A Project Submitted to

University of Mumbai for partial completion of the degree of

Master in Commerce (Advanced Accountancy)

Under the Faculty of Commerce

By

PRERANA SANGHAVI

SAP ID: 45209190039

Semester III

Under the guidance of

CA VINAY TIWARI

Submitted to

NARSEE MONJEE COLLEGE OF COMMERCE & ECONOMICS

(AUTONOMOUS)

December 2020
A STUDY ON MEGERS AND ACQUISITIONS

WITH THE HELP OF CASE STUDIES

2
 SVKM’s Narsee Monjee College of Commerce & Economics

(Autonomous)

Certificate
This is to certify that Ms. PRERANA SANGHAVI has worked and duly completed her Project

Work for the degree of Master in Commerce (Advanced Accountancy) under the Faculty of

Commerce and her project is titled, “A STUDY ON MEGERS AND ACQUISITIONS WITH

THE HELP OF CASE STUDIES” under my supervision.

I further certify that the entire work has been done by the learner under my guidance and that no part

of it has been submitted previously for any Degree or Diploma of any University.

It is her own work and facts reported by her personal findings and investigations.

Seal of
the Name and Signature of
College
Guiding Teacher

Date of submission: 2nd January, 2021

External Examiner PRINCIPAL

(Signature & Date) (Signature & Date)

Internal Examiner

(Signature & Date)

3
 DECLARATION

I the undersigned Ms. PRERANA SANGHAVI here by, declare that the work embodied in this

project work titled “A STUDY ON MEGERS AND ACQUISITIONS with the help of case

studies” is own contribution to the research work carried out under the guidance of CA VINAY

TIWARI and is a result of my own research work and has not been previously submitted to any other

University for any other Degree/ Diploma to this or any other University.

Wherever reference has been made to previous works of others, it has been clearly indicated as such

and included in the bibliography.

I, here by further declare that all information of this document has been obtained and presented in

accordance with academic rules and ethical conduct.

Signature of the Student Signature of the Guide

4
 ACKNOWLEDGEMENT

Every research big or small is successful largely due to the efforts of a number of wonderful people

who have always given their valuable advice or lent a helping hand. I sincerely appreciate the

inspiration; support and guidance of all those people who have been instrumental in making this

research a success.

I am grateful to our Principal Dr. PARAG AJAGAONKAR, for giving me the opportunity to do

this research and providing his immense support throughout the process of this research.

At this juncture, I am deeply honoured in expressing my sincere thanks to my research guide

CA VINAY TIWARI, for directing me through the whole process of my research and providing

valuable insights leading to the successful completion of my research.

My sincere thanks to all the teachers, Assistant Professors and other faculty members of

Narsee Monjee College of Commerce and Economics (Autonomous) for their kind cooperation

and assistance throughout the research in learning new concepts related to my research.

I would also like to thank all the library and non-teaching staff members of our college for

providing constant support and being very cooperative

and providing invaluable material for my research.

Last but not the least I place a deep sense of gratitude to my family members and my friends who

have been constant source of inspiration during the preparation of this project work.

5
 TABLE OF CONTENTS

CHAPTER NO CONTENT PAGE NO

COVER PAGE 1

TITLE OF THE STUDY 2

CERTIFICATE 3

DECLARATION 4

ACKNOWLEDGEMENT 5

1 1.1. INTRODUCTION 7

1.2. OBJECTIVE OF THE STUDY 36

1.3. SCOPE OF THE STUDY 36

1.4. LIMITATIONS OF THE STUDY 36

2 RESEARCH METHODOLOGY / DESIGN 37

3 LITERATURE REVIEW 39

4 DATA ANALYSIS & INTERPRETATION 45

5 CONCLUSION 81

6 BIBLIOGRAPHY & ANNEXURE 85

6
CHAPTER ONE: INTRODUCTION

7
The Concept of Mergers and Acquisitions

This section introduces the concept of mergers and acquisitions. The section assumes no prior

knowledge of the subject. It should be appreciated at the outset that mergers and acquisitions are

affected by a number of influences that are very much specific to the individual country where they

take place. Typical regional factors with a direct impact on mergers and acquisitions include:

➢ Company law;

➢ Employment law;

➢ Community law;

➢ Regulations and regulatory powers;

➢ Community codes of practice and standards;

➢ Custom and embedded practices;

➢ Protectionism.

