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In every organisation’s life and in every economy’s life comes a time when growth development and expansion seems to reach a plateau. Across what is today called the developed countries, we are witnessing such a Cycle, where iconic brands, companies and institutions are being acquired and merged. And across the world into Asia, transition economies like India, China are pumping in billions of dollars to acquire a stake or control of some of the crown jewels of American/European Business & Industry. Until upto a couple of years back, the news that Indian companies having acquired American-European entities was very rare. However, this scenario has taken a sudden U turn. Nowadays, news of Indian Companies acquiring a foreign business is more common than other way round. Buoyant Indian Economy, extra cash with Indian corporates, Government policies and newly found dynamism in Indian businessmen have all contributed to this new acquisition trend. Indian companies are now aggressively looking at North American and European markets to spread their wings and become the global players. The Indian IT and ITES companies already have a strong presence in foreign markets, however, other sectors are also now growing rapidly. The increasing engagement of the Indian companies in the world markets, and particularly in the US, is not only an indication of the maturity reached by Indian Industry but also the extent of their participation in the overall globalization process. The sectors attracting investments by Corporate India include metals, pharmaceuticals, industrial goods, automotive components, beverages, cosmetics and energy in manufacturing; and mobile communications, software and financial services in services, with pharmaceuticals, IT and energy being the prominent ones among these.
Year 2007 can be called as the year of mergers and aquisitions for India. Besides the investments flowing into India, Indian corporations currently loaded with excess cash are on an acquisitions spree. ICICI bank’s Global Investment Outlook report, says the total equity deals struck by Indian companies have crossed 50 billion USD in 2007. In the same timeframe last year the equity deals stood at about 15 billion dollars in 2006.
Here are the top 10 acquisitions made by Indian companies worldwide:
Target Acquirer Company Tata Steel Deal Country value Industry targeted ($ ml) 12,000 Steel 5,982 729 Steel Electronics Pharmaceutic al Energy Oil and Gas Pharmaceutic al Steel Electronics Telecom
Corus Group UK plc Canada Korea
Hindalco Novelis Daewoo Videocon Electronics Corp. Dr. Reddy’s Labs Suzlon Energy HPCL Betapharm Hansen Group
Germany 597 Belgium 565 500 324
Kenya Petroleum Kenya Refinery Ltd. Romania
Ranbaxy Terapia SA Labs Tata Steel VSNL Natsteel Teleglobe
Singapore 293 290 239 Canada
Videocon Thomson SA France
The largest overseas deal was the Videocon Group's acquisition of Thomson's colour picture tube business in China. Over a period of time. From where has this confidence come in Indian Businesses ? The outsourcing phenomenon.500 million. yet high quality products and services. Poland. Graphical representation of Indian outbound deals since 2000. First and foremost. which acquired 100 per cent of the Belgian pharma company. IT companies were active acquirers with 13 deals worth $89 million. and Italy for a total of $290 million. the Indian offshore companies have created an image of reliable low cost.If you calculate top 10 deals itself account for nearly US $ 21. UBS acted as the advisor to Thomson and Matrix respectively. This is more than double the amount involved in US companies’ acquisition of Indian counterparts. it has ensured that Indian managers and executives are now far more exposed to Western business culture and practices. The deal was paid for by an issue of shares in two Videocon companies — Videocon International (consumer durables) and Videocon Industries (oil and gas exploration). Docpharma for $263 million). Outsourcing/ . especially in IT Industry has helped Indian companies in lot of direct and indirect ways. Mexico. The other large overseas deal was by pharmaceuticals Matrix Laboratories.
