MERGERS AND ACQUISITIONS

MEMBERS KAJAL SUDANI 112 MANSI SHAH 104 JUHI PATEL 87 USHA SADHU 99 SHIMALI MEHTA 75 SURBHI KEDIA 37

MERGER
‡

A merger is a combination of two companies into one larger company, which involves stock swap or cash payment to the target.

Example: Company A+ Company B = Company C. ‡ Mittal Steel +Arcelor steel =ArcelorMittal
‡

Acquisition.

When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition. also known as a takeover or a buyout

It

Example: Company A+

Company B= Company A. Vodafone + Hutch =Vodafone

iv. iv. Acquisition is less expensive than merger. ii. Merger is expensive than acquisition(higher legal cost). It is faster and easier transaction. iii. Through merger shareholders can increase their net worth. It is time consuming and the company has to maintain so much legal issues. Buyers cannot raise their enough capital. iii. Buying one organization by another. . Merging of two organization in to one. ii. ACQUISITION i.DIFFERENCE BETWEEN MERGER AND ACQUISTION: MERGER i.

iii. Clash of corporate cultures Increased business complexity Employees may be resistant to change v. PROBLEM WITH MERGER i. ii. Managerial effectiveness iii. ii.MERGER:WHY & WHY NOT WHY IS IMPORTANT i. 6 . Economies of scale Profit for Research and development. Reduction of competition. Benefits on account of tax shields like carried forward losses or unclaimed depreciation. Increase Market Share. iv. vi.

7 . Inability to achieve synergy. Finance by taking huge debt. iii. Inadequate valuation of target. Increased diversification Avoid excessive competition i.ACQUISITION:WHY & WHY NOT WHY IS IMPORTANT i. ii. v. iv. Increased market share. Increased speed to market Lower risk comparing to develop new products. PROBLEM WITH ACUIQISITION iii. ii.

TYPES OF MERGERS. 8 Horizontal merger Vertical merger Conglomeration Market-extension merger Product-extension merger Product extension merger .

Debt & preference shares financing Some firm may have a relatively lower P/E ratio was also the requirement of some investors might be different. the relative price earnings ratios of two firms are an important consideration. other types of securities may be used for the purpose. 2. ordinary shares represent an ideal method for financing mergers and acquisitions. Firms having a high P/E ratio. To tailor a security to the requirements of investors who seek dividend/ interest income. Ordinary Share financing 9 Use of common shares to finance a merger.FINANCING TECHNIQUES IN MERGER 1. convertible debentures and preference shares might be used to finance mergers .

Since the future payment is linked to the firms earnings. also undertakes to make additional payments in future years to the target firm. besides making an initial payment. Since the tender offer is a direct appeal to the shareholders. . Deferred payment plan Here the acquiring firm. Tender offer In this approach purchaser approaches the shareholders of the firm rather than the management to encourage them to sell their shares generally at a premium over the current market price. this plan is also known as earn out plan. prior approval of the management of the target firm is not required.10 3. 4.

iv. vii. ix.PROCESS OF MERGER & ACQUISITION IN INDIA: The process of merger and acquisition has the following steps: i. v. iii.whichever earlier). ii. viii. . x. 11 Examination of Object Clause Information to the stock exchange Approval of Board of Directors Application in the High Court Dispatch of Notice to Shareholders and Creditors Holding of Shareholders and Creditors meetings Sanction by the High Court Filing of the court order Transfer of assets & liabilities Payment by cash and securities Maximum Waiting period:210 days from the filing of notice(or the order of the commission . vi.

12 CASE STUDY .

13 ACQUISITION Case study.Tata Steel and Corus .

ABN AMRO and Deutsche Bank.12 billion(combinelly ) .  Lead financer of Tata steel was Suisse.  Contribution from Tata Steel ± $3. Tata paid 608 pence( Rs 484)per share to Corus shareholders. which is four times larger than its size and the largest steel producer in the U.6% higher than the first offer which was 455 pence.14 Tata acquired Corus on the 2nd of April 2007 for a price of $12 billion. which is 33.88 Billion & $2bn equity . Tata acquired Corus.K.$ 8.

