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Introduction Vidya

Q1. Rationale Vignesh


Q2. Type of Merger Shobitha
Q3. SWOT analysis of Target Company and Acquiring
Company Vidur
Q4. And SWOT analysis on Merger Company Shawn
Conclusion - Manjunath

****Material for presentation is in the upcoming


pages. Prepare other than the Material Given . And the
points in the material might not be present in the
PPTs. Better to Memorize.

Chosen M&A - United Continental Inc.


Chosen Acquiring Company - United Airlines (UAL)

Target Company - Continental Airlines


Group Number Presentation-1
1. What was the rationale for the M&A you have chosen?
The major rationale for this M&A was the formation of a new company. Both the airlines
have taken losses in the recession and expect the merge to generate savings of more than
$1 billion. This merger is concerned with the aviation industry which is a good industry
to study about. This is the main reason why we have chosen United Continental Holdings
Inc as the M&A. Presently they have 1042 fleets. Their combined revenue is $29 billion.
Given the high revenue, it brought us more interest to study about this M&A.
2. Type of merger? Relate the benefits accrued in the earlier point in the light of the type of
merger and the benefits expounded in the literature
The merger between United Airlines and Continental Airlines is a concentric merger.
Following are the benefits achieved by United Continental Holdings Inc:
Organization

United Airlines

Continental Airlines

United Continental
Holdings

Revenue (FY 09-10)

$16.335 billion
(Annual Report
2009)

$12.586 billion
(Annual Report
2009)

$23.229 billion
(Annual Report
2010)

Operating Income

$(161) million FY
2009, $(4438)
million FY 2008

$(146) million FY
2009, $(314) million
FY 2008

$976 million

Passengers (in
millions)

55083

45573

100656

Presence

Pacific, Europe,
Latin America

Europe, Asia,
Canada, Mexico,
Latin America

Flights in a day

3300`

3000`

Africa, Europe,
Latin America,
Asia, Canada and
Mexico
5700

Presentation-2

3. SWOT for: a) Acquiring Company b) Target Company c) Merged Company. Do this


threats and weaknesses of the acquiring company and the target company get reduced
through the M&A? Or is there any reduction in strength/ opportunity availability on
account of the M&A?
SWOT Analysis:
Acquiring Company
Strengths
Destinations where United Airlines was flying was comparatively much higher
Fleet Operation was high at 696
Large number of employees worked in United Airlines
Tech, Asset Leverage, Customer Loyalty, Supply chain, Size Advantage
Weakness
Losses were being incurred before the merger
Higher Debt burden
Tarnished Reputation
Bad acquisition
Opportunities
Merge with different airlines to get the maximum market share
They operate on high end technology which gives scope for further sophistication
Online Market, Innovation and international market
Threats
Competitors can eliminate United Airlines from the race at any time
Bad Economy
Volatile cost
Change in tastes
International Completion

Target Company
Strengths
Brand Image of Continental Airlines was very strong in addition to the recognized
logo
Strong Management

Weakness
Lesser Fleet Size in comparison of United Airlines
High Staff turnover
High cost structure
Flawed industrial structure for airlines
Opportunities
International expansion
Threats
Political risks
Government regulation
Volatile energy prices
Fuel costs

Merged Company
Strengths
Market share of United Continental Holdings helped United Airlines to rank 2nd
largest airlines with a domestic market share of 15.9% and international share of
12%
Combined there were higher number of fleet, destinations and passengers
Weaknesses

Initially losses were incurred by United Airlines amounting to $1.1 billion in


2009. On the other hand Continental faced losses up to $282 million

Opportunities

Combined revenue generation scope is higher


Combined fleet strength and destinations are more
Capturing a higher market share in the aviation industry
The company has to optimize the gauge and frequency of its fleet in order to meet
travel demand and capitalize on its combined global network efficiency
Largest aircraft size

Threats

Competitors merging with each can out shadow this merger (For Example: Delta
Airlines which is a domestic competitor for United Airlines if merged with Air
France- KLM or any other airlines, the synergy cold cause a total operation
efficiency more than United Airlines)
Fare rates of the flights can bring a negative impact among passengers

4. What benefits were expected to be accrued to the acquiring and the target companies?
Were they actually realized? Was the M&A hostile or friendly? Provide sound reasons. If
hostile, were any defensive measures adopted? Explain how such measures were
overcome.
Through this merger, the main advantage that was expected was to cover up all the losses
being incurred by both the companies. They were also looking to improve the fleet size,
destinations.
By merging with each other, the United Continental Holdings was formed. Both the
acquiring and acquired company was able to benefit from this merger. Major benefit was
seen in the rise of revenue of the company. Since both the firms were under losses, a
merger was needed to revive these companies. If not the case would be similar to

Kingfisher Airlines. As the need for the moment, this was a friendly merger without any
force. Both the companies were benefitted from this merger.

Conclusion
Almost three years have passed since United Airlines and Continental Airlines merged to create
one of the world's largest carriers. The combined entity, which took United's name, has the
biggest fleet of commercial airliners on the planet and flies to more destinations than any
competitor. But three years in, the merger is still causing problems. Late last month, for example,
America's Department of Transportation fined United $350,000 for taking too long to process its
customers' refund requests. (The airline also got in trouble for reporting some of its overbooking,
baggage, and pet-related statistics incorrectly, but was not fined for those violations.) Here's the
remarkable thing about this latest fine, which was connected to delays of some 9,000 refund
requests: United blamed it on the merger. According to the Los Angeles Times, United told the
regulators that when the two legacy airlines' reservation systems were merged it resulted (in the
words of a DOT report) "in some unforeseeable anomalies that caused a temporary inability to
process refunds in a timely manner."
That's unacceptable. Again, it's been nearly three years since the merger. "Unforeseeable
anomalies" should have been corrected by now. And on what sort of scale is it appropriate to
describe a three-year-old problem as "temporary?" This isn't the first time United has run into
computer trouble: it has had repeated technology problems since the merger. Its technology team
has had more than enough time to sort things out and get them working smoothly. So are there
not enough resources devoted to tackling these sorts of problems? Or is there a management
issue? United needs to figure it out. Because, as the Denver Post reports, there are a lot of other
problems still plaguing this sewn-together giant. It has horribly inefficient labour contracts that
require formerly united crews to fly on united aircraft and formerly Continental crews to fly on
Continental aircraft. Jeff Smisek, the CEO, recently gave his company a vote of confidence by
buying $250,000 of stock in it.