What does all this result into . Their capacity to borrow large amount of cash has also gone high. Managers and Executives of Indian companies are taking much higher Risks than ever before.Acquisitions. Indian companies are now eyeing Global markets instead of domestic to move up the growth ladder. If you are a large company.Offshoring companies have increased their profits exponentially. you need to have a presence in US and Europe. There were 43 overseas acquisitions by Indian acquirers in H1 2005 compared to 60 in the whole of 2004 (Table 2). Also. the volume of overseas acquisitions by Indian companies can no longer be ignored. There is a lot more cash available with Indian companies than ever before. Net result? Indian companies are flush with foreign exchange ! Overseas deals While the INDATA survey is restricted to corporate finance activity involving Indian targets. Reasons for mergers We identify four key drivers for Indian companies considering overseas acquisitions: . the regulatory changes have made the whole process of acqusition much easier than ever before. Indian companies continued to acquire abroad continued in H1 2005. Some restrictions like the amount of Foreign exchange entering India have been relaxed.
Therefore. knowledge and technology abroad. resources and markets of the parent company. indeed. The pressure of domestic competition: Domestic competition is pushing some Indian companies into less competitive overseas markets. a failure to focus on this important factor may explain why so many mergers don’t pay off. The need to expand product or service portfolios: Accenture's analysis reveals that most Indian companies are endeavoring to increase market share by building the size of their product and service portfolios. .• The need to capture new markets: Some 81 percent of participants in the Accenture study said the key motivation for going global was to find new markets to sustain top-line growth. Reasons for its failure Revenue deserves more attention in mergers. the more the benefits to the home economy. Access to funds. Too many companies lose their revenue momentum as they concentrate on cost synergies or fail to focus on post merger growth in a systematic manner. The need to expand capabilities and assets: Many Indian companies are seeking to expand their distinctive capabilities by acquiring specific skills. The most important benefit that the developing and transition economies derive from outward investments is increased competitiveness. This strengthens the arms of local companies and of the MNCs to survive in a competitive milieu. 1. the more the domestic industries invest abroad. the acquired companies can expect to receive their share of benefits. 2. • • • Similarly. thereby spreading their risk across geographies. Yet in the end. Assurance of continued operation. which are either unavailable or of inadequate quality in India. Minimal workforce retrenchment 3. halted growth hurts the market performance of a company far more than does a failure to nail costs.
similar to how one might feel when a mate makes an abrupt announcement demanding a divorce. Mergers are like marriages. Machhi  states that . Also. The very minute that merger rumblings are heard in an organization. Lack of synergies. 2. the work climate begins to change.5. leading to loss of confidence among key personnel and workforce. it helps determine and legitimize what sort of behavior is rewarded in an organization. The right partner must be selected after an honest and meaningful courtship. The initial feeling is one of betrayal. Uncertainty over the process of merger/acquisition. 3. Gossip within the organization competes with production and then the competition can gain a foothold. traditions. Shuttering up the acquired company because it was a competitor whose products duplicate what the parent company is producing. Problems typically occur when the larger or stronger of the two organizations try to significantly influence the integration. flexibility and mutual respect. 4. Combining merged cultures requires a focus on one new vision and one new mission. There must be communication. Asset stripping of the acquired company. beliefs and priorities. Employees become emotionally confused and anxious. Organizational culture is a blend of an organization's values. developed by a cross-section team of representatives from both organizations. Employees begin to divert time and energy to wonder how their career. cultural practices and personnel characteristics of the target and acquirer” (Jemison and Sitkin 28]). 4. Culture Shock. It influences the ease with which two organizations can be integrated during implementation. and cultural fit between two companies. power and prestige will be impacted.It is said 2 out of 3 mergers fail for a number of reasons: 1. Poor Organization Fit : Organizational fit is described as “the match between administrative practices.
