technologies, Canvas M
Technologies and Mahindra Logisoft Business Solutions with Tech Mahindra. Mahindra
Satyam chairman, Vineet Nayyar said on 2nd
August 2012, that the merger with Tech
Mahindra was at the final stage of getting approval from the Andhra Pradesh and
Maharashtra High Courts. The two firms had received the go-ahead for merger from
the Bombay Stock Exchange and the National Stock Exchange. On June 11th
Andhra Pradesh High Court gave its approval for the merger of Mahindra Satyam with
Tech Mahindra, after Bombay High Court already gave its approval. Vineet Nayyar said
that technical approvals from the Registrar of Companies in Andhra Pradesh and
Maharashtra are required which will be done in two to four weeks, and within 8 weeks,
new merged entity will be in place, a new organisation chart would also come into
force led by Anand Mahindra as Chairman, Vineet Nayyar as Vice Chairman and C. P.
Gurnani as the CEO and Managing Director. Tech Mahindra on June 25th
announced completion of Mahindra Satyam's merger with itself to create nation's fifth
largest software services company with a turnover of US$ 2.7 billion. Tech Mahindra got
the approval from the Registrar of Companies for the merger late in the night at 11:45
(pm) on June 24th
2013. July 5th
2013 has been determined date on which the Satyam
shares will be swapped for Tech Mahindra shares which was approved by both the
boards. Mahindra Satyam (Satyam Computer Services), was suspended from trading with
effect from July 4th
2013, following its merger with Tech Mahindra. Tech Mahindra
completed share swap and allocated its shares to the shareholders of Satyam Computer
Services on July 12th
2013. The stock exchanges have accorded their approval for trading
the new shares effective July 12th
2013. On July 24th
2013, a division bench of Andhra
Pradesh High Court admitted a petition filed by Ekadanta Greenfields and Saptaswara
Agro Farms Private Limited challenging the Mahindra Satyam – Tech Mahindra merger
order. The order was given by a single judge of the court in June, allowing the merger
and dismissing the objections raised by a few parties. After admitting the petition, the
bench comprising N.V. Ramana and Vilas V. Afzulpurkar posted the matter to August
How Tech Mahindra turned around Satyam
The company had reported a consolidated net loss of Rs.2.33 billion for the July –
September quarter of 2010. Speaking at a press conference ,Vineet Nayyar chairman of
the company said the consolidate cash and cash equivalents at Rs.300 million compared
to Rs.260 million. “We will take three years for a turnaround,” he informed. Even
though the company got Rs.2.45 billion profit in Q4 for 2010 – 2011, but due to outside
payments nearly Rs.5.70 billion for SEK, UPAID and Class Action Suit in Q4 (Total
Rs.6.41 billion for the year 2010 – 2011), the company had reported a consolidated net
loss of Rs.3.27 billion for the January – March quarter of 2010 – 2011. IT firm Mahindra
Satyam posted a consolidated net profit of Rs.2252 million for the quarter ended 30th
June 2011. During the quarter, the company added 2,172 people, taking total headcount
to 31,438 as of 30th
June 2011. The company added 36 new customers during the
quarter. The total headcount of the company stood at 32,092 as of the quarter ended
September 2011 during which net addition of 654 personnel took place.
The company added 188 employees in quarter three ending 31st
December 2011 and
recorded 29.4% quarter-on-quarter in its consolidated net profit of
Rs.3.08 billion. Mahindra Satyam reported a net profit of Rs.5.34 billion for the fourth
quarter ended 31st
March 2012. Mahindra Satyam declared 30% dividend, signalling a
complete turnaround, after declaring Q4 results of 2012-2013 in May 2013.
Four years after it took over Satyam Computer Services Ltd, Tech Mahindra Ltd. had
managed to restore the company (re-named Mahindra Satyam) to health from the brink
of collapse. Tech Mahindra subsequently merged Satyam with itself to create India’s fifth
largest information technology company. The Satyam brand, tainted by the misdeeds of
the company’s founder B. Ramalinga Raju, has been discontinued.
“We have fulfilled the commitment made in 2009, when we acquired Satyam, to jointly
become one of the largest, diversified players leveraging technology for business
solutions,” Mahindra and Mahindra Ltd. Chairman Anand Mahindra said in a statement
In 2009, the biggest challenge facing Satyam’s new management was restoring the
confidence of investors, clients and employees – with many of the latter two leaving the
tainted organization. It helped that Mahindra and Mahindra is one of India’s largest
companies and is led by Anand Mahindra. The new management reached out to some of
the employees who had left the organization in the wake of the accounting scandal.
