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Trends in M&A Activity in India and world
The healthcare sector in India has seen significant changes in the past couple of decades with
the steady growth of corporate hospitals. Advanced infrastructure, a clinical team with global
exposure, and global benchmarks in healthcare delivery have marked the journey of the
corporate healthcare industry in India. However, in the past few years, stiff competition has
put the viability of private standalone hospitals at risk. Hospital owners are looking at
consolidating assets through mergers and acquisitions as a strategy for survival and growth.
Consolidation gives smaller hospitals access to a large pool of shared resources, best
practices, and larger funds for infrastructure investments. It enables hospitals to meet the
increased demands from the domestic and international market. However, integration of the
acquired entity with the parent company faces many pitfalls, unless it is planned and executed
well. Fortis Healthcare, a leading healthcare provider in India, has made several acquisitions
in India and abroad in the past decade. Fortis understands how crucial integration is for the
success of a merger. In 2009, Fortis Healthcare adopted project management to integrate 10
hospitals that it acquired from the Wockhardt group.
According to recent studies conducted, the customer's (patient) aspirations are fast changing.
Customers are growing more aware of their health needs, demand quick response, less
waiting times, and above all - demand nearness of the healthcare unit to them.
Customers though now demand better quality care; they however now do not want to travel
much as in earlier days.
And if you notice, the billing and pricing though important, is not a very high priority now as
insurance reach is getting stronger (to the tune of 40 per cent among patients visiting a urban
If this is the window to the future of healthcare, then it leaves immense opportunity for
existing hospitals across the country to revamp and re-organise in order to woo back their
immediate local drainage population as the competition would heat up soon. The patients
would have a lot to choose from, now being insured.
As per various studies including a report by IDFC, and Mc Kinsey, Indian Healthcare
industry will be worth $125 billion in the next five years.
Public spending is likely to increase beyond 20 per cent, there is room for everyone in the
organised private healthcare sector.

The entities who have noted this advantage to name among the other few are Apollo and
Fortis with its cumulative market cap of around $ five billion and may be considered as a
reflection of the healthcare scenario of the present and future of Indian healthcare.

Company Details
Fortis Healthcare International Pte Ltd.
Through its subsidiaries owns and operates hospitals. The company was incorporated in 2010
and is based in Singapore. As of January 10, 2012, Fortis Healthcare International Pte Ltd.
operates as a subsidiary of Fortis Asia Healthcare Pte. Limited .
Fortis Healthcare Ltd is one of the largest private healthcare companies in India. The
company is having a network of 28 Hospitals, Satellite Centers and Heart Command Centres
with about 3300 beds capacity. These hospitals include multi-specialty hospitals as well as
super-specialty centers providing tertiary and quaternary healthcare to patients in areas such
as cardiac care, orthopedics, neurosciences, oncology, renal care, gastroenterology and
mother and child care. They are delivering quality healthcare services to our patients in
modern facilities using advanced technology.
Fortis Healthcare Ltd was incorporated on February 28, 1996. The company commenced
their commercial operation by setting up the Fortis Heart Institute and Multi-Speciality
Hospital at Mohali in the year 2001. In December 2002, International Hospital Ltd became a
board controlled subsidiary of the company.
In August 2003, Fortis Hospital in Amristar was inaugurated. In October 2003, the company
executed an agreement with Seth Jessa Ram and Bros Charitable Hospital Trust for the
operation and management of Jessa Ram Hospital, New Delhi and Fortis Hospital in Noida
was commissioned in August 2004.
In September 28, 2005, the company acquired 90% interest in Escorts Heart Institute &
Research Centre Ltd that owns and operates three hospitals in north India and operates a
fourth hospital in collaboration with the Government of Chhattisgarh.