For example, in most European countries and the US there are government controls on mergers and

acquisitions where the combination of two or more companies can have an impact on the overall level

of competition within a particular market. This applies particularly where the merger or acquisition

would give the new company the ability to alter or fix prices in a particular sector. In the UK the

8
Competition Commission considers proposed mergers between large companies in the same sector

to determine whether there is any possibility of such price control being an outcome. Several large

proposed mergers have been blocked on these grounds in the UK over the past few years.

Employment law can be a major consideration in some EU countries. There are significant differences

in the level of employee rights in the various member states.

Germany, for example, has much more stringent employment law than the UK. AUK company

wishing to merge with a German company may find itself dealing with powerful legally protected

employee ‘commissions’ or representative groups. In some cases such groups can influence

government bodies and can make the difference between the proposed mergers being accepted

otherwise being blocked.

In considering mergers and acquisitions it is not possible to allow for the multitude of different

restrictions and laws that apply in the numerous different countries where such actions take place.

This text attempts to develop a generic overview of mergers and acquisitions. The main areas and

sections covered are intended to provide a general overview of what is involved and how the process

works. The individual regulatory and legal details are generally omitted.

History of merger and acquisition

Tracing back to history, merger and acquisitions have evolved in five stages and each of these are

discussed here. As seen from past experience mergers and acquisitions are triggered by Economic

factors. The macroeconomic environment, which includes the growth in GDP, interest rates and

monetary policies play a key role in designing the process of mergers or acquisitions between

companies or organizations.

9
First Wave Mergers

The first wave mergers commenced from 1897 to 1904. During this phase merger occurred between

companies, which enjoyed monopoly over their lines of production like railroads, electricity etc. the

first wave mergers that occurred during the aforesaid time period were mostly horizontal mergers that

took place between heavy manufacturing industries.

End of 1st Wave Merger

Majority of the mergers that were conceived during the 1st phase ended in failure since they could

not achieve the desired efficiency. The failure was fuelled by the slowdown of the economy in 1903

followed by the stock market crash of 1904. The legal framework was not supportive either. The

Supreme Court passed the mandate that the anticompetitive mergers could be halted using the

Sherman Act.

10
Second Wave Mergers

The second wave mergers that took place from 1916 to 1929 focused on the mergers between

oligopolies, rather than monopolies as in the previous phase. The economic boom that followed the

post-World War I gave rise to these mergers. Technological developments like the development of

railroads and transportation by motor vehicles provided the necessary infrastructure for such mergers

or acquisitions to take place. The government policy encouraged firms to work in unison. This policy

was implemented in the 1920s.

The 2nd wave mergers that took place were mainly horizontal or conglomerate in nature.

End of 2nd Wave Mergers

The 2nd wave mergers ended with the stock market crash in 1929 and the great depression. The tax

relief that was provided inspired mergers in the 1940s.

Third Wave Mergers

The mergers that took place during this period (1965-69) were mainly conglomerate mergers.

Mergers were inspired by high stock prices, interest rates and strict enforcement of antitrust laws.

The bidder firms in the 3rd wave merger were smaller than the Target Firm. Mergers were financed

from equities; the investment banks no longer played an important role.

End of the 3rd Wave Merger

The 3rd wave merger ended with the plan of the Attorney General to split conglomerates in1968. It

was also due to the poor performance of the conglomerates. Some mergers in the 1970shave set

precedence. The most prominent ones were the INCO-ESB merger; United Technologies and OTIS

Elevator Merger are the merger between Colt Industries and Garlock Industries.

11
Fourth Wave Merger

The 4th wave merger that started from 1981 and ended by 1989 was characterized by acquisition

targets that wren much larger in size as compared to the 3rd wave mergers. Mergers took place

between the oil and gas industries, pharmaceutical industries, banking and airline industries. Foreign

takeovers became common with most of them being hostile takeovers. The 4th Wave mergers ended

with anti-takeover laws, Financial Institutions Reform and the Gulf War.

Fifth Wave Merger

The 5th Wave Merger (1992-2000) was inspired by globalization, stock market boom and

deregulation. The 5th Wave Merger took place mainly in the banking and telecommunication

industries. They were mostly equity financed rather than debt financed. The mergers were driven long

term rather than short term profit motives. The 5th Wave Merger ended with the burst in the stock

market bubble. Hence we may conclude that the evolution of mergers and acquisitions has been long

drawn.

Many economic factors have contributed its development. There are several other factors that have

impeded their growth. As long as economic units of production exist mergers and acquisitions would

continue for an ever-expanding economy.

