What are Mergers and Acquisitions?

Mergers and acquisitions (M&A) are defined as a combination of companies,

or as consolidation of companies

When two companies combine together to form one company, it is termed as

Merger of companies. While acquisitions are where one company is taken over

by the company.

 In the case of Merger, the acquired company ends to exist and becomes

part of the acquiring company.

 In the case of Acquisition, the acquiring company takes over the

majority stake in the acquired company, and the acquiring company

continues to be In existence. In short one in acquisition one

business/organization buys the other business/organization

M&A is one of the major aspects of corporate finance world.

The reasoning behind M&A generally given is that two

separate companies together create more value compared

to being on an individual stand. With the objective of wealth

 maximization, companies keep evaluating different

opportunities through the route of merger or acquisition.

M&A is one of the major aspects of corporate finance world. The

reasoning behind M&A generally given is that two separate
companies together create more value compared to being on an
individual stand. With the objective of wealth maximization,
companies keep evaluating different opportunities through the
route of merger or acquisition.

How Can Mergers & Acquisitions Take Place?

 by purchasing assets

 by purchasing common shares

 by exchange of shares for assets

 by exchanging shares for shares

 Types of Mergers and Acquisitions

There are different types of Mergers and Acquisitions which are as follows:-

1. Horizontal Mergers

2. Vertical Mergers

3. Concentric Mergers

4. Congl omerate Mergers

Three important considerations should be

taken into account:
• The company must be willing to take the risk and vigilantly make
investments to benefit fully from the merger as the competitors
and the industry take heed quickly
• To reduce and diversify risk, multiple bets must be made, in
order to narrow down to the one that will prove fruitful
• The management of the acquiring firm must learn to be resilient,
patient and be able to adopt to the change owing to ever-
changing business dynamics in the industry
 Reasons for M&A

 Mergers and Acquisitions (M&A) improves the quality of companies

performance by reducing the redundant cost of operations

 Removes Excess capacity

Mergers & Acquisitions can take place:

• by purchasing assets
• by purchasing common shares
• by exchange of shares for assets
• by exchanging shares for shares

Mergers and Acquisitions Process

1. Phase 1: Pre-acquisition review: In this phase, the self-assessment of

the acquiring company with reference to the need of Mergers and

Acquisitions (M&A) is done and a strategy for growth plan through the

target is done.
2. Phase 2: Search and screen targets: In this stage, possible takeover

candidates (Companies) are identified. This process is mainly to identify

a good strategy for the acquiring company.

3. Phase 3: Investigate and valuation of the target: Once the

appropriate company is identified through screening, detailed analysis

of that company is done. This is termed as due diligence.

4. Phase 4: Acquire the target through negotiations: Once the target

company is selected, the next step is to start negotiations to come to an

agreement for a negotiated merger. This will result into deal getting

executed.

5. Phase 5: Post-merger integration: If all the above steps are

successfully completed, then there is a formal announcement of the

agreement of merger by both the participating companies.

 Accelerate growth

 Acquire skills and technology

TATA steel acquired BHUSHAM steel

The buyer/acquirer
Tata Steel is one of the world's largest steel companies with a steel production
capacity of approximately 27.5 million tonnes per annum (MnTPA) as on 31
March 2017. The company is a diversified steel producer with major operations
in India, Europe and South East Asia. The company has manufacturing units in
26 countries and a commercial presence in over 50 countries. Tata Steel is the
second largest steel producer in Europe with a crude steel production capacity
of over 12.1 million tonnes per annum.

The company together with its subsidiaries, is engaged in the manufacture and
sale of steel products in India and internationally. They offer hot and cold rolled
coils and sheets, galvanized sheets, tubes, wire rods, construction rebars and
bearings. Tata Steel is one of the few steel companies that are fully integrated -
from mining to the manufacturing and marketing of finished products.

The seller /acquiree

Bhushan Steel Ltd is engaged in the steel business. The company has a portfolio of flat products,
which are manufactured at steel processing facilities at Sahibabad, Uttar Pradesh. The company is
producing cold rolled close annealed coils (CRCA), galvanized sheets, precision tubes, high tensile
steel, hardened and tempered steel strip (H&T strips), wire-rods, color-coated sheets and galume.
They also produce, sponge iron, pig iron, billets, slabs, HRC and power.

The deal

Tata Steel completes Rs 35,200 crore purchase of bankrupt Bhushan Steel in 2018.
Tata Steel had acquired Bhushan Steel under the Corporate Insolvency Resolution Process in April this year for Rs
35,200 crore. T V Narendran Tata Steel’s Global CEO & MD who chaired the meeting briefed the members on the
corporate insolvency resolution process of the company, its financial performance for the year ended March 31, 2018
and activities in connection with aligning the company's operations with that of Tata Steel.
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Tata Steel completes Rs 35,200 crore purchase of bankrupt Bhushan Steel

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