MERGER AND ACQUISITION

Merger
A transaction where two firms agree to integrate
their operations on a relatively coequal basis
because they have resources and capabilities that
together may create strong competitive
advantage.
Company A Company B
Newly Formed
Company
Deal Summary
Y-0n-Y
Volume Volume(US $
billion)
2009 2010 2011 2009 2010 2011
Inbound 74 91 132 3.9 9 26.9
Outbound 82 198 132 1.4 22.5 10.4
Cross border 156 289 264 5 31 37
Domestic 174 373 342 6.7 18.3 5
Total M&A 330 662 606 12 50 42
PE 206 253 347 3.4 6.2 7.7
QIP 54 56 8 8.6 6.2 0.9
Grand Total 590 971 961 24 62.2 50.9
The year witnessed a sustained momentum in
M&As as well as Private Equity(PE) activity
despite the ongoing euro zone crisis, rising
inflation, low business confidence and interest
rates, weakening rupee and volatile stock
markets. The year 2011 recorded 961 deals
amounting to $51 billion compared to 971 deals
amounting to $62 billion in 2010 (both M&A
and PE). As events unfolded in the euro zone,
there was significant decline in deal values in
both M&As and PE in the second half of the
year.
Acquirer Target Sector % stake $ billion
1. Vedanta Plc Cairns India Oil & Gas 59.00%
2. British Petroleum Reliance Industries Oil & Gas 30.00%
3. Vodafone Group Plc Vodafone Essar Telecom N.A
4. Mundra Port SEZ Ltd (Adani Group) Abbot Point Port Shipping& ports 100.00%

5. GVK Power & Infrastructure Hancock group-coal mines
and a port and rail project
Mining 79.00%
6. iGATE Corporation Apax Partners Patni computers IT and ITES
7. Aditya Birla Group Columbian Chemicals Plastic &
Chemicals
26.00%
8. Hero Investment Ltd Hero Honda Motors Ltd
from Honda motors
Automotive 26.00
9. Nippon Life Insurance Reliance Life Insurance Banking& Financial
Services
26.00%
10. Fortis Healthcare Fortis Healthcare
International

Pharma,
Healthcare &
Biotech
100.00%
The top three M&A (Vedanta, BP,
Vodafone) deals remained in the news
throughout the year due to regulatory
hurdles . All these deals over over $ 1
billion each. There has been an increasing
trend of stake sale by promoters of Indian
companies to strategic acquirers . The
trend may also continue in the future as
the need of large scale operation and
international expansion grows. Foreign
companies are still finding Indian
businesses highly attractive and hence
there was a sharp jump in inbound deals
complimented with huge premium over
market valuations.
Sector Volume Value ( $ billion) %
Oil & Gas 14 16530 39.00%
Telecom 11 5769 14.00%
IT & Ites 117 3251 8.00%
Pharma, Healthcare & Biotech 57 2053 5.00%
Shipping & Ports 3 1957 5.00%
PE 206 253 347
QIP 54 56 8
Grand Total 590 971 961
As a sector , Oil & Gas dominated M&A
activity with big deals like Reliance and
British petroleum , Cairn and Vedanta. The
telecom sector came second to Oil & Gas .
However, the value of Indi-focused M&A
deals just managed to total $39 billion in the
first nine months of this year- a significant
31% decline compared t the same period last
year. This was primarily a result of high
interest rates, inflation, policy paralysis
pertaining to foreign direct investment and
poor returns from financial markets.
However, with the expected rate cuts, the
situation might improve I the near future and
can help attract foreign companies to the
county in turn acceleration M&A activity
sector
2007 2008 2009 2010 2011
Telecom 14755 7181 2772 15132 5831
Metals & Ores 1264 21 430 4100 603
Pharma, Healthcare &
Biotech
1925 5908 1646 6565 2315
Banking & Financial
Services
3714 4113 741 4234 1775
Power & Energy 4489 3596 863 3038 1478
Hospitality 362 12 164 958 58
Due to lack of policy reforms, telecom sector saw a
huge retreat in M&As this year. Same was the case
with metals and Ores sector due to regulatory
issuers over mining . On the other hand sectors like
Oil and Gas, IT and ITES saw a big leap in terms of
M&A. Ongoing carnage in financial markets also had
a negative impact and hence. As a result the BFSI
sector did not witness as much M&A activity as it
did in 2010. However, the situation might improve in
the next year as there seems to be a desperate
effort from authorities to introduce a series of
policy reforms in the telecom sector
Hero Honda is a joint Venture, set up in
1984 between Indias Hero Group and
Japans Honda Motor Co. It has been
the world largest two wheeler
Company for nine years in succession
with a customer base of more than 30
million. It has 48% share of the
domestic two wheeler market; in fact,
Every second motorcycle sold in the
country rolls out from one of the Hero
Hondas Factories.
June,1984 Hero Honda was formed
Honda agreed to provide technical
knowledge to HHM and setting up
manufacturing facilities.
Both have equal stake.
2011 2010 2009 2008 2007
Total incomes
16,784.16 13,093.56 10,607.36 8,982.43 8,726.92
Total Expense
19,669.29 16,096.14 12,537.80 10,517.22 11,731.89
Sales(nos.) 4600130 3722000 3337142 3336756
Sales turnover
19,245.03 15,860.51 12,356.88 10,331.80 9,899.96
Profit After Tax
1,927.90 2,231.83 1,281.76 967.88 857.89
Market
Capitalization
38827 21390 13869 13753
Earning per Share
96.55 111.77 64.19 48.47 42.96
Current Ratio
0.24 0.58 0.46 0.48 0.57
CAGR (%) of Sales
12.5 11.9 12.4 14.7 18.5
Debt Equity Ratio
0.50 0.02 0.02 0.04 0.07
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The increasing cost of royalty and technological
(R&T).
The growing presence and market of Honda
Motorcycle & Scooter India (HMSI) a 100%
subsidiary of Honda.
Relaxed government norms.
Enough knowledge of Indian market for Honda
India would want to go on its own because 9.3
million two-wheeler market will grow to 16 million
by 2015.
A minority stake in Hero Honda also yield limited
profits for Honda compared with a fully
consolidated 100%.
It will not have R & D support from
Honda.
Launch of new products and its
acceptance.
Competition will become more fierce.
Honda will become more aggressive.
Company is considering a brand strategy
focusing on popular bike brands, rather
than the corporate brand.
Pushing the product brands for the time
being, but building the corporate brand in
the background for latest products.
Exploiting overseas market.
The company can now establish
distribution networks across the globe.
2010-2011 2009-2010 2008-2009 2007--2008 2006-2007
EPS 85.02 67.56 52.85 46.22 36.29
PAT 392640 294870 228063 228063 163875
PE 26.29 28.80 18.42 28.62 27.59
Current Ratio 0.06 0.03 0.04 0.04 0.04
Quick Ratio 6.89 7.14 5.23 4.89 4.07
Total Assets 277,352.61 222,458.56 183,270.78 133,176.60 91,235.61
Total Liabilities 277,352.60 222,458.56 183,270.77 133,176.60 91,235.61
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