Mergers with strategic fit can improve profitability through reduction in overheads. especially lack of synergies results in merger failure. Mismatch of organization fit leads to failure of mergers. 4. the time frame for achieving these goals (shortterm versus long term) and the way in which assets are utilized (high capital investment or an asset stripping mentality). The absence of strategic fit between the companies may destroy the value for shareholders of both the companies.8. a . 4. Poor Strategic Fit: A Merger will yield the desired result only if there is strategic fit between the merging companies. Sudarsanam. was described by analysts as a perfect merger (Chaturvedi and Sinha ). P&G –Gillette merger in consumer goods industry is a unique case of acquisition by an innovative company to expand its product line by acquiring another innovative company.organisation structure with similar management problem. the ability to raise funds at a lower cost. effective utilization of facilities. cultural system and structure will facilitate the effectiveness of communication pattern and improve the company’s capabilities to transfer knowledge and skills. Paying Too Much (Over paying): In a competitive bidding situation. Strategic fit can also include the business philosophies of the two entities (return on investment versus market share). But many a time lack of strategic fit between two merging companies.6. and deployment of surplus cash for expanding business with higher returns. But once this is assured. Need for proper organization fit is stressed by Hubbard . Holl and Salami  find that marriage between companies with a complementary fit in terms of liquidity slack and surplus investment opportunities is value creating for both groups of shareholders. the gains will outweigh the losses (Maitra ).
14.When the price paid is too much. Failure to Examine the Financial Position: Examination of the financial position of the target company is quite significant before the takeovers are concluded.company may tend to pay more. details and location of fixed assets. the deal may not create value (Koller ). the M&A fail. and Zhao  find that the benchmark portfolio of acquirer dominates the merger portfolio of acquirers that paid highest premiums to the target firms. Schlingemann and Stulz  find overall. and loans from the promoters. 4. Chandra ). unsecured loans. Ho. Often highest bidder is one who overestimates value out of ignorance. salability of finished products. how well the deal may be executed. When the acquirer fails to achieve the synergies required to compensate the price. value and quality of receivables. Moeller.24 percent. he happens to be in a way the unfortunate winner. A London Business School study in 1987 highlighted that an important influence on the ultimate success of the acquisition is a thorough audit of the target company before the takeover (Arnold ). . Variaya and Ferris ’s empirical findings also subscribe to the overpayment hypothesis. More one pays for a company. He views that overpayment may be a possible reason for the long-run underformance of some acquiring firms. it arranged for comprehensive audit of financial affairs of the unit. claims under litigation. the abnormal return associated with acquisition announcements for small firms exceeds the abnormal returns associated with acquisition announcements for large firms by 2. This is called winners curse hypothesis (Roll . When ITC took over the paper board making unit of BILT near Coimbatore. the harder he will have to work to make it worthwhile for his shareholders (Banerjee ). Areas that require thorough examination are stocks. Though he emerges as the winner. They point out that the large firms offer larger acquisition premiums than small firms and enter into acquisitions with negative dollar synergies. Abyankar.
Companies that rush in without them are likely to stumble. growth in strategic alliances as a cheaper and less risky route to a strategic goal than takeovers. deterring investors who fear that they might not be able to sell their holdings at a later date. a successful Mergers & Acquisition growth strategy must be supported by three capabilities: deep local networks. the abilities to manage uncertainty. Other Causes: Apart from the causes mentioned above there may be other reasons for failure of mergers which include: cash acquisitions resulting in the acquirer assuming too much debt (Business India ).Many a times the acquirer is mislead by window-dressed accounts of the target (Hariharan ). inadequate attention to people issues while the due diligence process is carried out. and the skill to distinguish worthwhile targets. but for local companies.22. loss of identity of merging companies after the merger. mergers between two weak companies. and spending too much time on new activity neglecting the core activity. expecting results too quickly after the takeover. and debt markets are small and illiquid. finance is likely to be the single biggest obstacle to an acquisition. What will it take to succeed? Funds are an obvious requirement for would-be buyers. ego clashes between the top managements of the companies to the M&As and subsequently lacking coordination especially in the case of mergers between equals. failure to retain the key people and best talent (Zainulbhai ). Financial institution in some Asian markets are banned from leading for takeovers. The credit squeezes and the depressed state of many Asian equity markets have only made an already difficult situation worse. Funds apart. . 4. Raising them may not be a problem for multinationals able to tap resources at home.