Business Environment during deal year

The Indian hospital-chain operator said its board approved the valuation after considering the
recommendations of an agency appointed by a committee of independent directors. While the
agency recommended a valuation of $695.7 million, the founders "agreed to offer their
investment in Fortis Healthcare International" for $665 million, the local company said in a
statement.The company had said in September it would acquire Fortis Healthcare

International, owned by the Singh family, to consolidate local and overseas operations.Fortis
Healthcare Managing Director Shivinder Singha member of the founding familysaid that
the company would need to raise funds via debt to finance the acquisition. The combined
entity's post-deal consolidated debt will go up to $1 billion as a result, Mr. Singh said.The
local and overseas entities have been growing through acquisitions and by setting up new
hospitals as demand for health-care services rises.

Literature Review on M&A

A lot of early studies on mergers have majorly focused on the motivations behind Mergers and
acquisitions and the basic synergies associated with it. Companies resorting to M&A activities
have been motivated by different objectives A few very obvious motives as presented by
Sudarshan (2003) being synergies, increased growth, cost savings and increased efficiency.
Kumar and Rajib (2007) identified the characteristics of merging firms in India based on their
study of 227 acquirer and 215 target firms during the period 1993-2004. A lot of researchers
have even analyzed the various benefitting aspects of M&A activities major being economies
of scale and scope (Bradley, Desai and Kim , 1983, 1988 ) ,combination of complementary
resource, generation of efficiency improvements, and increased competitiveness (Coase,
1937); gaining fast access to new technologies or new markets, benefiting from economies of
scale in research and/or production, tapping into the sources of knowhow located outside the
boundaries of the firm, and finally, monopoly type advantages (Jensen and Ruback, 1983;
Mandelkar, 1974; Freedman, 1989; and Porter, 1987); and corporate control (Manne, 1965;
and Alchian and Demsetz, 1972). The financial aspects of M&A activities has also been of
major interest to a number of researchers Duso Tomaso, Gugler Klaus , Burien Yurtoglu used a
sample of 167 mergers to study the ability of event study analysis to capture mergers' expost profitability (2010). Kokkoris, Ioannis (2007) analyzed the usefulness of event studies for
mergers and acquisitions. Whether mergers create value or not has always been of special
interest to researchers. A number of theories have been propounded in this regard the
theories based on synergy and efficiency argue in favor of mergers and consolidation whereas
theories based on agency cost, free cash flow conflict, and managerial incentive vote against
mergers on the ground that wealth is destroyed. Moeller et al (2005) have concluded that
value is actually destroyed when engaging in acquisitions. Roll (1986), based on hubris
hypothesis, suggests that in merger and acquisition transactions, wealth migration takes
place from the bidder bank shareholders to the target bank shareholders and no wealth is
created in the process. Other studies include analysis of the market reaction to a takeover
announcement; which focuses on the acquiring firm and/or on the target firm (Lys and
Vincent, 1995; Bruner, 1999), the announcement and completion of a takeover bid/divestiture
(Agrawal and Mandelker, 1990; Lys and Vincent, 1995; Gregory, 1997; Bruner, 1999).

Basics Deal Details

Type of M&A deal Acquisition
Deal date September 11, 2011
Deal value - The combined revenue is estimated to be more than $1 billion.

Method/mode of payment for deal shares

Name of industry of acquirer and target firm - Fortis Healthcare (India) Ltd. said Tuesday
it would pay $665 million to acquire Singapore-based Fortis Healthcare International Pte
Ltd., an entity run by the Indian company's founders.
Fortis health care limited one of the India's largest and Delhi based private hospital chain
offering super specialty hospitals in Amritsar, Kolkata, Navi Mumbai, Hyderabad, Mohali,
Jaipur, Chennai, Kota, Bangalore, Gurgaon acquired Singapore based Fortis healthcare
International from RHC Financial Services Mauritius Ltd, for $ 665 million (around Rs3,270
crore) in Dec 2011. This acquisition was assumed to be a part of consolidation of domestic
and global operations of the healthcare group. Fortis International, was founded in 2010 to
pursue overseas business, it also has made seven acquisitions in 10 markets, including Hong
Kong-based Quality HealthCare Asia.