A merger or an acquisition in a company sense can be defined as the combination of two or more

companies into one new company or corporation.

The main difference between a merger and an acquisition lies in the way in which the combination

of the two companies is brought about. In a merger there is usually a process of negotiation involved

between the two companies prior to the combination taking place.

12
In most cases the acquirer acquires the target by buying its shares. The acquirer buys shares from the

target’s shareholders up to a point where it becomes the owner. Achieving ownership may require

purchase of all of the target shares or a majority of them. Different countries have different laws and

regulations on what defines target ownership.

Acquisitions can be friendly or hostile. In the case of a friendly acquisition the target is willing to be

acquired. The target may view the acquisition as an opportunity to develop into new areas and use

the resources offered by the acquirer. This happens particularly in the case of small successful

companies that wish to develop and expand but are held back by a lack of capital. The smaller

company may actively seek out a larger partner willing to provide the necessary investment. In this

scenario the acquisition is sometimes referred to as a friendly or agreed acquisition.

Alternatively, the acquisition may be hostile. In this case the target is opposed to the acquisition.

Hostile acquisitions are sometimes referred to as hostile takeovers. Acquisitions can be friendly or

hostile. In the case of a friendly acquisition the target is willing to be acquired. The target may view

the acquisition as an opportunity to develop into new areas and use the resources offered by the

acquirer. This happens particularly in the case of small successful companies that wish to develop

and expand but are held back by a lack of capital. The smaller company may actively seek out a larger

partner willing to provide the necessary investment. In this scenario the acquisition is sometimes

13
referred to as a friendly or agreed acquisition. Alternatively, the acquisition may be hostile. In this

case the target is opposed to the acquisition. Hostile acquisitions are sometimes referred to as hostile

takeovers.

One tactic for avoiding a hostile takeover is for the target to seek another company with which it

would rather merge or be acquired by. This third company, if it agrees, is sometimes referred to as a

white knight, as it ‘comes to the rescue’ of the threatened target.

In hostile takeovers the acquirer may attempt to buy large amounts of the target’s shares on the open

market. The problem with this action is that the target’s share price will tend to increase in value as

soon as any large-scale purchases are detected In order to minimize share price rises, the acquirer

may attempt to buy as much stock as possible in the shortest possible time, preferably as soon as the

markets open. This practice is sometimes referred to as a dawn raid, as it attempts to take the market

(insofar as is possible) ‘by surprise’.

In both friendly and hostile takeovers the decision on whether or not to sell shares in the target lies

with the shareholders. If all or a large proportion of target shareholders agree to sell their shares,

ownership will be transferred to the acquirer. Shareholders generally will agree to a merger if they

are recommended to do so by the board of directors and if they stand to make a profit on the deal.

The acquirer may offer either cash or its own shares in exchange for target shares. Cash transactions

offer shareholders an immediate potential profit, whereas shares offer a longer-term investment.

Share transactions tend to be more attractive to shareholders in a buoyant market as the value of the

shares is likely to increase more rapidly than in a stagnant market.

Merger and acquisition process

Mergers and acquisitions are parts of corporate strategies that deal with buying / selling or combining

of business entities, which in turn, help a company to grow quickly. However, merger and acquisition

process is quite a complex process that consists of a few steps. Before going for any merger and

14
acquisition, both the companies need to consider a few points and also need to go through some

distinct steps. The merger and acquisition process is also a big point of concern for the companies

involved in the deal, as the process could be full of risk and uncertainty. However, prior effective

planning and research could make the process easy and simple.

Steps of Mergers and Acquisition Process

The process of merger and acquisition has the following steps:

Market Valuation

Before you go for any merger and acquisition, it is of utmost important that you must know the present

market value of the organization as well as its estimated future financial performance. The

information about organization, its history, products/services, facilities and ownerships are reviewed.

Sales organization and marketing approaches are also taken into consideration.

15
Exit Planning

The decision to sell business largely depends upon the future plan of the organization what does it

target to achieve and how is it going to handle the wealth etc. Various issues like estate planning,

continuing business involvement, debt resolution etc. as well as tax issues and business issues are

considered before making exit planning.

Structured Marketing Process

This is merger and acquisition process involves marketing of the business entity. While doing the

marketing, selling price is never divulged to the potential buyers. Serious buyers are also identified

and then encouraged during the process.

Following are the features of this phase.-

Seller agrees on the disseminated materials in advance. Buyer also needs to sign a Nondisclosure

agreement.

