Strategic Management

M3 Assignment

Develop a detailed M&A strategy for Jio.

Propose likely companies that it can
target for acquisition, or can merge with.
By:
Name: Sthahvi Agarwal
Roll No. N001
Div. E
• Reliance Jio Infocomm Limited, Jio, is an
Indian telecommunications company and
wholly owned subsidiary of Reliance
Industries, headquartered in Mumbai,
Maharashtra, India.
• It operates a national LTE network with Jio Apps Suite
coverage across all 22 telecom circles.
• It’s primary business is 4G mobile
broadband service. Other offerings include
Fiber Internet, Jionet Wifi, Mobile Devices
(JioPhones)
 PORTER’S
This gives us an idea about the different FORCES
threats, of entry and substitutes, and RELEVANT TO
competition.
M&A STRATEGY
 New Entrant in the Telecom Industry

• Reliance Jio is the newest entrant into the telecom industry in India
• Jio has led to the closure of multiple former service providers such as Aircell and
RCOM
• With the high entry barrier, stiff competition and ongoing price war in the telecom
industry no new firm is likely to attempt entry into the Indian Telecom Industry in
the near future
COMPETITION
THREAT OF SUBSTITUTES
• The availability of substitute products or services makes the
competitive environment challenging for Reliance Jio.

• Threat of substitute might depend on the following factors:

Buyer Propensity to Substitute
• – Internet subscriber base increasing in India by 18.06% , compared to 10.60% for GSM/CDMA services(2015)
• – Representations from the industry and from within the DoT to open up Net telephony.

Relative Prices
• – Internet Telephony eating into the revenue of GSM/CDMA telephony.
• – Flat/ fixed rate revenues from internet services - cannibalization of revenues
• from GSM/CDMA services.

Performance of Substitute
• – Voice quality is an issue with internet telephony.
• – Internet voice services also currently limited due to regulatory road blocks
This gives us an idea about which changes in
DRIVERS OF
the industry can lead to mergers and INDUSTRY
acquisitions and can become a part of the
merger & acquisition strategy.
CHANGE
DRIVERS OF INDUSTRY GROWTH (CHANGE)
 EFFECTS OF INDUSTRY CHANGE

Industry Drivers Market Demand Competitive Rivalry Profitability

Increases the competition as every company would

Increases market demand by increasing the
Growing Demand want to increase their market share by getting new Increases the profitability of the industry
number of users
customers

Maybe - Through policy support, companies could Might increase competitive rivalry depending on
Policy Support Has a chance to increase profitability
offer better services to customers the policy support

Increases competition by providing competitive

Increasing Investments Does not directly affect market demand Increases profitability
advantage to a particular company

Might not give back instant returns due to many

Technology Emergence Has the capability to increase the market demand Increases competitive rivalry
things such as advertising, infrastructure, etc.

Might directly impact competitive rivalry depending Might increase profitability on the long run
Telecom Infrastructure Might not directly impact market demand
on the development depending on the development

Telecom Equipment Might directly impact competitive rivalry depending Might increase profitability on the long run
Might not directly impact market demand
Market on the development depending on the development
CLUSTERING
STRATEGIC
MAP –
PRICE &
QUALITY
STRATEGIC
MAP –
PRICE &
GEOGRAPHIC
COVERAGE
STRATEGIC
MAP –
PRICE &
PRODUCT LINE
BREADTH
STRATEGIC
MAP –
PRICE &
SUBSCRIBERS
(Millions)
MERGER &
ACQUISITON
STRATEGY
 WHAT ARE MERGERS AND ACQUISTIONS ?

• Mergers and acquisitions are types of deals in which two companies combine their
assets. Although the terms are sometimes used interchangeably, mergers and
acquisitions are not technically the same.

• In a merger, two companies are combined. This may be a transaction among equals, but
usually one side is bigger. The stronger company absorbs the purchased company, and
the purchased company ceases to exist.

• In an acquisition, the acquiring company buys most or all of the purchased company. The
acquired company may be absorbed or combined with other operations of the
purchasing company, or the acquired company may operate as a standalone business
under its original name.
TYPES OF MERGERS AND ACQUISTIONS
• The target is not as close
to your area of core • The target is close to
competency, but offers your company’s area of
revenue and growth core competency, and
opportunities. This could the opportunity to
be a company that has realize cost synergies is
similar products, but high.
different customer
markets.

