Mergers , Acquisitions & Takeovers

What Does Merger Mean?
The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock.

Benefits of merger • Diversification of product and service offerings • Increase in plant capacity • Larger market share • Utilization of operational expertise and research and development (R&D) • Reduction of financial risk .

Why do mergers fail ? • Lack of human integration • Mismanagement of cultural issues • Lack of communication .

•Acquisition is generally considered negative in nature . the purchase is called an acquisition.Acquisition •When one company takes over another and clearly established itself as the new owner.

SYNERGIES RELATED TO ACQUISITION • Economies of scale • Staff reductions • Acquiring new technology • Improved market reach and industry visibility • Taxation .

Royal Dutch Petroleum Co.041 60. Time Warner SmithKline Beecham Plc.961 74.Top Acquisitions Rank Year Purchaser Purchased Transaction value (in mil.243 59.559 72.974 8 9 2002 2004 Comcast Corporation Sanofi-Synthelabo Aventis SA SA Spin-off: Nortel Networks Corporation Pharmacia Pfizer Inc.671 72. Shell Transport & Trading Co BellSouth Corporation AT&T Broadband & Internet Svcs 164.515 58.747 75.761 . USD) 1 2 2000 2000 3 4 5 6 7 2004 2006 2001 2004 2000 America Online Inc. AT&T Inc. (AOL) Glaxo Wellcome Plc. Corporation JP Morgan Chase Bank One Corp & Co 59.

the acquiring company will make an offer for the outstanding shares.Takeovers • A corporate action where an acquiring company makes a bid for an acquiree. . If the target company is publicly traded.

.Takeover might be : Hostile Takeover A takeover attempt that is strongly resisted by the target firm Friendly Takeover Target company's management and board of directors agree to a merger or acquisition by another company.

WHY SHOULD FIRMS TAKEOVER? • To gain opportunities of market growth more quickly than through internal means • To seek to gain benefits from economies of scale • To seek to gain a more dominant position in a national or global market • To acquire the skills or strengths of another firm to complement the existing business • To acquire a speedy access to revenue streams that it would be difficult to build through normal internal growth • To diversify its product or service range to protect itself against downturns in its core markets .

. • ‘White squires‘ is a firm which may not be big enough to be able to take control of another firm but may well seek to buy into the 'victim' firm to prevent the 'black knight' from being able to achieve its takeover plans. • ‘Yellow knight' is a firm who originally seeks to launch a hostile takeover bid but then moderates its stance and negotiates on the basis of a merger.KNIGHTS AND SQUIRES • In the case of a hostile takeover. the firm making the bid can be referred to as a 'black knight'. • ‘White knight' is a firm that may enter the fray as a 'friendly' bidder. • A 'grey knight' is a third firm that is not welcomed by the 'victim'. seeking to exploit the situation to their own advantage.

Types of Merger 1. 2. 3. Horizontal Merger Vertical Merger Conglomerate Merger Concentric Merger . 4.

.Horizontal Merger • Horizontal mergers are those mergers where the companies manufacturing similar kinds of commodities or running similar type of businesses merge with each other.

Examples of Horizontal Merger • Lipton India and Brooke Bond. • Bank of Mathura with ICICI Bank. • Associated Cement Companies Ltd Damodar Cement. • BSES Ltd with Orissa Power Supply Company. .

Vertical Merger • A merger between two companies producing different goods or services. .

and the Turner Corporation. • Pixar-Disney Merger . TBS. and other programming. a major cable operation.Example of Vertical Merger • Time Warner Incorporated. which produces CNN.

Mixed conglomerate mergers involve firms that are looking for product extensions or market extensions. Pure conglomerate mergers involve firms with nothing in common. 2.Conglomerate Merger A merger between firms that are involved in totally unrelated business activities. . Two types of conglomerate mergers: 1.

Example of Conglomerate Merger • Walt Disney Company and the American Broadcasting Company. .

.Concentric Merger A merger of firms which are into similar type of business.

• Concentric. a national ISP.S. offers dedicated and dial-up Internet access. high-speed DSL and VPN services across the U.Example of Concentric Merger • Nextlink is a competitive local exchange carrier offering services in 57 cities and building a nationwide IP network. and overseas. .

GUJARAT METAL FORM LTD.LTD.LTD. PIDILITE INDUSTRIES LTD. GEORGE WILLIAMSON (ASSAM) LTD. ARTPLY WOOD INDUSTRIES LTD. GENERAL ELECTRIC CO. ARVIND MILLS LTD. ASIAN CABLES & INDUSTRIES LTD. ARUN GENERAL INDUSTRIES LTD.ANAND TANKS & VESSELS PVT. ASIAN WOODS & POLYMERS PVT. APURAJ CHEM LTD. ARUNA LEATHERS & EXPORTS LTD. ASIAN CABLES CORPN.LTD. SANGAMESHWAR COFFEE EST. CONSOLIDATED COFFEE LTD. GENERAL INDUSTRIAL SOCIETY LTD. DISHERGARH POWER SUPPLY CO.LTD. ASSOCIATED HOTELS OF INDIA LTD.& CHEM. ASSOCIATED POWER CO. LLOYDS STEEL LTD. AUTO RUBBERS TOOLS LTD. ASHIANA HOUSING & FIN.& INDS. ATV PROJECTS INDIA LTD. ASIAN CABLE & INDUSTRIES LTD. KELVINATOR OF INDIA LTD. HINDUSTAN BROWN BOVERI LTD. ATTAREEKHAT TEA CO. MRF LTD. ASHIANA PROTEINS LTD.LTD. ATLANTIC (EAST) LTD.LTD GUJARAT AROMATICS LTD. ION EXCHANGE (INDIA) LTD.LTD. EAST INDIA HOTELS LTD. ASOKA MILLS LTD. ARAVALLI SVACHALIT VAHAN LTD.OF INDIA LTD. . SARASWATI COMMERCIAL (INDIA) LTD. TVS SRICHAKRA LTD. KANORIA CHEMICALS INDS. ANIL SYNTHETICS LTD. ATTIKHAN (BILIGIRI) LTD. ARRON INVESTMENT LTD.(I) LTD. ASSOCIATED ELECTRICAL INDS. RPG CABLES LTD. ANKLESHWAR ION EXCH. ANJU SYNTHETICS PVT.LTD. ASIAN COFFEE LTD.LTD.LTD. ASEA LTD. KITPLY INDUSTRIES LTD.LTD. ATUL PRODUCTS LTD. ANANDMANGAL COMMODEAL PVT.LTD RECKITT & COLEMAN OF INDIA LTD. KITPLY INDUSTRIES LTD.