Letter of Intent

Both, buyer and seller take the letter of intent to their respective attorneys to find out whether there

is any scope of further negotiation left or not. Issues like price and terms, deciding on due diligence

period, deal structure, purchase price adjustments, earn out provisions liability obligations, ISRA and

ERISA issues, Non-solicitation agreement, Breakup fees and no shop provisions, pre closing tax

liabilities, product liability issues, post-closing insurance policies, representations and warranties, and

indemnification issues etc. are negotiated in the Letter of Intent. After reviewing, a Definitive

Purchase Agreement is prepared

Buyer Due Diligence

This is the phase in the merger and acquisition process where seller makes its business process open

for the buyer, so that it can make an in-depth investigation on the business as well as its attorneys,

bankers, accountants, tad advisors etc.1.2 Why Companies Merge and Acquire.

16
Definitive Purchase Agreement

Finally Definitive Purchase Agreement are made, which states the transaction details including

regulatory approvals, financing sources and other conditions of sale.

Merger

There are numerous reasons why one company chooses to merge with or acquire another. The

literature suggests that the underlying motivation to merge is driven by a series of rationales and

drivers. Rationales consist of the higher-level reasoning that represents decision conditions under

which a decision to merge could be made. Drivers are mid-level specific (often operational)

influences that contribute towards the justification or otherwise for a merger. As an example,

company A might decide to acquire company B. The underlying rationale could be that of strategy

implementation. In order to achieve one or more strategic objectives it may be necessary for company

A to acquire company B because, at present, there is over-capacity in the sector in which company A

and company B operate. This is an example of a strategic rationale. The underlying driver for

acquiring company B is the desire to control capacity in that sector. An understanding of the various

rationales and drivers behind mergers and acquisitions is very important in developing command of

this text.

17
Underlying Rationales

There are several primary rationales that determine the nature of a proposed merger or acquisition.

These rationales are:

Strategic Rationale: The strategic rationale makes use of the merger or acquisition in achieving a

set of strategic objectives. As discussed above, a merger to secure control of capacity in the chosen

sector is an example. Mergers and acquisitions are usually not central in the achievement of strategic

objectives, and there are usually other alternatives available. For example, company A might want to

gain a foothold in a lucrative new expanding market but lacks any experience or expertise in the area.

One way of overcoming this may be to acquire a company that already has a track record of success

in the new market. The alternative might be to develop a research and development division in the

new market products in an attempt to catch up and overtake the more established players. This

alternative choice has obvious cost and time implications. In the past it has only really been achieved

successfully where the company wishing to enter the new market already produces goods or has

expertise in a related area.

The strategic rationale may also be fundamentally defensive. If there are several large mergers in a

particular sector, a non-merged company may be pressured into merging with another non-merged

company in order to maintain its competitive position. This strategic scenario tends to happen in

sectors dominated by relatively large players. In the UK, all of the major high street banks were

engaged in merger activity between 1995 and 2002. In the global oil production sector, all of the

major oil producers were involved in merger activity in the same period. In some cases three or more

major producers merged into super companies. In both industries the merger wave was driven by a

need to respond to the merger activities of competitors.

Speculative rationale: The speculative rationale arises where the acquirer views the acquired

company as a commodity. The acquired company may be a player in a new and developing field. The

acquiring company might want to share in the potential profitability of this field without committing

itself to a major strategic realignment. One way to achieve this is to buy established companies,

18
develop them, and then sell them for a substantial profit at a later date. This approach is clearly high

risk, even if the targets are analysed and selected very carefully. A major risk, particularly in the case

of small and highly specialised targets, is that a significant proportion of the highly skilled people

who work for the target may leave either before, during or immediately after the merger or

acquisition. The speculative rationale is also high risk in that it is very vulnerable to changes in the

environment. Apparently attractive targets, purchased at inflated (premium) cost, may soon diminish

significantly in value if market conditions change. Mergers or acquisitions can sometimes be forced

on a company because of management failures. Strategies may be assembled with errors in alignment,

or market conditions may change significantly during the implementation timescale. The result may

be that the original strategy becomes misaligned. It is no longer appropriate in taking the company

where it wants to go because the company now wants to go somewhere else. Mergers and acquisitions

are sometimes required for reasons of financial necessity. A company could misalign its strategy and

suddenly find that it is losing value because shareholders have lost confidence. In some cases the only

way to address this problem is to merge with a more successful company or to acquire smaller more

successful companies.