TATA GROUP THE EPITOME OF ACQUISITIONISTS One Indian group epitomizes the current trend: The Tatas have been the most aggressive and successful Indian group in acquiring prized overseas assets. Hotels. Steel. IMPACT ON INDIA . IT. The Tatas’ acquisitions have spanned the range of products. Coffee. Telecom. And their hunger for acquisitions shows no signs of abating. Yet Respected No other business house in India can boast the kind of unbroken century-old lineage that is the proud legacy of Tatas. Chemicals. brands. the Tatas have pumped in huge sums of money. Aggressive. And it was this legacy that swung the acquisition of Jaguar & Land Rover in Tatas favour. industries and geographies From Automobiles. to Tea.
• • • • SUCCESS ASSURED? . the Tatas get to access new markets. France. which are otherwise difficult to prise open. S. Improving operating margins and efficiencies. Brar. Buying cutting-edge technology rather than importing it. and engineering expertise.This Tata buy-out of these two brands is much more than mere acquisition of a company. Australia. according to the former Ranbaxy CEO. And this cannot come through organic growth or internal expansion. and taking on the global competition. Corus will give Tatas a whole mix of premium quality steel products. But why M&As? Six reasons. to Steel and Automobiles. • Maintaining growth momentum. Jaguar & Land Rover are expected to bring a whole raft of new technologies and processes. The Tatas clearly have serious ambitions of becoming strong global players. Developing new product mixes. Mr D. Jaguar and Land Rover have brought the Tatas global attention. much more is expected to come Into India through these acquisitions. It is a strong positive message that Tata is sending across the globe about Indian companies and India itself ! For all the billions that will be going out of the country. Acquiring visibility and international brands Corus. The development of Nano is another instance of the Tatas desire to meet the world on their terms. drive M&As: • Accessing new markets From hotels across UK.
V Thyagarajan said. India (Merger Success). None of the factors above can be said to apply to the Tatas. Grow & Flourish With Tatas. patients. their intentions are clear: Live. “The two companies that have merged to become GlaxoSmithKline in India have a great heritage – a fact that gets reflected in their products with strong brand equity. It may be recalled here that the global merger of the two companies came into effect in December 2000.” He added. India The merger in India brings together two strong companies to create a formidable presence in the domestic market with a market share of about 7 per cent. GlaxoSmithKline Pharmaceuticals Limited. regulatory authorities and trade bodies. India.Glaxo India Limited and SmithKline Beecham Pharmaceuticals (India) Limited have legally merged to form GlaxoSmithKline Pharmaceuticals Limited in India (GSK).” GlaxoSmithKline. . “The two companies have a long history of commitment to India and enjoy a very good reputation with doctors.The Tatas have shown that they are cut from a different cloth. Commenting on the prospects of GSK in India. CASE STUDY 1 GlaxoSmithKline Pharmaceuticals Limited. Mumbai -. At GSK it would be our endeavor to leverage these strengths to further consolidate our market leadership. Mr. Vice Chairman and Managing Director. Let Live.
000 employees and supplies its products to 140 markets around the world. GlaxoSmithKline. The company has over 100. With a field force of over 2. It has one of the largest sales and marketing operations in the global pharmaceutical industry. genomics. With an R&D budget of over ₤2. .16.3 billion (Rs. the company’s products are available across the country. A truly global organization with a wide geographic spread.000 stockiest. India will help serve patients better by strengthening the hands of doctors by offering superior treatment and healthcare solutions. GlaxoSmithKline has increased its reach significantly in India. UK. GlaxoSmithKline has its corporate headquarters in the West London.With this merger. Worldwide GlaxoSmithKline plc is the world’s leading research-based pharmaceutical and healthcare company. combinatorial chemistry and other leading edge technologies. The enhanced basket of products of GlaxoSmithKline. GlaxoSmithKline has a powerful research and development capability.000 employees and more than 5. encompassing the application of genetics. 130 crores).