Year Event
June 2001 Commissioning of Fortis Hospital, Mohali. August 2003 Inauguration and
commissioning of Fortis Hospital, Amritsar. October 2003 Executed an agreement with Seth
Jessa Ram and Bros Charitable Hospital Trust for the operation and management of Jessa
Ram Hospital, New Delhi. August 200 Commissioning of Fortis Hospital, Noida. September
2005 Acquired 90% of the equity share capital of Escorts Heart Institute and Research Centre
Limited resulting in the acquisition of EHCL, EHSSIL, EHSSHL and EHRCL. October 2005
Signed an agreement with Jeewan Mala Hospital Private Limited for the operation and
maintenance of Jeewan Mala Hospital, New Delhi. January 2006 Signed an agreement with
Sunrise Medicare Private Limited for the operation and management of Fortis La Femme,
New Delhi, and acquisition of 5% equity interest in Sunrise Medicare Private Limited, with
an option to acquire additional equity shares. January 2006 Signed an agreement with Khalil
Public Welfare Trust for the operation and maintenance of Khyber Medical Institute,
Srinagar. March 2006 Acquired 99.99% of the paid up equity share capital of International
Hospital Limited resulting in the acquisition of Fortis Hospital, Noida. March 2006 Acquired
100.00% of the paid up equity share capital of Oscar Bio-Tech Private Limited.

2004 -Fortis inks deal with Jessa Ram Hospital to takeover the management of the hospital
-Fortis Hospital rolls out Golden Age Club
-Fortis buys Escorts Heart
-Fortis Healthcare signs $33.33m pre-IPO deals
The Company was incorporated on February 28, 1996 as Rancare Limited under the
Companies Act. Subsequently on June 20, 1996 our name was changed to our present nameFortis Healthcare Limited. The Company received the certificate of commencement of
business on July 1, 1996.
-Fortis Healthcare to buy majority stake in Trehan`s Medicity
-Fortis Healthcare signs $33.33m pre-IPO deals
-Fortis HealthWorld has joined hands with US hearing aid maker Starkey for its Audible
range and is looking to soon offer dental services at its Health stores too.
-Colgate-Palmolive India, the market leader in toothpaste in India, declared the acquisition of
three domestic companies in south India recently. The company purchased 75 per cent equity
in Advanced Oral Care Products (Goa), Professional Oral Care Products (Goa) and SS Oral
Hygiene Products (Hyderabad).
-Fortis Healthcare acquires Hiranandani Hospital
-Fortis Healthcare Ltd has informed that the Board of Directors of the Company at its
meeting held on January 23, 2008, inter alia, has approved change in registered office of the
Company from "Piccadily House, 275-276, 4th Floor, Captain Gaur Marg, Srinivas Puri, New
Delhi - 110065" to "Escorts Health Institute And Research Centre, Okhla Road, New Delhi 110025".
-Fortis completes Wockhardt Hospital Acquisition