Political rationale: The impact of political influences is becoming increasingly significant in mergers

and acquisitions. In the UK between 1997 and 2002, the government instructed the merger of a

number of large government departments in order to rationalise their operations and reduce operating

costs. Government policy also encouraged some large public sector organizations to consider and

execute mergers. These policies resulted in the merger of several large health trusts (hospitals

financed by central government but under their own management control). By 2002 several large

universities were also considering merging as a result of changes in government funding policy. In

Australia, some of the ‘big four’ banks embarked on an aggressive overseas acquisitions policy

because legislation in Australia directly prevented them from merging with each other.

19
Merger Drivers

Some typical merger drivers are considered below:

A company sometimes seeks to merge with or acquire another company because the company is keen

to acquire a specific skill or resource owned by the other company. This type of merger or acquisition

often occurs where a smaller company has developed high value specific skills over a number of

years and where it would take an acquiring company a long time and a great deal of investment to

develop these same skills. National and International stock markets. Variations in share prices can

act as powerful drivers for mergers and acquisitions. A stock market boom tends to make acquisition

activity more attractive because it becomes easier to use the acquirer’s shares as the basis for the

transaction rather than cash. Alternatively a falling stock market can lead to potential targets being

valued lower, and therefore they become more attractive for a cash purchase.

Globalization drivers: Increasing globalization, facilitated to a considerable extent by the growth

and development of IT, tends to encourage mergers as the geographical separation between individual

companies becomes less of an obstacle to organizations working together as several large high street

banks have been successfully acquired by a major Australian bank. National and International

Consolidation, this type of driver occurs where there are compatible companies available for merger

or acquisition within the same general geographical area(s).

Diversification drivers: A company may want to diversify into new areas or sectors as a means of

balancing the risk profile of its portfolio. Diversification was a primary driver of many mergers and

acquisitions in the 1960s, 1970s and 1980s. More recently there has been a discernible move away

from diversification as a risk-management strategy. Numerous researchers and practitioners have

argued that diversification and non-related acquisition does not in fact reduce the risk profile faced

by an organisation. This argument is supported by the assertion that the more diversified an

organisation is, the less it has developed the specific tools and techniques needed to address individual

problems relating to any one of its range of business activities.

20
Industry and sector pressures: The total production in a given sector may exceed or be near to

demand so that the value of the product is low. In some cases it may be desirable for a company to

merge with or acquire a competitor in order to secure a greater degree of control over total sector

output. If company A acquires company B, company A has achieved greater control over total sector

production and also has the opportunity to maintain more of its own production facilities and

employees within the new company at the expense of company B.

Reasons for Mergers and Acquisitions

➢ Operating synergies: The uniting of two firms improve productivity or cut costs so that the

unlevered cash flows of the combined firm exceed the combined unlevered cash flows of the

individual firm

➢ A vertical merger between a supplier and a customer, eliminates various coordination and

bargaining problems

➢ A horizontal merger between competitors, produces a less competitive product market and

cost savings from combining R&D facilities and sales forces

➢ Financial synergies: Information and incentive problems may cause cash starved firms to pass

up positive NPV projects, but cash-rich firms to overinvest in negative NPV projects

➢ Conglomerates can use internal capital markets to transfer funds from negative NPV projects

to positive NPV projects

➢ Enhance the flexibility of the organization

➢ Reduces bankruptcy risk

Reasons for decrease in M & A in India

From the analysis that the number of M&A deals decreased from 1,320 to1,077, i.e. decreased by

18.5 per cent, in manufacturing sector it has decreased from 842 to 442, i.e. decreased by 47.5 %.

21
The following are the possible reasons for decrease in the number of deals of M&A in India during

the last couple of years.

➢ The Worldwide economic slowdown is one of the most important factors for decrease in the

no. of M&A in India during the last couple of years.

➢ The various research studies in past shows that management cannot take it for granted that

synergy can be generated and profits can be increased simply by going for mergers and

acquisitions.

➢ Bubble in the Financial market during the period of 2004-07 results in the over valuation in

the stock prices almost all of the companies

➢ Further, the number of deals that fell through in the first 10 months of 2009 is less than that

in2007, experts and analysts say the overwhelming trend is of slowing M&A (merger and

acquisition) activity in the background of drying credit lines, plunging market capitalizations

and global economic uncertainty.