The merged bank was to retain the name Deutsche Bank but adopted the Dresdner Bank’s green corporate color in its logo. the new bank would have reached the no. The merger was to create the most powerful banking group in the world with the balance sheet total of nearly 2.S.1 position of the US and create new dimensions of aggressiveness in the international mergers.5 trillion marks and a stock market value around 150 billion marks. with a balance sheet total amounting to 1. where the new banking group was hoped to outside the traditionally dominant Swiss Bank. which the executive committee of the bank did not want to relinquish under any circumstances. Security and loan banking and finally financially corporate clients ranging from major industrial corporation to the mid-scale companies. Kleinwort Benson. asset management. extensive network of bank branches associated with it. This would put the merged bank for ahead of the second largest banking group.7 trillion marks as the balance sheet total. With this kind of merger. But barely 2 months after announcing their agreement to form the largest bank in the world. U.CASE STUDY 2 Deutsche – Dresdner Bank (Merger Failure) The merger that was announced on march 7. The future core business lines of the new merged Bank included investment Banking. The main issue of the failure was Dresdner Bank’s investment arm. The new banking group intended to spin off its retail banking which was not making much profit in both the banks and costly. Germany’s largest and the third largest bank respectively was considered as Germany’s response to increasingly tough competition markets.2 trillion marks and also in front of the planned Japanese book mergers of Sumitomo and Sukura Bank with 1. negotiations for a merger between Deutsche and Dresdner Bank failed on April 5. 2000 between Deutsche Bank and Dresdner Bank. based citigroup. 2000. .
Deutsche Bank’s asset management had only integrated with London’s investment group Morgan Grenfell and the American Banker’s trust. So there was only one option left with the Dresdner Bank i. the chairman of the Dresdner Bank was not prepared for this. This division alone contributed over 60% of Deutsche Bank’s profit.e. The top people at the asset management were not ready to undertake a new process of integration with Kleinwort Benson.In the preliminary negotiations it had been agreed that Kleinwort Benson would be integrated into the merged bank. the planned merger was celebrated as Germany’s advance into the premier league of the international financial markets. But from the outset these considerations encountered resistance from the asset management division. to sell Kleinwort Benson completely. In economic and political circles. . which was Deutsche Bank’s investment arm. This led to the withdrawal of the Dresdner Bank from the merger negotiations. However Walter. But the failure of the merger led to the disaster of Germany as the financial center.
globally. it will be a dynamic bank.CASE STUDY 3 Standard Chartered Grindlay’s (Acquisition Success) It has been a hectic year at London-based Standard Chartered Bank. ANZ Grindlays will exist separately as Standard Chartered Grindlays (SCG). That makes the new entity the world's biggest 'emerging markets' bank. By way of strengths. The '2' and '3' are Citibank and Hong Kong and Shanghai Banking Corp (HSBC).of growth through consolidation of emerging markets . Can Stan Chart’s proposed merger with ANZ Grindlays be any different? The '1' refers to the new entity. for $1. it could per. which will be India's No 1 foreign bank once the integration is completed. going by its acquisition spree across the Asia-Pacific region. he knew what he was up against when he propounded his 'emerging stronger' strategy . At the helm of affairs. Best of all. in particular. Thanks to pre-merger initiatives taken by both banks. is Rana Talwar. up 31 per cent from the same period last year.3 billion. The quintessential general. Everyone knows that acquisition is the easy part. are not as simple to execute as unifying balance sheets. The central issue: Stan Chart’s August 2000 acquisition of ANZ Grindlays Bank. India's second and third largest foreign banks.for the turn of the Millennium: loads of scepticism. And recent history has shown that banking mergers and acquisitions (MERGERS & ACQUISITION’s). a typically lowprofit business which accounted for less than 40 per cent of its global operating profits till . Net revenue increased 6 per cent to $2 billion for the same period. group CEO. having reported a profit-before-tax of $650 million in the first half of 2000. This should take around 18 months. It is currently targeting global cost-savings of $108 million in 2001. StanChart is rated highly on other parameters too. merging operations is not.haps boast of the country's fastest growing retail-banking business. it will have treasury operations that will probably go unchallenged as the country's most sophisticated. till then. respectively. Consumer banking.