KOTHARI INDUSRIAL COPN. ALLIANCE FUND MANAGEMENT LTD. ALEMBIC DISTRIBUTORS LTD.Company A & F HARVEY LTD. GREAT EASTERN SHIPPING CO. ANAGRAM FIN. A. SUPREME INDUSTRIES LTD.COTEX ABRASIVES & CASTINGS LTD. AKAR LAMINATORS LTD. BROOKE BOND (INDIA) LTD.CO. AMBUJA SHIPYARD & SOFTWARE LTD.P.& WVG. ICICI LTD.LTD AKAR POLYMATIK LTD. STANDARD MEDICAL & PHARMA.LTD. . MADHUR FOOD PRODUCTS LTD. ALU CAPSULES LTD. LARSEN & TOUBRO LTD. ANAGRAM FINANCE LTD. GALAXY APPLIANCE LTD. A. ADDI INDUSTRIES LTD. GILLANDERS ARBUTHNOT & CO. UPPER GANGES SUGAR & INDUSTRIES LT ALEMBIC CHEMICALS WORKS CO. AEGIS CHEMICALS INDUSTRIES LTD. AMRITA EXPORTS PVT. Merged With MADURA COATS LTD.LTD. ADVANI-OERLIKON LTD. ADDI WORSTED LTD. ADEQUATE WEIGHERS (INDIA)LTD. ADDI INDUSTRIES LTD.H.BHIWANDIWALA & CO. A. AEKTA LTD. ARVIND MILLS LTD. KIRTIVARDHAN FINVEST SERVICES PVT. ACT INDIA LTD. ADVANCE WELDING ALLOYS LTD. ALLIANCE CREDIT & INVESTMENT LTD.LTD. ADDI INDUSTRIES LTD. ADDI WOOLLENS LTD. ALCO-CHEM LTD. A.K. AGIPI CHEMICALS LTD. ADONI SPG. BHUWALKA STEEL INDUSTRIES LTD. AELPE FINANCE LTD.& INDUSTRIES LTD.LTD.LTD.A. INDRAD AUTO COMPONENTS LTD. AMRIT BANSPATI LTD.ALLOYS LTD. ORIENT BEVERAGES LTD. AMRIT PROTIEN FOOD LTD.LTD. AMIT ALCOHOL & CARBON DIOXDIE LTD. ADDI FASHIONS PVT.LTD. WOOD POLYMERS LTD.LTD.STRUCTURAL LTD. AHMEDABAD LAXMI COTTON MILLS CO.LTD. ASIAN PAINTS LTD.

Pac-Man defense • Scare off by purchasing large amounts of the acquiring company's stock. In the end • Bendix Corporation was bought by Allied Corporation .of Bendix Corporation. • Resisting company may even sell off non-vital assets to procure enough assets to buy out the acquirer. Example Attempted acquisition of Martin Marietta by Bendix Corporation in 1982 : • Martin Marietta's management responded to takeover attempt by selling non-core businesses in order to attempt a takeover of its own .

Top 10 acquisitions made by Indian companies worldwide: Acquirer Tata Steel Hindalco Videocon Target Company Country targeted Deal value ($ ml) Industry Corus Group plc Novelis UK Canada 12.000 5.982 729 597 565 500 Steel Steel Electronics Pharmaceutical Energy Oil and Gas Daewoo Korea Electronics Corp. Germany Belgium Dr. Ranbaxy Labs Tata Steel Terapia SA Natsteel Romania Singapore 324 293 Pharmaceutical Steel Videocon VSNL Thomson SA Teleglobe France Canada 290 239 Electronics Telecom . Reddy’s Labs Betapharm Suzlon Energy HPCL Hansen Group Kenya Petroleum Kenya Refinery Ltd.

Indian outbound deals since 2000 .

the company was highly successful. to whom Durant had sold and resold shares. Durant offered a five-for-one stock swap. finally decided to oust him and consolidate current holdings. Although Durant soon disagreed with Chevrolet about the direction of the company and bought him out.William Durant. who helped with refinancing efforts. the founder of General Motors. GM particularly relished merging with a brand that could help it fight off Ford. Going wholeheartedly from a carriage manufacturer to an automotive force. Durant immediately began to look for a way to regain control of his company. lost control of his company due to his aggressive expansion plans. . Durant used debt to finance his takeovers and mergers with other auto startups. The bankers. GM shareholders jumped at the chance to get another popular brand under their umbrella at a cheap price. and the stockholders. Durant eventually owned enough GM stock to bring the company to the table for merger/buyout talks. He hooked up with a Swiss racer named Louis Chevrolet and the two formed Chevrolet. Durant regained control of the company he had founded. As part of the deal. rather than to continue the breakneck expansion. Durant still held a large amount of GM stock and he used the profits from his new company to buy even more.