➢ The environment also makes it very difficult for the companies involved in a transaction to

arrive at a “bidding price”, Hon added, because the volatility in stock and credit markets had

skewed traditional parameters used to arrive at this figure.

REASONS FOR THE FAILURE OF MERGER AND ACQUSITION

➢ Poor strategic fit: Wide difference in objectives and strategies of the company

➢ Poorly managed integration: Integration is often poorly managed without planning and

design. This leads to failure of implementation.

➢ Incomplete due diligence: Inadequate due diligence can lead to failure of merger and

acquisition as it is the crux of the entire strategy.

➢ Overly optimistic: Too optimistic projections about the target company leads to bad

decisions and failure of the merger and acquisition.

22
Types of Mergers:

Horizontal Merger: It is the process in which the merging companies are competitors and have the

same product line. Horizontal Merger is done with the expectation to provide synergy and cost

efficiency.

The advantages like staff reduction and economies of scale help in decrease in the cost. Also, the

market reach is increased. It refers to two firms Operating in same industry or producing ideal

products combining together. For e.g. in the banking industry in India, acquisitions of Times bank by

HDFC bank, bank of Madura by ICICI bank, Nedungadi bank by Punjab National bank etc. in

consumer electronics, acquisition of Electrolux’s Indian operations by Videocon International ltd., in

23
BPO sector, acquisition of Daksh by IBM, spectra mind by Wipro etc. The main objectives of

Horizontal Mergers are to benefit from economies of scale, to reduce competition, achieve monopoly

status and control the market.

Vertical Merger: It is the process in which the merging companies are not competitors but the

products are complementary or related to each other.

24
Vertical Merger is done with the expectation to have benefits in terms of raw material, transportation

and marketing etc.

Conglomerate Merger: It is the process of merging of two unrelated firms where the products are

not dependent or related to each other. Conglomerate Merger is done when the company is planning

to increase the product lines.

Co-Generic Merger: It is the process of merging of companies which are related on some grounds

such as manufacturing tools, market strategies, technology etc. It is done to become the market leader

on a particular basis.

25
Acquisition

Acquisition on the other hand is a different process. It is a process in which one company overtakes

the other (one or more) company. It can be done with the mutual consent known as friendly

acquisition. Or it can be done forcibly known as hostile acquisition. This is generally done to come

over the competitive threats. Sometimes, the acquiring company comes to know about the process

after acquisition, in case of hostile acquisition. Though in both the cases the process is carried out in

two ways mentioned below Acquisition. Through Asset Purchase In this type of acquisition, some

specific assets of the target company are bought by the acquiring company. The acquiring company

does this where the buying of assets help in its existing business also. However, this process is not

much supported as it is difficult to settle the issue, if any, on a later stage. And also target Company

has to pay tax on capital gains. Acquisition through Stock Purchase: Here the acquiring company

buys all the equity of the target company. There is no change in the employees or the ongoing process.

Just all the assets and liabilities are under the new owner. It is a very simplified and easy process.

26
What is the difference between mergers and acquisitions

Mergers and acquisitions are two of the most misunderstood words in the business world. Both terms

are used in reference to the joining of two companies, but there are key differences involved in when

to use them.

A merger occurs when two separate entities combine forces to create a new, joint organization.

Meanwhile, an acquisition refers to the takeover of one entity by another. Mergers and acquisitions

may be completed to expand a company’s reach or gain market share in an attempt to create

shareholder value.

MERGER ACQUISITION

DEFINITION When two companies combine in case of acquisition, the

together to form one company it is acquiring company takes over the

termed as merger of the company. majority stake in the acquired

The two companies end to exists company, and acquiring company

and the new company is formed. continues to be in existence.

COMPANIES The companies of the same size The larger companies acquire

are combined together. smaller companies.

CHALLENGES The two companies of the same The two companies of different

size combine to increase their sizes come together to conquer the

potential strength and financial challenges of the decline of

profits along with breaking the business.

trade barriers.

27
 AGREEMENT A buyout agreement is known as A buyout agreement is known as

a merger when both owners an acquisition when the

mutually decide to combine their agreement is aggressive, or when

business in the best interest of the target firm is unwilling to be

their firms. bought.

EXAMPLE Disney and Pixar merged together Google acquired Android for $50

to collaborate easily and freely. million in August 2005.

