Session 1 : Course Objectives and Structure

MERGERS AND ACQUISITIONS

Presented by Prof. (Dr.) Manish Popli

Evaluation Criteria and Weightage

Evaluation Criteria and Weightage

Class participation

10%

Quiz

20%

Term Paper

30%

End Term examination

40%

Term Paper

Form groups of 5-6 members each

Send the group details to your CR by 10:00 PM, Date: 8th September , 2015

Each group shall look for an M&A deal (Either Domestic and Cross-border)

Another way to approach this term-paper could be an industry-analysis

Strategic Group analysis
Case study (from secondary sources only)

Some Recent Deals

India registering a #3 fold increase in M&A activities in the first quarter of 2015.
The total value is around $12 Billion.
Ranbaxy-Sun Pharma Deal
Merck-Sigma
Thomas cook India- Sterling Resorts
Kotak Mahindra- ING vysya

Submission details

A two stage project report submission

Stage 1: Interim report
Analysis of the firms involved and their respective industry scenarios
Analysis of merger intent, expectations from the deal
Deadline: 21st September-2015
Stage 2: final report
The structuring of the deal
The merger performance vis--vis expectations Synergies, Economies of
Scale and Scope and/or Market Power gained etc.
Deadline: 28th November-2015

Guidelines: Term-Paper

Quote
exact
reference

plagiarism
(presenting
data/information/views/opinions without reference to original source) will be
severely penalized

Word limit 3000 words (excluding appendices comprising of charts, tables,

figures & graphs, and references)

One possible approach: assume the role of M&A consultants hired by the
chairman of the company for making recommendations for their overall
strategy in future

Professionalism is expected !!
Sequencing and proper flow
Index; page numbers
References for data downloaded should include URL as well as date of access

Lets begin the Journey

Course Objectives

To provide a strategic perspective of M&A

As a Vehicle of Corporate Strategy
M&A versus Strategic Alliances (the Choice!)

Motives of M&As

To provide an understanding on how to identify and evaluate targets for M&A.

To introduce different valuation techniques and discuss the pros and cons of each
technique.

Course Objectives

To critically examine different types of deal structures and their impact on the
success of M&A.

To look at post-merger integration issues

Case of Tata motors integration of Daewoo Commercial Vehicle company

To provide an overview of the legal, regulatory environment and its importance to the
success of M&As.

A Highly Multidisciplinary Subject

Strategic issues

Issues arising due to External Environment

Economic issues

Accounting and Financial issues

HR/Cultural issues

Behavioral issues

Legal/Regulatory issues

10

Course structure

Modules
Introduction (Merger motives)
M&A Process
Valuation and Deal Structuring
Post Merger integration (Organizational issues)
Legal and Regulatory issues

11

Historical Activity of Mergers and Acquisitions

12

Historical US M&A waves

13

Time

Reasons for Rise

Reasons for Fall

1893-1904

Horizontal Mergers. Created giants in

steel, mining, railroad (through trust or
holding companies)

Supreme court judgement in

1904 against trusts

1919-1929

Vertical Mergers

Great Depression

1955-1973

Post-war Slowdown in defenseexpenditures and resultant growth

Crash of Conglomerate
stocks since benefits were
not realized

Conglomerate mergers
1974-1989

Financial Innovation, Investment Banking Collapse of Junk bond

market

1993-2000

Age of deregulation , globalization,

technology

Dotcom Bubble Burst

2003-2008

Private equity

Sub-prime crisis

India Story

15

16

Institutional Shock
Description of significant changes in financial liberalization (year-wise)
Year

Changes in financial policies

1999/ 2000-01

(1) Withdrawal of neutrality condition: condition in which the amount invested in form of outward
FDI is repatriated in full in a period of five years. The repatriation could be in the form of dividend,
royalty etcetera.
(2) Upper limit for automatic approval was raised to US$50 million per annum.
(3) Investment in an overseas JV/WOS may be funded out of one or more of the following sources:
(a) Balances held in Exchange Earners Foreign Currency account.
(b)Withdrawal of foreign exchange including capitalization of exports from an authorized dealer
in India.
(4) Two stage approval process (Ministry of Finance and Department of economic affairs) of
ADR/GDRs abolished in 2000.