Strategic Synergistic

Complementary Diversifying

• These opportunities
offer little overlap • These are deals in which
with your current the target has no overlap
core business, and with your current
the synergies tend to business. Diversifying
be indirect. strategies are the most
difficult to execute
profitably and successfully.
STEPS TO DEVELOP M&A STRATEGY
 OBJECTIVES TO DEVELOP M&A STRATEGY
Disruption
If a disruptive strategy identified has the
capability to createsa sustainable
“leadership position” for the firm then it
acts as the driver for a merger or
acquisition strategy.
Competitive Response
It may be a result of the response towards
some action of the competitor which could
drive the need for a merger or acquisition.
Customer Experience
Business relationship decisions are driven
by customer experience. While quantifying
the bottom-line impact of customer
characterizations of their suppliers—
positive or negative—remains a challenge,
there is no doubt that the everyday
experiences of customers shape their
perspectives and impact purchase decision
making. Hence, a strategy can be devised
by keeping customers needs in mind.
Security
A merger or acquisition might be able to
provide security to both the parties in their
respective environments which might lead to
their desired results.
 Start-ups are totemic of operators current appetite to transform themselves into end-
to-end solution providers and the benefits of this arrangement are mutual.
• On one hand, the sheer size of most operators offers a unique proposition to these
acquired technology companies by allowing them access to literally millions of
customers.
• On the other hand, considering the vast trove of data operators house, it could
benefit them to apply start-ups relevant software, automation and virtualization
solutions.

CRITERIA • Meaningful collaboration and acquisition could help the operators to unlock the
vast potential for business insights and new services for telecom operators.
• Operators can also leverage expertise and cutting-edge solutions which these start-
ups bring to streamline their business models, user experience, customer profiling
and engagement, as well as redefining their cost in marketing, sales and
operations.

To find out why companies become M&A targets, City University London’s Cass
Business School examined nearly 34,000 businesses.
• For private companies, being large and highly leveraged are the most significant
predictors of being acquired. For public companies, being small and having low
profitability are most important.
• Private companies tend to become targets for acquisition when they’re big,
growing quickly, and highly profitable, and when they have high leverage and low
liquidity, according to the research. Public companies, on the other hand, become
targets for acquisition while they’re small but fast growing and have low
profitability, leverage, liquidity, and valuation.
 CRITERIA FOR MERGER OR ACQUISITON
Improve a Product’s Time to
Improve a Company’s Performance: Market: Smaller companies often
A company is acquired with the goals lack the resources to quickly get
of streamlining to increase its value, their offering to market. Procter
slashing costs, improving growth in & Gamble’s acquisition of Gillette
earnings per share, and widening was intended to improve their
profit margins. collective speed to market.
Exploit Economies of Scale in Specific Industries:
A business leverages an opportunity to drastically lower
operating costs by consolidating with another. For example,
German automakers Volkswagen, Audi, and Porsche share some
of their car platforms, so they can split the massive costs of
developing new ones.

Invest in Young Companies with Lots of

Acquire Technologies, Expertise, Products, and Resources:
Consolidate to Remove Excess Capacity:
A company buys a business because the acquisition costs less
A company absorbs another in its
than it would to develop a technology, expertise, or product
industry, so it can keep a check on
from scratch. Apple bought Siri for this purpos. Companies
production capacity and reduce it if
such as Google and Facebook have made acquisitions to gain a
necessary.
target company’s expert key staff and intellectual property.
Promise: A mature company acquires a
young business because the established firm
believes it can turn the upstart into a winner
by investing resources and expertise.
Johnson & Johnson did this with its purchase
of the orthopedic device manufacturer
DePuy, which then posted an annual growth
rate of 17 percent over the next 12 years.
 • In 2017, at the company's 40th annual general meeting, Mukesh
Ambani reiterated his commitment to entrepreneurs and startups
when he said,
• “Just as Reliance became known in the past 40 years as a company
that won the trust of millions of retailers, it will be known in the
RELIANCE’S coming decade as an enterprise with lakhs of partners and an
enabler of a large ecosystem of entrepreneurs.”

PLAN • Today, Reliance Industries – India's most valuable company – has

already established itself as an enabler of the Indian startup
ecosystem, having stepped up its engagement with startups
through outright acquisitions, partnerships, or equity stake
purchases.

• Reliance’s mission to lead the digital revolution in India by

empowering all Indians and enterprises, the company appears
poised to continue engaging with startups that provide technology-
driven solutions that can be used on its consumer platforms and as
part of its digital offerings.
 JIO’S INVESTMENT PORTFOLIO
Jio, the youngest of the Indian mobile operators had a predominant share of subscribers (331.26 million or approximately 59 %).
Sheer scale and competitive pricing have been leveraged by Jio to build an entire digital lifecycle for the customer, enabling them to access
services via single platform. Hence, acquisition of these start-ups presents a unique opportunity for Jio, either to
transform its existing domain or add new services for its customers.