In an acquisition, a new company does not emerge. Instead, the smaller company is often consumed

and ceases to exist with its assets becoming part of the larger company. Acquisitions sometimes called

takeovers generally carry a more negative connotation than mergers. Due to this reason, many

acquiring companies refer to an acquisition as a merger even when it is clearly not. Legally speaking,

a merger requires two companies to consolidate into a new entity with a new ownership and

management structure. An acquisition takes place when one company takes over all of the operational

management decisions of another. The more common distinction to differentiating a deal is whether

the purchase is friendly (merger) or hostile (acquisition).

Friendly mergers of equals do not take place very frequently. It's uncommon that two companies

would benefit from combining forces with two different CEOs agreeing to give up some authority to

realize those benefits. When this does happen, the stocks of both companies are surrendered and new

stocks are issued under the name of the new business identity. Both mergers and acquisitions have

pros and cons. Mergers requires no cash to complete but dilute each company's individual power.

Acquisitions require large amounts of cash, but the buyer's power is absolute. Since mergers are so

uncommon and takeovers are viewed in a negative light, the two terms have become increasingly

blended and used in conjunction with one another. Contemporary corporate restructurings are usually

referred to as merger and acquisition (M&A) transactions rather than simply a merger or acquisition.

28
The practical differences between the two terms are slowly being eroded by the new definition of

M&A deals.

Advantages of Merger and Acquisition

The nine major advantages of Mergers and Acquisition are depicted below

Economies of scale

Tax benefits

Financial resource

Entry in global markets

Growth and expansion

Helps to face competition

Increase in market share

Increases goodwill

Research and development (R&D)

Miscellaneous advantages

1. Economies of scale

Mergers result in economies of scale for the company. Economies of scale is the cost benefit that a

company obtains due to merger. Due to merger, company became large, and therefore, it can buy

materials on a large-scale and also get huge discounts on purchases. Similarly, a merged company

can produce and distribute its goods and services on a large-scale.

The types of economies of scale seen in a merger are depicted below the different types of economies

of scale are as follows:

Technical economies refer to the fixed technical-costs of the company before merger, this cost

reduces after merger. Bulk-buying economies help a merged company to obtain a discount on buying

raw-materials in bulk quantity. Financial economies help a merged company to bargain (negotiate)

29
on a better rate of interest from financial institutions. Organizational economies help a merged

company to have a proper or good unity of command as it is lead by one management with efficiency.

2. Tax benefits

Mergers result in a large tax benefit to the companies. A merged company gets tax benefits when a

profit-making company takes over a loss-making company. When a company enjoys a subsidized

rate of taxation it can be said as tax benefited.

3. Financial resources

After merger, the companies will have adequate financial resources. The combined assets of the

merged company will help to Increase the credit worthiness of the companies in the financial markets

.Increase the bargaining power to obtain loans at a subsidized rate of interest.

4. Entry in global markets

Global market means a huge world-level market in which any company can sell their goods and

services. This market does not have any restrictions for entrances. Merger helps merged companies

to get an entry in the global market which encompasses various regions. Examples of mergers

showing an entry in the global market are as follows: TATA Steel's acquisition of CORUS Steel

increased Tata's presence in the global market.

MITTAL Steel's acquisition of ARCELOR Steel increased Mittal's presence in the Global market.

5. Growth and expansion

Mergers help companies to grow and expand their business activities. This growth and expansion are

achieved by making a strong presence in the domestic markets. Companies are entering into various

foreign markets.

6. Helps to face competition

Merger helps the merged company to face competition at both levels, national as well as international

markets. Generally, merged company face the market competition by merging the competitors in their

company. Companies are providing the goods and services at competitive prices.

30
7. Increase in market share

Merger aids in increasing the market share of the merged company. This rise in the market share is

achieved by Providing an adequate supply of goods & services as needed by clients. Entering into an

agreement with clients for continuous supply of goods and services increases the market share.

8. Increases goodwill

Merger helps the merged company to boost its goodwill in the market. It creates goodwill by:

Increasing the confidence of the shareholders of the merged company. Creating a good image of the

merged company among the customers..

9. Research and development

Merger enhances the research and development (R&D) programmes of the merged company. This

enhancement in R&D is achieved by: Allowing uninterrupted investment in research and

development programmes. Companies appoint various skilled professionals to carry out the research

and development programmes.

10. Miscellaneous advantages

Miscellaneous advantages of mergers are listed as follows: Merger generates value of the merged

company by accessing funds and assets to support its business growth and development. It helps a

merged company to deal with the threats of multinationals companies (MNCs).