2001-02

(1) Indian companies are allowed to utilize up to 100 per cent proceeds of
ADRs/GDRs for overseas investments instead of the existing ceiling of 50 per Cent.
(2) Abolition of profitability pre-condition which required that Indian companies applying for OFDI
must have earned a net profit in preceding three years.
(3) Upper limit for automatic approval was raised to US$100 million per annum.
(4)Companies registered under the Indian Partnership Act, 1932, are also allowed to make OFDI.
17

Institutional Shock (Contd)

2002-03

(1) Firms were allowed to invest up to 100 percent of their net worth under automatic approval
route (with overall ceiling at $100 million).
(2) Removal of the condition of the same core activity for OFDI removed and companies are
allowed to invest in any bona fide business activity

2003-04

(1) Prior permission of RBI is dispensed for OFDI by way of share swap and investment in
JV/WOS abroad is permitted through the route of SPV under the automatic route and the overall
ceiling of investment of $100 M is removed.
(2) Fund raised through Foreign currency convertible bonds (FCCBs), external commercial
borrowing (ECB) can be used in overseas direct investment in JV/WOS including M&As.
(3) Indian banks were permitted to provide credit to wholly owned or majority-owned subsidiaries of
Indian firms abroad up to 10 percent of their unimpaired capital funds

2005-2006

(1) Firms are allowed to invest up to 200 per cent of their net worth under the automatic
route.
(1) Automatic approval route limit is increased up to 300 per cent of the net worth in June 2007 and
up to 400 per cent of the net worth in September 2007

2006-2007

Source: www.rbi.org.in Notifications [RBI Circular, A.D. (DIR. Series) Circular No. 32, April 28, 2001; RBI Circular, A.D.(DIR. Series) Circular No. 32,
April 28, 2001. RBI Circular, A.P. (DIR. Series) Circular No. 27, March 2, 2002; (RBI Circular, A.P. (DIR. Series) Circular No. 83, March 1, 2003); RBI
Circular A. P (DIR Series) Circular No. 41, December 6, 2003; RBI Circular RBI /2004/11 A. P.(DIR Series) Circular No.57, January 13, 2004; RBI
Circular AP (DIR Series) Circular No.42, May 12, 2005; RBI Circular AP (DIR Series) Circular No.75, June 14, 2007; RBI Circular AP (DIR Series)
Circular No.11, September 26, 2007]; Apte (2006); Nayyar (2008).

18

Examples

19

Deal Examples (Industry wise)

20

Pharmaceuticals

21

Ranbaxy Laboratories Ltd

Target Name
Ohm Laboratories
Ranbaxy(M)Sdn Bhd
Rima Pharmaceuticals Ltd
Gufic Labs(Gufic Group)
Croslands Research Laboratories Ltd
Vorin Laboratories Ltd

Announcement Date
9/25/1995
11/17/1995
1/11/1996
1/13/1997
1/13/1997
2/14/1998

Percent of Shares Acquired

100
10
100
100
100
30

Bayer-Generics Pharmaceutical Business

Specialty Ranbaxy Ltd (Specialty Laboratories
Inc, Ranbaxy)

4/27/2000

100

2/9/2001

50

Procter & Gamble GmbH- Veratied Brand

Signature Pharmaceuticals Inc- Liquid Drug
Manufacturing Facility
RPG Aventis
Efarmes SA-Generic Drug Portfolio
Senetek PLC-Certain Assets
Terapia SA
Ethimed NV
Zenotech Laboratories Ltd
Be-Tabs Pharmaceuticals Ltd
Be-Tabs Pharmaceuticals Ltd
Jupiter Bioscience Ltd
Ochoa Laboratories Ltd- Dermatological &
Lifestyle Products Brands

6/27/2002

100

7/23/2002
9/3/2003
6/9/2005
3/20/2006
3/29/2006
3/30/2006
7/17/2006
12/1/2006
2/27/2007
4/6/2007

100
100
100
100
96.7
100
11.31
100
6.4
14.9

5/21/2009

100

Biovel Life Sciences(P)Ltd

1/7/2010

22

Sun Pharmaceutical Industries Ltd

Target Name
Milmet Laboratories Pvt Ltd
MJ Pharmaceuticals Ltd
Caraco Pharmaceutical
Laboratories Ltd
MJ Pharmaceuticals Ltd

Announcement Date
11/20/1998
11/2/2001

Percent of Shares Acquired

100
20

2/3/2004
4/4/2005

16
28

ICN Co Hungary Ltd

Able Laboratories Inc
Taro Pharmaceutical Industries Ltd
Taro Pharmaceutical Industries Ltd
Caraco Pharmaceutical
Laboratories Ltd

8/10/2005
11/1/2005
5/21/2007
2/19/2008

100
48.7
9.4

12/3/2010

24.5

Taro Pharmaceutical Industries Ltd

10/18/2011

Ochoa Laboratories Ltd

2/15/2012

STADA Arzneimittel AG

8/2/2012

Taro Pharmaceutical Industries Ltd

DUSA Pharmaceuticals Inc
Enceladus Pharmaceuticals BV
Sun Pharma Medication Pvt Ltd