Behind it all is a strategy that everyone at StanChart seems to be in synchrony with. and StanChart initiated the duediligence proceedings. the banks are doing fine. though. A new vehicle. ANZ had expressed a willingness to sell out. By December. as a percentage of net total advances. with Citibank and HSBC just waiting to snip at it. At first.four years ago. as the two banks integrate their businesses."getting the right footprint". navigators in place. at Stan Chart’s headquarters in London. The aggression.5 per cent of its riskweighted assets. To steer clear of trouble is the only caution advised by industry analysts. StanChart has a capital base of 9. though the process started in early 1999. with or without a safety net provided by the global group. while SCG has 10. It wasn't until March that a few senior Indian bank executives were let into the secret. it was just talk of a strategic tie-up with ANZ Grindlays. In terms of capital adequacy too. Now. well over the industry average of below 10 per cent. the road ahead is challenging and full of promise. very much the originator of the oft-repeated phrase uttered by every executive . And behind that strategy is Talwar. StanChart knows it mustn't let its energy dissipate. now brings in 55 per cent of profits. It has been growing at a claimed annual rate of 25 per cent in the last two years. The other key words that tend to find their way into every discussion are 'focus' and 'growth'. . Sceptics don't see how StanChart can really be greater than the sum of its parts. So the company's global report card looks fairly good. StanChart India's net non-performing loans. But maintaining this pace won't prove easy. which had the same colonial British antecedents. So.9 per cent. is reported at just 2 per cent for 1999-2000. is not as raw as it sounds. engines revving and map charted. the Indian operations are on firm ground. where the two are headquartered. it's time to get going. The ANZ Grindlays acquisition had happened just before that. But this plan was abandoned when it became evident that all decision-making would vacillate between Melbourne and London.
all under 200 million pounds. it invested 70 million pounds as equity capital to set up Tata Tea. Tetley was never a easy buy. its intent was very clear. The plan was that Tetley’s cash flows would be insulated from the debt burden. Unilever and Sara lee had put in bids. had put Tetley on the block. the second largest brand after Lipton in its bag. Tata Tea didn’t have enough of its own. In 1996. Even then Tata Tea. 15 months ago. the biggest ever leveraged buyout by an Indian company. It was a coup! An Indian company had used a leveraged buyout to snag one of the Britain’s biggest ever brands.CASE STUDY 4 TATA – TETLEY (Controversial Issue over Success And Failure). Eventually. most missed what Krishna Kumar's statement meant. Tata Tea looked ready to set the Thames on fire. isn’t proceeding according to the plan. Tetley went for an IPO. bought the entire equity stake for 190 million pounds in all cash deal. Already high on a heady brew of a fresh buy and caffeine. one of the world’s biggest tea brands. It was by far. the liquor and retail conglomerate. . Right from the start. When Tata Tea took the big gamble to buy Tetley. Tetley group together with a consortium of financial investors like Prudential and Schroders. It borrowed 235 million to buy the Tetley stake. Instead. Soon afterwards. Two years later. the Kolkata based Rs 913 crore Tata Tea’s buyout of the privately held The Tetley Group for Rs 1843 crore had stunned corporate watchers and investment bankers alike. With Tetley. But the IPO never took place. hoping to raise 350-400 million pounds. Allied Domecq. Tata Tea didn’t pay cash upfront. nestle. Allied wanted to cash on the table.7% stake in the UK-based Tetley last year. The others bids also did not go through. Tata Tea’s much hyped acquisition of Tetley. the investors began looking for exit options. Going global looked like the obvious thing to do. Tetley was once again on the block. The company had established a firm foothold in the domestic market and had a controlling position in growing tea. The Tata group was infusing a fresh 30 million pounds into Tata tea that had been used to buy an 85.