000 people worldwide.5 Pence/share .1st in UK 371st rank in fortune list 50.PROFILE PRE MERGER TATA STEEL CORUS 15 102 years in steel bazaar World·s 56th largest Capacity of 30 Million Founder:J.60 World·s 6th largest 2nd in Europe. Tata Presence in 26 nations On the date of announcement ±536.N. Presence in 50 nations On the date of announcement ± 360.

90 as TATA STEEL Production capacity of tata U. CORUS was named 464.K.3thousand tonnes Today tata steel is on 5th ranks in world y . steel increase from 5.PROFILE POST MERGER TATA STEEL CORUS 16 On the date of Acquisition. Ltd.3 thousand tonnes to 23.

Tata Steel Background 17 ‡ Tata Steel a part of the Tata group. and Thailand based Millennium Steel ‡ Tata Steel generated net sales of Rs. ‡ Started with a production capacity of 1. . one of the largest diversified business conglomerates in India. Tata steel emerged as Asia·s first and India·s largest integrated steel producer in the private sector.00.by Jamshedji Nusserwanji Tata.1990s. has transformed into a global giant ‡ In the mid.175 billion in the financial year 200607. ‡ Founded in 1907.000 tones. ‡ Tata steel acquired the Singapore based steel manufacturer NatSteel.

The Netherlands. British Steel (38.7%) ‡ Corus has manufacturing operations in many countries with major plants located in the UK.142 million annual .CORUS BACKGROUND 18 ‡ Corus Group was formed on 6th October 1999.3%) and Koninklijke Hoogovens. through the merger of two companies. Germany. France. Norway and Belgium ‡ It has wide variety of products and services ‡ Largest steel producer in UK with £10. (61.

Reasons for Tata Steel to Bid 19 19 Tata want to tap European Mature Market because Cost of acquisition is lower than setting up of Green field plant & marketing and distribution channel. .long and flat steel products . Technology Benefit. Corus holds number of patents and R&D facilities.while Corus produce High Value Stripped products. TATA manufactures Low Value . Helped TATA to feature in Top 10 players in world.

 Though the Corus had a revenue of $ 18.  The total debt of Corus was 1.6bnGBP.84bn & profit $824 mn .20 REASONS FOR CORUS FOR ACCEPTING BIDS  To get access to low cost materials. due to that the market share and profit had decline.06bn it¶s profit was just $ 626mn on against Tata revenue was $ 4.  Corus wanted to reduce its employees cost(15%) and TATA (9%)is well known for handling its labours efficiently.

NTT DoCoMo and Tata 21 .MERGER Case study.

13.TATA DOCOMO 22 ‡ ‡ ‡ ‡ Tata and NTT Docomo had merged in Nov.7 bn) Tata Docomo had launced GSM service on 24 June 2009 in South India. First mobile service provider to have second pulse tariff Reason for Merger: ‡ Docomo has a good promoting techniques and its is largest mobile operator in Japan with 50% market share ‡ Docomo want enter in world's fastest growing mobile market ‡ Tata want to increase it¶s market share.(TTSL) NTT Docomo have 26%equity stake in TTSL for Rs. .070($2.2008 under Tata Teleservice Ltd.

TOP 11 M&A DEALS« .

Corus CEO. J Leng. 2007 Largest Indian take-over After the deal TATA¶S became the 5th largest STEEL co.per share Image: B Mutharaman. Tata chairman. Ratan Tata. Tata Steel MD. and P Varin. Corus chair. 100 % stake in CORUS paying Rs 428/.1. TATA STEEL-CORUS: $12. .2 BILLION January 30.