8/13/2012
11/8/2012
3/13/2013
5/20/2013

100
23.35
100

Ranbaxy Laboratories Ltd

Pharmalucence Inc
Neetnav Real Estate Pvt Ltd
Neetnav Real Estate Pvt Ltd

4/7/2014
7/16/2014
10/1/2014
12/17/2014

100
60
40
23

Banking

24

ICICI Bank Ltd

Target Name

Announcement Date

Percent of Shares
Acquired

Bank of Madura Ltd

Industrial Credit & Investment
Corp of India Ltd{ICICI Ltd}
Standard Chartered Grindlays
Bank Ltd-Branches(2)
Transamerica Apple Distribution
Finance Pvt Ltd
Himachal Futuristic
Communications Ltd
Govind Rubber Ltd
Mysore Cements Ltd
B S Refrigerators Ltd
Prudential ICICI Trust Ltd
Prudential ICICI Asset
Management Co Ltd
Jindal Vijayanagar Steel Ltd
Investitsionno-Kreditny Bank
Sangli Bank Ltd

12/8/2000

100

10/24/2001

100

7/8/2002

100

1/4/2003

30

1/31/2004
3/23/2004
3/31/2004
10/7/2004
3/11/2005

12.65
18.73
8.78
5.33
6

3/11/2005
3/21/2005
5/19/2005
12/9/2006

6
10.43
100
100

1/15/2010
5/18/2010
7/26/2011
6/24/2014
12/1/2014

100
29.3
5.62
4.5

Lavasa Corp Ltd

Bank of Rajasthan Ltd
GTL Ltd
Gokaldas Exports Ltd
Gokaldas Exports Ltd

25

IDBI

Target Name

Announcement Date

Percent of Shares Acquired

Zen Technologies Ltd

8/23/2000

Securities Trading Corp of

India{STCI}

2/25/2002

3.01

BNP Paribas SA-Merchant

Acquisition Business,India

7/30/2002

100

Suman Motels Ltd,Mangoaon,

Maharashtra
Suman Motels Ltd
Tata Homefinance Ltd
Recron Synthetics Ltd
IDBI Bank Ltd
Govind Rubber Ltd

4/29/2003
4/29/2003
5/30/2003
9/17/2003
2/20/2004
3/23/2004

100
100
100
5.51
43
37.95

Soma Textiles & Industries Ltd

Mysore Cements Ltd
Oil Country Tubular Ltd

3/29/2004
3/31/2004
3/2/2005

12.11
6.77
11.29

Amit Spinning Industries Ltd

United Western Bank Ltd
Jayaswals Neco Ltd
Ispat Industries Ltd
IDBI Trusteeship Services Ltd