-Fortis signs $15 mn outsourcing deal with HCL

-Fortis Healthcare Ltd Issues Rights in the Ratio of 2:5
- 25% stake in Parkway holdings, Asias largest private healthcare provider.
- "Fortis Healthcare infuses USD 100 Million".
- Fortis increases stake in Parkway.
- Government of Singapore Investment Corp (GIC) to join hands with Fortis at strategic
- Fortis Healthcare has entered into a pact with two hospitals in Dubai and Tanzania to set up
specialised medical facilities.
- Company has announced its foray into Speciality Medical Centres focused on the
management of diabetes, metabolic diseases and endocrinology.
- A Memorandum of Understanding has been signed by Fortis Healthcare Ltd with the
University of Utah to develop courses for Emergency Medical Technicians.
- Through its wholly owned subsidiary, has entered into an agreement with Cauvery Hospital
Limited, Mysore, wherein Fortis will set up, operate and manage a Cardiac Centre in the
- The name of Fortis Healthcare Limited shall be changed to Fortis Healthcare (India)
Limited w.e.f. April 11, 2011.
- "Fortis Healthcare ties up with TotipotentRX to set up Stem Cell Therapy Centres".
- Fortis Healthcare (India) Ltd has announced that it will buy 86 per cent stake in Super
Religare Laboratories Ltd (SRL) .
- Fortis Healt - Fortis announces new hospitals in Hyderabad and Agra.
- "Fortis to get Rs. 3700 Mn Equity infusion in SRL through IFC and NYLIM Jacob Ballas
- Fortis Healthcare raises around S$510 mn through Singapore IPO.
-Company has changed its name from Fortis Healthcare (India) Ltd. to Fortis Healthcare Ltd.

2013 -"Fortis launches its Flagship Hospital, One of the First of its Kind in Asia Bridges the
gap for expert talent, trans-disciplinary, quaternary care". -"Fortis to divest stake in Quality
Healthcare to Bupa for US$ 355 million Intensifies Focus on Healthcare Delivery in India".
2014 -"Fortis launches state of the art, multi super-specialty hospital in Ludhiana".

Analysis of Deal
Motives for going for deal - Fortis Healthcare Managing Director Shivinder Singha
member of the founding familysaid that the company would need to raise funds via debt to
finance the acquisition. The combined entity's post-deal consolidated debt will go up to $1
billion as a result, Mr. Singh said.
Benefits of deal / Is the deal successful as a Business Strategy? - Shares of the Mumbailisted entity have lost 14% since Sept. 19 when the acquisition was first announced as the
market wasn't convinced by the rationale for the move. But the stock gained 3.6% Tuesday
2016-03-11 to 128.95 rupees ($2.62).
"This deal is possibly aimed at creating a consolidated entity that will be attractive to a
foreign buyer," said Ranjit Kapadia, senior vice president at Mumbai-based Centrum Broking
Pvt. Ltd.
Value Created or Destroyed? - stock gained 3.6% Tuesday 2016-03-11 to 128.95 rupees
Ranbaxy promoted Fortis Healthcare Limited would continue with its strategy of
entering into Operation and Management (O&M) contracts with owners of existing
and new hospitals apart from expansion by building new hospitals and acquiring
existing hospitals.
Fortis already has such contracts with existing and new hospitals like Jessa Ram
Hospital, Fortis La Femme, Rajan Dhall hospital, Vasant Kunj in New Delhi and
Khyber Medical Institute in Jammu and Kashmir.
The company is also entering into new satellite and heart command centre

Fortis Healthcare, India was established in 1996 by the
promoters of Ranbaxy Laboratories, among the world's top 10
generic companies, also India's largest pharma company.
Fortis Healthcare India hospitals are benchmarked to
International standards - achieving quality.
The Fortis Healthcare circle of caring is fast expanding,
spreading the name of Fortis Healthcare.
significantly in the caring approach of our people.
It can be said that Indian environment provides a very good
opportunity for private players in healthcare than other
countries. Growing population with much deeper pockets and
low government participation has lead to higher demands where
people are willing to pay even high cost for proper medical care.


Agarwal Anoop, Jaffe. F. Jeffrey, N. Gershon & Mandelkar (1992), Post merger
performance of acquiring firms : A Re-examination of an Anomaly, The Journal of
Alchian, Armen & Harold Demsetz (1972), Production Information cost & economic
organization , American economic review
Asquith, P. and E.H. Kim, 1982, The impact of merger bids on the participating firms'
security holders, Journal of Finance
Bradley Michael Desai Anand, Kim Han E (1987), Synergestic gains from corporate
acquisitions and their division between stock-holders of target and acquiring firm.
Becher D. A. (2000), Valuation effects of Bank mergers, Journal of corporate finance.

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