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issue in merger & acquisition .ppt

issue in merger & acquisition .ppt

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Published by ravi4185
presentation of merger & acquisition with some successful cases
presentation of merger & acquisition with some successful cases

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Published by: ravi4185 on Oct 09, 2009
Copyright:Attribution Non-commercial


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In business or economics a merger is a combination of two company into one larger company. Such actions are commonly voluntary and involve stock swap or cash payment to the target. Stock swap is often used as it allows the shareholders of the two companies to share the risk involved in the deal. A merger can resemble a takeover but result in a new company name (often combining the names of the original companies) and in new branding; in some cases, terming the combination a "merger" rather than an acquisition is done purely for political or marketing reasons.

● ● ● ● Horizontal Mergers Vertical Mergers Conglomerate Mergers Concentric Mergers


Horizontal Merger  Combination of two or more firms operating in the same stage of production. 2. Vertical Merger  Combination of two firms that operate in different stages of production. - Textiles firm merges raw materials firm. 3. Conglomerate Mergers  Merger of firms in unrelated lines of business that are neither competitors nor potential or actual customers or suppliers of each other.  Buying and selling ability to manage

Example: General Electric buying NBC television

4. Concentric Mergers

Merger of two firms that are so related that there is a carryover of specific management functions (research, manufacturing, finance, marketing, etc.)

Example: Citigroup (principally a bank) buying Salomon Smith Barney (an investment banker/stock brokerage operation)


An acquisition, also known as a takeover or a buyout, is the buying of one company (the ‘target’) by another. An acquisition may be friendly or hostile. In the former case, the companies cooperate in negotiations; in the latter case, the takeover target is unwilling to be bought or the target's board has no prior knowledge of the offer. Acquisition usually refers to a purchase of a smaller firm by a larger one.

Sometimes, however, a smaller firm will acquire management control of a larger or longer established company and keep its name for the combined entity. This is known as a reverse take over. Another type of acquisition is reverse merger, a deal that enables a private company to get publicly listed in a short time period. A reverse merger occurs when a private company that has strong prospects and is eager to raise financing buys a publicly listed shell company, usually one with no business and limited assets.

Reasons for Acquisitions
Increased market power Learning and Developing new capabilities Overcoming entry barriers Cost of new product development Increase speed to market Lower risk than developing new products

Google bought YouTube ($1.65B in 2006) Why? Google bought a rival. YouTube had four times as many hits as Google Video YouTube streamed nine times as many clips as Google Video. Google’s choice to buy rather than build marked a big strategic change. YouTube = 53% of video users in the world.

Distinction between mergers and acquisitions
When one company takes over another and clearly establishes itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded In the pure sense of the term, a merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals". Both companies' stocks are surrendered and new company stock is issued in its place.

M&A Activities in India:
In 2007, there were a total of 676 M&A deals and 405 private equity deals, in 2007, the total value of M&A and PE deals was USD 70 billion, Total M&A deal value was close to USD 51 billion, Private equity deals value increased to USD 19 billion. In year 2008.. • M&A deals in India in 2008 totaled worth USD 19.8 bn • Less compared to last year which stood at 33.1 bn $. • Decline of M&A activity was in line with the global activity. • Cross border M&A totaled 8.2 bn $ compared to 18.7 bn $.

Major M&A Deals Undertaken Abroad by India Inc.
 Tata steel buys Corus Plc : 12.1$ billion  Hindalco acquired novelis: 6$ billion  Tata buy jaguar and land rover : 2.3$ billion  Essar steel buys Algoma Steel: 1.58$ billion  Vodafone buys hutch : 11$ billion  POSCO to invest in building steel manufacturing plants and facilities in India by 2016  Goldman Sachs Plans investment in private equity, real estate, and private wealth management

Tata Steel has acquired the 5th largest steel producer of the world, Corus, scoring over Brazil's CSN at $12.15 billion (around Rs. 55,000 crore) in cash, making it the largest acquisition by an Indian company and the second largest in the industry after Mittal Steel's $38.3 billion acquisition of Arcelor. Tata's bid of 608p per share, which beat a price from CSN of 603p, was 33.6 per cent higher than its original bid. By some measures, it exceeded the price paid in other recent industry deals, such as Mittal Steel's acquisition of Arcelor last year.

Netherlands-based Mittal Steel on Tuesday claimed it has met the minimum conditions for takeover of Arcelor by acquiring 50 per cent of the Luxembourg-based company's outstanding shares. "Mittal Steel announces today that... on a preliminary basis and based on statements made by financial intermediaries, the minimum tender condition of the offer (that is acquisition of 50 per cent of Arcelor's outstanding shares on a fully diluted basis) has been met," the company said in a statement. After an intense battle of nerves that lasted five months since January, the Arcelor Board last month accepted Mittal's improved takeover bid worth $34 billion. A merger of the two would create the world's largest steel entity Arcelor-Mittal, which would be three times bigger than its nearest rival. The results of the offer will be published on July 26, Mittal Steel said. Under the revised offer, Arcelor shareholders would get 13 Mittal Steel shares and 150.60 euros for every 12 Arcelor shares. If the takeover is accepted by 100 per cent of current Arcelor shareholders, they will end up owning 50.5 per cent of the combined group, with the Mittal family owning 43.6 per cent of the capital and voting rights.

Quaker Oats bought in 1994 Snapple for $ 1,7 bn. $ 500 mil. lost on announcement, $ 100 mil. a year later Snapple was spun off 2 years later at 20% of price Anheuser-Busch bought in 1982 Campbell-Taggart at $ 560 mil Closed down after 13y of struggling for survival IBM bought Lotus for $ 3,2 bn. (more than 100% premium) Probably never to be recouped


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