Many of them re-joined, confident that the new management will be able to rebuild the
company. In the meantime, Mahindra Satyam’s top management, including Anand
Mahindra, was engaged in constant dialogue with its top clients to prevent them from
deserting the company and get more orders.
Mahindra Satyam’s financials started improving. The company then leveraged its
relationships with companies such as General Electric Co., AT & T Inc. and Cisco
Systems Inc. to get new business, requesting them to put in a good word on thei r
behalf. The takeover helped Tech Mahindra in burying the stigma attached to the Satyam
brand that has haunted the company ever since Raju confessed to committing fraud. It
also gives the combined entity a stronger balance sheet and a larger client base which it
can leverage to win new business.
Cadbury is a British multinational confectionery company owned by Mondelēz
International. It is the second largest confectionery brand in the world after Wrigley's.
Cadbury was established in Birmingham in 1824, by John Cadbury who sold tea, coffee
and drinking chocolate. Cadbury developed the business with his brother Benjamin,
followed by his sons Richard and George. George developed the Bournville estate, a
model village designed to give the company's workers improved living conditions.
Cadbury is best known for its confectionery products including the Dairy Milk chocolate,
the Crème Egg, and the Roses selection box. Dairy Milk chocolate in particular,
introduced in 1905, used a higher proportion of milk within the recipe compared with
rival products. By 1914, the chocolate was the company's best-selling product. Crème
Eggs are made available for sale in the United Kingdom (now available all year) from
January of each year until Easter, and are the best-selling confectionary product in the
country during the period.
The company was known as Cadbury Schweppes Plc. from 1969 until its demerger in
2008, when its global confectionery business, was separated from its US beverage unit
(now called Dr. Pepper Snapple Group). It was also a constant constituent of the FTSE
100 from the index's 1984 inception until the company was bought by Kraft Foods in
2010. Cadbury is headquartered in Uxbridge, London, and operates in more than fifty
Kraft Foods Group Inc. is an American grocery manufacturing and processing
conglomerate headquartered in the Chicago suburb of Northfield, Illinois.
The company was formed in 2012 by a demerger from Kraft Foods Inc., which in turn
was renamed Mondelēz International. The new Kraft Foods Group is a North American
grocery business, while Mondelēz is a multinational snack and confectionary company.
Kraft Foods Group is an independent public company; it is listed on the NASDAQ.
KRAFT’s TAKEOVER of CADBURY
September 2009 Kraft Foods made a £10.2 billion (US$16.2 billion) indicative
takeover bid for Cadbury. The offer was rejected, with Cadbury stating that it
undervalued the company. Kraft launched a formal, hostile bid for Cadbury valuing the
firm at £9.8 billion on 9th
November 2009. Business Secretary Peter Mandelson warned
Kraft not to try to make a quick buck from the acquisition of Cadbury.
January 2010, it was announced that Cadbury and Kraft Foods had reached a
deal and that Kraft would purchase Cadbury for £8.40 per share, valuing Cadbury at
£11.5billion (US$18.9billion). Kraft, which issued a statement stating that the deal will
create a "global confectionery leader", had to borrow £7 billion (US$11.5 billion) in
order to finance the takeover.
The Hershey Company, based in Pennsylvania, manufactures and distributes Cadbury
branded chocolate (but not its other confectionery) in the United States and has been
reported to share Cadbury's "ethos". Hershey had expressed an interest in buying
Cadbury because it would broaden its access to faster growing international markets. But
January 2010, Hershey announced that it would not counter Kraft's final offer.
The acquisition of Cadbury faced widespread disapproval from the British public, as well
as groups and organizations including trade union Unite, who fought against the
acquisition of the company which, according to Prime Minister Gordon Brown, was very
important to the British economy. Unite estimated that a takeover by Kraft could put
30,000 jobs at risk, and UK shareholders protested over the mergers and acquisitions.
Cadbury's M&A advisers were UBS, Goldman Sachs and Morgan Stanley.
Controversially, RBS, a bank 84% owned by the United Kingdom Government, funded
the Kraft takeover.
February 2010, Kraft secured over 71% of Cadbury's shares thus finalizing the
deal. Kraft had needed to reach 75% of the shares in order to be able to delist Cadbury
from the stock market and fully integrate it as part of Kraft. This was achieved on 5th
February 2010, and the company announced that Cadbury shares would be delisted on
March 2010. On 3rd
February 2010, the Chairman Roger Carr, chief executive Todd
Stitzer and chief financial officer Andrew Bonfield all announced their resignations.
Stitzer had worked at the company for 27 years.