In March 2018, Jio

announced integration of its
JioMusic, and OTT platform
Jio Digital Services struck an
approximately $98.42 million
deal to acquire Haptik, one of
the world’s largest
conversational AI platforms
which counts Samsung, Coca-
Cola, Future Retail, KFC, Tata
Group, Oyo Rooms and
Mahindra Group among
marquee clients. It underlines
Jio’s strategy of providing
Indian users conversational AI-
enabled devices with
multilingual capabilities
June 2018 saw Jio buy
digital music service, open telecom solution
provider Radisys for $74
Saavn, which powers million, in a deal
Amazon Alexa in India. The focused mainly on Tesseract is a deeptech startup and has
combined entity, valued at enhancing Jio’s presence launched three hardware and two
more than $1 billion, then in 5G, IoT and open software products in the MR, AR, and VR
spaces — Methane, Holoboard, and
introduced JioSaavn to source architecture Quark. Holoboard is being touted as the
compete with the likes adoption. first made-in-India AR headset and works
Reliance Jio
of Amazon Music, with smartphones. Users of AR headsets
Infocomm completed can see digital and virtual images in the
Apple Music the acquisition of real world around them. Tesseract has
and Gaana.
multi-system developed the Jio HoloBoard as a native
mixed reality headset for JioFiber users.
operators (MSO) Den
While specifics about the Jio HoloBoard
Network Limited and are yet to be revealed, Reliance Jio wants
Hathway Cable and to make the headset available for
Datacom Ltd, in the purchase in the market very soon at an
“extremely affordable price”.
fourth quarter of FY19
 • The reason behind
Jio’s successful
acquisitions is Timing
& Consistency.

RELIANCE • Timing plays an

important part in the

INVESTMENT
Merger & Acquisition
strategy which
depends on the
PORTFOLIO •
PESTEL environment.
Reliance Jio has
maintained a
consistent
environment of
developing an
emerging startup
ecosystem by
consistently acquiring
companies that
support its business
purposes.
 • The startup focused division of Reliance Industries Limited (RIL), JioGenNext
advises and mentors exceptional founders for launching their startup in the Jio
ecosystem through strategic investments, commercial partnerships and
mentoring.

• JioGenNext has accelerated 136 startups in 11 cohorts over the last five years.
Today, many of these startups are on the road to become unicorns.
JIO GenNext • “As a corporate accelerator, we solve specific product and business growth
challenges of startups. World-class B2B companies like Headspin and LogiNext
who were in our programme have collectively raised almost $100 mn in 2020”
says Amey Mashelkar, Head of JioGenNext.

• RIL had set up a venture arm, GenNext Ventures, which is looking to acquire up
to 15% stake in young startups. Its GenNext Innovation Hub is a startup
accelerator programme launched in partnership with Microsoft Ventures.

• It also plans to set up an INR 5,000 Cr VC fund — Reliance Jio Digital India Startup
Fund — to boost entrepreneurship in the country over a five-year period. The
fund will be used to develop and fund new businesses across sectors such as
agriculture, education, health, rural livelihoods, and ecommerce.
 Dish TV

Jio can merge with Dish Tv to

increase adoption of Jio TV and the
set up box. Through this Jio would

TARGET FOR become the number one player in

the Direct-to-Home operator.

MERGER
Toppr ATL Balaji

Reliance Jio has been Reliance Jio has acquired a

focussing on the field of online
education for expanding their
services to their large
customer base and an
enhanced customer
experience. Jio can merge with
Toppr to focus more on the
field.
25% stake in Balaji Telefilms
for Rs 413 crore for content
creation for JioCinema, JioTV.
Jio can merge with ALT Balaji
for more content on JioTV and
create a significat position in
the OTT sector.
 Mymo
is a startup which works in the area
of 5G chipsets. It aims to create IP for
faster communication for 4G and 5G
networks

TARGET FOR Reliance

Communications
Kuliza
Technologies:

ACQUISITION Reliance Jio

infocomm has
acquired assets of
They focus on
digital
transformation for
financial
Rcomm and
companies.
should consider
Purpose-built
acquiring the
platform with
company.
business user
control & one click
deployment

Signalchip
is a startup which is into 5G new radio
(NR) modems & is an exciting fabless
semiconductor company. They work on
extremely innovative chips to enable
high speed wireless communication
standards like 4G-LTE/3G-WCDMA and
5G-NR.
STRUCTURING AN M&A DEAL
ANALYZING MERGER & ACQUISITIONS
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