9/21/2005
1/12/2006
4/5/2006
4/8/2006
10/1/2011

6.03
100
20.06
12.49
14.92

26

IT, Software

27

3i Infotech Ltd

Target Name

Announcement Date

Percent of Shares Acquired

Innovative Business Solutions Inc

FormulaWare Inc

9/27/2005
11/1/2005

100
100

SDG Software Technologies

Datacons

12/11/2005
4/17/2006

100
100

G4 Software Technologies (India)Ltd

Rhyme Systems Ltd
Professional Access Inc
KNM Services Pvt Ltd

9/4/2006
10/20/2006
11/13/2006
5/29/2007

100
100
51
60

aok in-house Factoring Services Pvt Ltd

aok in-house BPO Services Ltd

5/29/2007
5/29/2007

50.5
50.5

Taxsmile.com India Pvt Ltd

9/11/2007

26

Linear Financial & Management Systems Pvt Ltd

Regulus Group LLC

12/4/2007
4/29/2008

100

Locuz Enterprise Solutions Ltd

5/8/2008

26

FinEng Solutions Pvt Ltd

6/11/2008

51

aok in-house Factoring Services Pvt Ltd

aok in-house BPO Services Ltd

7/8/2009
7/8/2009

49
49

FinEng Solutions Pvt Ltd

7/8/2009

Taxsmile.com India Pvt Ltd

Elegon Infotech Ltd

7/8/2009
7/14/2009

25
49

Delta Services (India) Pvt Ltd

7/15/2009

49

28

HCL Technologies

Target Name

Announcement Date

Percent of Shares
Acquired

06-20-1996

Utilities Insurance Co Pty Ltd

100.00

01-03-1997

CareAmerica Compensation &

100.00

01-09-1997

Colonial Mutual General

100.00

02-07-1997

Sphere Drake Holdings-Protecti

100.00

07-18-1997

Colonial Mutual General Ins NZ

100.00

12-08-1998

Nam Seng Insurance

24.60

08-30-2001

Computech Corp

100.00

08-30-2001

Systech Inc

100.00

10-27-2001

BT-Apollo Contact Centre

100.00

06-03-2002

Gulf Computers Inc

100.00

01-18-2003
12-20-2004
12-23-2004

Aalayance Inc
Aalayance Inc
HCL Technologies BPO Service

19.00
51.00
10.00

02-20-2008
07-16-2008

CapitalStream Inc
Liberata PLC-Financial Service

100.00

08-25-2008
08-04-2009
01-12-2010

Control Point Solutions Inc

Undisclosed Data Centre
OLR

100.00
100.00

29

Telecommunication

30

Reliance Commun Ventures Ltd

Target Name

Announcement Date

Percent of Shares
Acquired

Reliance Telecom Ltd

3/12/2006

64.4

Reliance Communications
Infrastructure Ltd

3/12/2006

55

Reliance Infocomm Ltd

3/12/2006

54.7

Formax Commercial(P)Ltd

4/28/2006

100

Reliance Business
Management Pvt Ltd

4/28/2006

100

Ambani Enterprises Pvt Ltd

4/28/2006

100

Reliance Communications
Technologies Pvt Ltd

4/28/2006

100

Reliance Software Solutions

Pvt Ltd

4/28/2006

100

Reliance Communications
Solutions Pvt Ltd

4/28/2006

100
31

Videsh Sanchar Nigam Ltd

Target Name

Announcement Date

Percent of Shares
Acquired

Tata Teleservices Ltd

5/28/2002

19.9

Shyam Telecom Ltd

3/31/2003

100

Gemplex Internet Inc

7/3/2003

100

DishnetDSL LtdBroadband Business

3/17/2004

100

Teleglobe International
Holdings Ltd

7/25/2005

100

Tata Power Broadband Co

Ltd

9/5/2005

100

Direct Internet Ltd

5/8/2006

100

32

Automobile

33

Amtek Auto Ltd

Target Name
Indsil Auto Components Ltd
Ahmednagar Forgings Ltd
Ahmednagar Forgings Ltd
Ahmednagar Forgings Ltd
Lloyds(Brierly Hill)Ltd
GWK Group Ltd
Sigma Cast Group Ltd
JL French Automotive
Castings Inc-Aluminum
Foundry
Triplex-Ketlon Group
Amtek India Ltd
Amtek Auto Ltd
Neumayer Tekfor Holding
GmbH
JMT Auto Ltd
JMT Auto Ltd

Announcement Date
4/23/2002
10/10/2002
10/10/2002
10/11/2002
1/1/2003
10/30/2003
2/7/2005

Percent of Shares
Acquired
89.66
30.72
14.8
20
100
100
100

6/5/2007
11/7/2007
5/28/2010
8/25/2011

100
100
26.25
6.24

3/11/2013
6/27/2013
6/27/2013

100
20.46
26.61

HJ Kuepper GmbH & Co KG

Kaiser GmbH
Scholz Edelstahl GmbH

12/24/2013
6/4/2014
7/17/2014

100
100

34

Mahindra & Mahindra Ltd

Target Name
Mahindra Nissan(Mahindra &
Mahindra,Nissan Motor Co)
Guest Keen Williams Ltd-Metal Processing
Unit
Gujarat Tractors(Gujarat)

Announcement Date

Percent of Shares Acquired

12/31/1992
11/21/1995
8/20/1998

100
51

Mahindra Europe SrI

Tractorul UTB SA
Plexion Technologies(India)Pvt Ltd
Stokes Forgings Ltd
Schoeneweiss & Co GmbH
DGP Hinoday Industries Ltd
Punjab Tractors Ltd
Swaraj Engines Ltd
Punjab Tractors Ltd
Mahindra Gesco Developers Ltd
G R Grafica Ricerca Design srl
Kinetic Motor Co Ltd
Punjab Tractors Ltd

5/31/2005
10/29/2005
12/12/2005
1/4/2006
10/25/2006
11/24/2006
3/8/2007
3/12/2007
3/12/2007
3/30/2007
3/7/2008
7/30/2008
7/30/2008