February 2010, Kraft announced that they were planning to close the Somerdale
Factory, Keynsham, with the loss of 400 jobs. The management explained that existing
plans to move production to Poland were too advanced to be realistically reversed,
though assurances had been given regarding sustaining the plant. Staff at Keynsham
criticized this move, suggesting that they felt betrayed and as if they have been sacked
twice. On 22nd
April 2010, Phil Rumbol, the man behind the famous guerilla
advertisement, announced his plans to leave the Cadbury company in July following
In June 2010 the Polish division, Cadbury-Wedel, was sold to Lotte of Korea. The
European Commission made the sale a condition of the Kraft takeover. As part of the
deal Kraft will keep the Cadbury, Hall's and other brands along with two plants in
Skarbimierz. Lotte will take over the plant in Warsaw along with the E Wedel brand.
August 2011, Kraft Foods announced they would be splitting into two companies
beginning on 1st
October 2012. The confectionery business of Kraft became Mondelēz
International, of which Cadbury is a subsidiary.
Tata Steel’s Takeover of Corus
On January 31st
2007, India based Tata Steel Limited acquired the Anglo-Dutch steel
company, Corus Group Plc. For US$ 12.04 billion. The merged entity, Tata-Corus,
employed 84,000 people across 45 countries in the world. It had the capacity to produce
27 million tons of steel per annum. Tata Steel outbid the Brazilian Steelmaker Company
Siderurgica Nacional's (CSN) final offer of 603 pence per share by offering 608 pence
per share to acquire Corus. Tata Steel had first offered to pay 455 pence per share of
Corus, to close the deal at US$ 7.6 billion on October 17th
2006. CSN then offered 475
pence per share of Corus on November 17th
2006. Finally, an auction was initiated on
2007, and after nine rounds of bidding, Steel could finally clinch the deal
with its final bid 608 pence per share, almost 34% higher than the first bid of 455
pence per share of Corus.
The deal is the largest Indian takeover of a foreign company and made Tata Steel the
world's fifth largest steel group.
Tata Steel, formerly known as TISCO(Tata Iron and Steel Company Limited), was the
largest and India's 2nd
largest steel company with an annual crude steel
capacity of 3.8 million tonnes. It is based in Jamshedpur, Jharkhand, India. It is part
of the Tata Group of Companies. Post Corus merger, Tata Steel is India's second largest
and second-most profitable company in private sector with consolidated revenues of
Rs.1,32,110 crore and net profit of over Rs.12,350 crore during the year ended March
2008. The company was also recognized as the world's best steel producer by World
Steel Dynamics in 2005. The company is listed on BSE and NSE; and employs about
Corus was formed from the merger of Koninklijke Hoogovens N.V. with British Steel
Plc. on 6th
October 1999. It has major integrated steel plants at Port Talbot, South
Wales; Skuthorpe, North Lincolnshire; Teesside, Cleveland (all in the United Kingdom)
and Ijmuiden in the Netherlands. It also has rolling mills situated at Shotton, North
Wales (which manufactures Color coat products), Trostre in Llanelli, Llanwern in
Newport, South Wales, Rotterdam and Stockbridge, South Yorkshire, England,
Motherwell, North Lanark shire, Scotland, Hayange, France, and Bergen, Norway. In
addition it has tube mills located at Corby, Stockton and Hartlepool in England and
Oosterhout, Arnhem, Zwijndrecht and Maastricht in the Netherlands. Group turnover for
the year to 31st
December 2005 was £10.142 billion. Profits were £580 million before
tax and £451 million after tax.
The Indian steel industry is more than 100 years old now. The first steel ingot was
rolled on 16th
February 1912 - a momentous day in the history of industrial India. Steel
is crucial to the development of any modern economy and is considered to be the
backbone of the human civilization. The level of per capita consumption of steel is
treated as one of the important indicators of socio-economic development and living
standard of the people in any country. It is a product of a large and technologically
complex industry having strong forward and backward linkages in terms of material flow
and income generation. All major industrial economies are characterized by the existence
of a strong steel industry and the growth of many of these economies has been largely
shaped by the strength of their steel industries in their initial stages of development.
India is the seventh largest steel producer in the world, employing over half a million
people directly with a cumulative capital investment of around Rs.1 lakh crore. It is a
core sector essential for economic and social development of the country and crucial for
its defense. The Indian iron and steel industry contributes about Rs.8,000 crore to the
national exchequer in the form of excise and custom duties, apart from earning foreign
exchange of approximately Rs.3,000 crore through exports. Consumption of finished steel
grew by 5.9 % and increased to 24.9 million tones. Steel consumption is likely to
increase in the at a rapid pace in future due to large investments planned in
infrastructure development, increase urbanization and growth in key steel sectors i.e.
automobile, construction and capital goods.