By this time. The offer price did not include rights to Tetley coffee business. But the situation worsened.It was until Feb 2000 that the due diligence was completed. That substantially reduced Tetley’s pricing flexibility. the UK tea markets have been under pressure for some time now. Besides. Some of the problems could have been obviated if Tetley’s cash flows had increased by 40 % in FY 2001 over the previous year. to service the loans Tata Tea had taken for the acquisition. Implicit in the LBO was that Tetley’s future cash flows would fund the SPV’s interest and principal repayment requirements. the problems were only just beginning. Consider the facts. there has been a substantial fall . If you were to assume that depreciation and restructuring charges were pegged at last year’s levels. the bill tots up to 48 million pounds a year. According to the UK government’s national food survey. too. which was sold to the US-based Rowland Coffee Roasters and Mother Parker’s Tea and Coffee in Feb 2000 for 55 million pounds. At the same time. it also has to pay back the principal of 110 million pounds over a nice period through half yearly installments. Major UK retailers clamped down on grocery prices last year. When Tata Tea acquired Tetley through Tata Tea. In FY 1999. Add to this the interest on the high cost vendor loan notes of 30 million pounds —it worked out to be 4. That way.5 million and the charges on the working capital portion. Tetley needed to generate 22 million pounds in interest alone on a loan o 190 million pounds. That’s where reality bites. amounting to 2 million pounds per annum. the Tetley’s cash flows were 29 million pounds. The balance would go the owners. the company would have covered both its own commitments as well as of the Tata's. At an average interest rate of 11. the Tata's were ready with their offer. For Tetley new owners. They would pay 271 million pounds to buy the entire Tetley equity and the funds would go towards first paying off Tetley’s 106 million debt. The deal hinged on Tetley’s ability. This works out to 12 million pounds per year. over and above covering its own debts.5%. All this works out to about 28 million pounds in interest alone per year. it sunk in 70 million pounds as equity and borrowed 235 million pounds fro ma consortium to finance the deal.
it could not do much. By contrast. So.63 crore to Rs 100. On the other hand. All the sectors. when it was confronted by Tetley’s sliding performance. Investors can take comfort in the idea that a merger will deliver enhanced market power. Additional capital can fund growth organically or through .1% to 68. One size doesn't fit all. But Tata still calls it to be a success whereas in reality it is a failure.72%. Thus from the above case we infer that Tata had to shell out a lot of money to cover all the debts of Tetley which was found not worthy enough by the general public.3% in 1999.59% from Rs 124. manufacturing. given the prestige attached to the deal. Also the tea drinking population in UK has come down from 77. The drop in tea prices and a proliferation of smaller brands in the organized segment have taken toll on Tata Tea’s performance. de-merged companies often enjoy improved operating performance thanks to redesigned management incentives. Auto and FMCG are all buzzing with Mega Indian acquisitions. Information technology. Indian Businessmen and Entrepreneurs are set out to revamp Indian image that will be boasting world’s biggest corporation’s in near future. be it Steel. Many companies find that the best way to get ahead is to expand ownership boundaries through mergers and acquisitions.21 crore. expanding operations and cutting costs. At least in theory. For others. Income from operations declined by 8. The last year has been one of the worst years for the Indian tea industry and Tata Tea has also been affected. natural juices and coffee have consistently increased their market share.tea-bag black teas drunk with milk and sugar. But letting Tetley sink under the weight of the interest burden would have been an unthinkable option. separating the public ownership of a subsidiary or business segment offers more advantages.in the consumption of mainstream teas. mergers create synergies and economies of scale. what options did Tata Tea have? On its own. Tata Tea’s net profit fell by 19. Conclusion The giant positive strides that Brand India has taken in last few years are nothing less than astonishing. In FY 2001.
M&A comes in all shapes and sizes. investors benefit from the improved information flow from de-merged companies. The most beneficial form of equity structure involves a complete analysis of the costs and benefits associated with the deals .acquisition. Meanwhile. and investors need to consider the complex issues involved in M&A.
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