100
88.41
98.6
100
66
45
0.06
20
7.31
100
100
35.36

Gippsland Aeronautics Pty Ltd

12/15/2009

Aerostaff Australia Pty Ltd

REVA Electric Car Company Private
Ltd{RECC}
Ssangyong Motor Co Ltd
Tech Mahindra Ltd
EPC Industrie Ltd
EPC Industrie Ltd
EPC Industrie Ltd
Mahindra Navistar Engines Pvt Ltd
Mahindra Navistar Automotives Ltd

12/15/2009
5/26/2010
11/23/2010
11/26/2010
2/9/2011
2/9/2011
6/9/2012
12/18/2012
12/18/2012

55.2
70.04
5.49
0.12
38
31.01
49
49

35

Metals and Mining

36

Hindalco Industries Ltd

Target Name

Announcement Date

Percent of Shares
Acquired

Indian Aluminum Co Ltd

3/9/2000

54.62

Indian Aluminum Co Ltd

Bihar Caustic & Chemicals
Ltd

3/24/2000

20

12/8/2000

10

Indo Gulf Corp Ltd

7/21/2002

100

Indian Aluminum Co Ltd

7/21/2002

22

7/22/2002

100

1/24/2003

50

1/24/2003

100

2/18/2005

0.08

1/16/2006

100

7/18/2007

45

Indo Gulf Corp Ltd-Copper

Business
Maroochydore Copper
Project
Straits(Nifty)Pty Ltd
Bihar Caustic & Chemicals
Ltd
Asset Reconstruction
Co(India) Ltd-Certain Assets
Utkal Alumina International
Ltd

37

Jindal Steel & Power Ltd

Target Name

Announcement Date

Percent of Shares
Acquired

El Mutun(Bolivia)

5/31/2006

50

Globeleq Singapore Pte

Ltd

2/15/2007

40

Kiepersol Thermal Coal

Mine

6/1/2009

100

Apollo Minerals Ltd

5/8/2012

13.84

CIC Energy Corp

7/18/2012

100

Jindal Steel & Power Ltd

8/30/2013

2.16

Legend Iron Ltd

11/20/2013

100

Cameroon Mining Action

SA

11/20/2013

90

Wollongong Coal Ltd

4/25/2014

45
38

Textile

39

Spentex Industries Ltd

Target Name

Announcement Date

Percent of Shares
Acquired

Tai Chonbang Textile

Industries Ltd-Assets

10/31/2005

100

Indo Rama Textiles Ltd

2/17/2006

20

Indo Rama Textiles Ltd

2/17/2006

49

Indo Rama Textiles Ltd

Amit Spinning Industries
Ltd
Amit Spinning Industries
Ltd
Amit Spinning Industries
Ltd
Tashkent-Toyetpa Tekstil
Ltd

2/17/2006

15

2/26/2006

31.8

3/6/2006

6.77

3/27/2006

12.4

7/24/2006

100

Schoeller Litvinov ks

7/3/2007

100
40

Indian Rayon & Industries Ltd

Target Name

Announcement Date

Percent of Shares
Acquired

PSI Data Systems Ltd

(Bull SA)

5/22/2001

50.4

PSI Data Systems Ltd

(Bull SA)

6/27/2001

20

Transworks Information
Services Pvt Ltd

6/20/2003

100

Idea Cellular Ltd

7/30/2005

16.5

Birla Global Finance Ltd

9/11/2005

100

Indo Gulf Fertilisers Ltd

9/11/2005

100
41

Construction Material

42

Gujarat Ambuja Cements Ltd

Target Name

Announcement Date

Percent of Shares
Acquired

Modi Cements Ltd

7/4/1997

100

DLF Cements(India)
Ltd(DLF Cements)

12/14/1999

21

DLF Cements(India)
Ltd(DLF Cements)

12/14/1999

10

DLF Cements(India)
Ltd(DLF Cements)

12/15/1999

24

12/15/1999

20

12/22/1999

7.2

5/9/2000

5/28/2005

14.9

DLF Cements(India)
Ltd(DLF Cements)
Associated Cement Cos
Ltd
Associated Cement Cos
Ltd
ING Vysya Life
Insurance Co Pvt Ltd

43

Carborundum Universal Ltd

Target Name

Announcement Date

Percent of Shares
Acquired

Webword Holdings &

Management Pvt Ltd

11/5/2001

68

Southern Energy
Development Corp Ltd

4/9/2003

12

OAO Volzhsky Abrasive

Works

6/9/2007

84.1

8/21/2007

100

1/28/2008

100

8/4/2014

49

IVP Ltd-Industrial Ceramics

Division
Prodorite Anticorrosives
Ltd
Cellaris Refractories India
Ltd

44

Thanks

45