Though the potential benefits of the Corus deal were widely appreciated, some analysts
had doubts about the outcome and effects on Tata Steel's performance. They pointed out
that Corus' EBITDA (earnings before interest, tax, depreciation and amortization) at 8%
was much lower than that of Tata Steel which was at 30% in the financial year 2006-07.
Final Deal Structure
US$3.5 – 3.8 billion infusion from Tata Steel (US$2 billion as its equity
contribution, US$1.5 – 1.8 billion through a bridge loan).
US$5.6 billion through a LBO (US$3.05 billion through senior term loan, US$2.6
billion through high-yield loan).
Financing the Acquisition
By the first week of April 2007, the final draft of the financing structure of the
acquisition was worked out and was presented to the Corus' Pension Trusties and the
Works Council by the senior management of Tata Steel. The enterprise value of Corus
including debt and other costs was estimated at US$ 13.7 billion.
There were a lot of apparent synergies between Tata Steel which was a low cost steel
producer in fast developing region of the world and Corus which was a high value
product manufacturer in the region of the world demanding value products. Some of the
prominent synergies that could arise from the deal were as follows:-
Tata was one of the lowest cost steel producers in the world and had self-
sufficiency in raw material. Corus was fighting to keep its productions costs under
control and was on the lookout for sources of iron ore.
Tata had a strong retail and distribution network in India and SE Asia. This
would give the European manufacturer an in-road into the emerging Asian
markets. Tata was a major supplier to the Indian Auto Industry and the demand
for value added steel products was growing in this market. Hence there would be
a powerful combination of high quality developed and low cost high growth
There would be technology transfer and cross-fertilization of R&D capabilities
between the two companies that specialized in different areas of the value chain.
There was a strong culture fit between the two organizations both of which
highly emphasized on continuous improvement and ethics. Tata Steel's Continuous
Improvement Program Aspire with the core values:-
Respect for Individual,
Corus's Continuous Improvement Program The Corus Way with the core values:-
Code of Ethics,
Creating Value in Steel,
Selective Growth, and
Respect for our People.
Before the acquisition, the major market for Tata Steel was India. The Indian market
accounted for sixty-nine percent of the company's total sales. Almost half of Corus
production of steel was sold in Europe (excluding UK). The UK consumed twenty-nine
percent of its production. After the acquisition, the European market (including UK)
would consume fifty-nine percent of the merged entity's total production.
There is no one reason about why takeover occurs. But there are a variety of reasons
which create an urge for takeover. First, we will discuss some General Motives behind
1. Increased Market Power:- Acquisition intended to reduce the competitive balance
of the industry.
2. Overcome Barriers to Entry:- Acquisitions overcome costly barriers to entry
which may make start-ups economically unattractive.
3. Lower Cost and Risk of New Product Development:- Buying established
businesses reduces risk of start-up ventures.
4. Increased Speed to Market:- Closely related to Barriers to Entry, allows market
entry in a more timely fashion.
5. Diversification:- Quick way to move into businesses when firm currently lacks
experience and depth in industry.
6. Reshaping Competitive Scope:- Firms may use acquisitions to restrict its
dependence on a single or a few products or markets.
Through this report and above cases of takeover, we have concluded some Beliefs which
1. Not only big companies are opting for global takeover, even middle sized
companies are becoming multinationals through acquiring foreign corporations. So
this could be a main reason behind takeover, to become global.
2. If one is preparing to enter global market than creating a totally new entity
would have been much more difficult rather than to acquire an established
successful brand name.
3. Company not having a long term vision, not changing with the market trends, not
using their financial resources properly, and overall, having a very poor
management, can definitely face a takeover possibility.
4. Even companies, overwhelming with debt and unacquainted with their efficiency
level and capacity, faces high chances of takeover.
5. Sometimes, better facilities and lower cost of production in Target Company also
push Acquirer Company to acquire it.
6. Acquirer Company may think that a diversified product mix will reduce risks
while higher end products will add to bottom line.
7. It helps the acquirer company to reduce their dependency for supply of raw
material and labor cost in their home country and gaining access to international
8. The Acquirer Company may hold a view that the acquisition would provide it
with the opportunity to spread its business across different customer segment and
9. Takeover facilitates sharing of best practices in manufacturing, quality assurance
systems and processes.
10. More resources enable intensive collaborative supply chain initiatives in a more