2.1 BILLION 11th February 2007 TELECOM sector 2nd largest takeover deal 67 % stake holding in hutch Image: The then CEO of Vodafone Arun Sarin visits Hutchison Telecommunications head office in Mumbai. VODAFONE-HUTCHISON ESSAR: $11. .

chairman of Aditya Birla Group. . HINDALCO-NOVELIS: $6 BILLION June 2008 Aluminium and copper sector Hindalco Acquired Novelis  Hindalco entered the Fortune-500 listing of world's largest companies by sales revenues Image: Kumar Mangalam Birla (center).3.

RANBAXY-DAIICHI SANKYO: $4.4.000 crore 15th biggest drugmaker . 2008 Pharmaceuticals sector Acquisition deal largest-ever deal in the Indian pharma industry Daiichi Sankyo acquired the majority stake of more than 50 % in Ranbaxy for Rs 15. and Takashi Shoda. president and CEO of Daiichi Sankyo.5 B June Image: Malvinder Singh (left). ex-CEO of Ranbaxy.

ONGC-IMPERIAL ENERGY:$2.5.8BILLION January Image: Imperial Oil CEO Bruce March. ONGC paid 880 per share to the shareholders of imperial energy ONGC wanted to tap the siberian market . 2009 Power sector Acquisition deal Imperial energy is a biggest chinese co.

November Image: A man walks past a signboard of Japan's biggest mobile phone operator NTT Docomo Inc. in Tokyo. .7bn 2008 Telecom sector Acquisition deal Japanese telecom giant NTT DoCoMo acquired 26 per cent equity stake in Tata Teleservices for about Rs 13.Tata -NTT Docomo ±$ 2.070 cr.

HDFC BANK-CENTURION BANK OF PUNJAB: $2. .4 BILLION February. HDFC Bank chairman.510 crore Image: Rana Talwar (rear) Centurion Bank of Punjab chairman. Deepak Parekh.7. 2008 Banking sector Acquisition deal CBoP shareholders got one share of HDFC Bank for every 29 shares held by them. 9.

TATA MOTORS-JAGUAR LAND ROVER: $2. .3 BILLION March 2008 (just a year after acquiring Corus) Automobile sector Acquisition deal Gave tuff competition to M&M after signing the deal with ford Image: A Union flag flies behind a Jaguar car emblem outside a dealership in Manchester.8. England.

.9.8 BILLION May 2008 Acquisition deal Sector copper Image: Vedanta Group chairman Anil Agarwal. STERLITE-ASARCO: $1.

D of Suzlon Energy Ltd. SUZLON-REPOWER: $1.7 BILLION May 2007 Energy sector Acquisition deal Suzlon is now the largest wind turbine maker in Asia 5th largest in the world. . chairman & M.10. Image: Tulsi Tanti.

500 crore RIL-RPL merger swap ratio was at 16:1 .68 BILLION March Image: Reliance Industries' chairman Mukesh Ambani. Rs 8. RIL-RPL MERGER: $1. 2009 Merger deal amalgamation of its subsidiary Reliance Petroleum with the parent company Reliance industries ltd.11.

WHY INDIA? Dynamic government policies Corporate investments in industry Economic stability ´Ready to experimentµ attitude of Indian industrialists .

INDIA SECOND MOST TARGETED COUNTRY FOR MERGERS & ACQUISITIONS(2010): .AMONGST BRIC NATIONS.

MERGER & ACQUISITION(2009-10) : 37 .

32 bn Hyderabad-based HBL Power Systems is set to take over Igarashi Motors India Ltd. a Japanese-owned company GCPL (Godrej Consumer Products) has decided to buy two domestic brands ± Genteel (a liquid detergent) and Swastik (soaps) .RECENT M&A HAPPENINGS« Godrej acquires Argentine firm Oil India eyes shale gas acquisition overseas RIL acquires Pioneer stake for $1.

Pharma major Dr Reddy's Laboratories Ltd will buy oral penicillin facility and product portfolio of GlaxoSmithKline plc in the US . revive Logan sales.CONTD« Dabur completes merger of Fem Care Ebay India ties up with Adidas for FIFA World Cup. Abbott buys Piramal unit Eurocopter signs two joint ventures with Pawan Hans Mahindra to buy out Renault¶s stake in India.

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