Benefits Start-ups can Experience When Acquiring Other Companies

Some of the positives of acquisitions for marketing for start-ups include:

1. Increased traffic at the top of the funnel.

Amazon provides an excellent case study of how acquisitions can increase top-of-funnel traffic. Tens

of millions of people visit sites like IMDb, Box Office Mojo, Good reads, and Twitch.tv (all acquired

31
by Amazon over the past 20+ years) every month. Many, if not most, of the people who visit these

properties are looking to learn more about movies, books, or video games. Amazon, which is the

world’s largest seller of movies, books, and video games, can efficiently use these properties to link

to products on its website.

.2 . Significant PR and content marketing.

It’s no secret that the press loves to cover mergers and acquisitions. While acquisitions worth billions

or hundreds of millions of dollars tend to get the most attention from journalists, smaller sales can

get plenty of love as well. Just search “Mergers and Acquisitions” in Google News or “acquisition”

in Tech crunch, and you’ll see tens of thousands of articles about how this company bought that start-

up. Acquisitions are very rare.

3. The opportunity to cross-sell your primary product and the one you’ve acquired.

If you acquire a product that’s relevant to some or all of your customers but has a different value

proposition or focus than your core business, you can cross-sell it to them. Similarly, you can

potentially cross-sell your core business’s product to the customers of the company you’ve acquired.

If you combine two revenue-generating products under one company and leverage those products’

audiences to consistently cross-sell each service, both products will grow faster and be more valuable

than before. When it comes to this type of acquisitions as marketing, Microsoft has made several

exciting purchases.

4. The removal of a competitor from the market and the chance to on board its customers to

your product.

It’s common for companies to buy other products, start-ups, or IP to bring competitors’ customers to

their product. A recent and now somewhat famous example of this is Slack’s acquisition of Hipchat.

Hipchat was one of Slack’s main competitors in the employee chat and communication market. Yet,

as Slack’s dominance grew, Hipchat floundered. With the acquisition of Hipchat, Slack plans to shut

down the service and migrate its existing users over to its product. The examples of Slack and

Fomoshow how effective strategy this can be.

32
5. A fresh infusion of new talent and processes.

Companies, especially large corporations, frequently acquire other businesses as a way to bring smart

talent into their organizations. These acquisitions, typically referred to as acquires, can help with

marketing by bringing in the new skills, knowledge, or processes companies need to launch fresh

products or grow existing ones. There are hundreds, if not thousands, of acquire examples. A few

include: Facebook’s acquisition of FriendFeedin 2009 (Bret Taylor, one of the co-founders of

FriendFeedin, became Facebook’s CTO as a part of the deal).Google acquired Kevin Rose’s company

Milk to add him to its team. Large corporations recognize that even if they don’t see value in a start-

up’s product or underlying tech, teams at certain companies can add real value to their organizations.

While acquires by Facebook, Twitter, and Google often range from $1M — $50+M, small start-ups

can participate as well.

Disadvantages:

Following are the some difficulties encountered with a merger-

• Loss of experienced workers aside from workers in leadership positions. This kind of loss

inevitably involves loss of business understand and on the other hand that will be worrying to

exchange or will exclusively get replaced at nice value.

• As a result of M&A, employees of the small merging firm may require exhaustive re-skilling.

• Company will face major difficulties thanks to frictions and internal competition that may

occur among the staff of the united companies. There is conjointly risk of getting surplus

0employees in some departments.

• Merging two firms that are doing similar activities may mean duplication and over capability

within the company that may need retrenchments.

• Increase in costs might result if the right management of modification and also the

implementation of the merger and acquisition dealing are delayed.

33
• The uncertainty with respect to the approval of the merger by proper assurances.

• In many events, the return of the share of the company that caused buyouts of other company

was less than the return of the sector as a whole.

• Inevitably involves loss of business understand and on the other hand that will be worrying to

exchange or will exclusively get replaced at nice value.

• As a result of M&A, employees of the small merging firm may require exhaustive re-skilling.

• Company will face major difficulties thanks to frictions and internal competition that may

occur among the staff of the united companies. There is conjointly risk of getting surplus

employees in some departments.

• Merging two firms that are doing similar activities may mean duplication and over capability

within the company that may need retrenchments.

• Increase in costs might result if the right management of modification and also the

implementation of the merger and acquisition dealing are delayed.

• The uncertainty with respect to the approval of the merger by proper assurances.

• In many events, the return of the share of the company that caused buyouts of other company

was less than the return of the sector as a whole.

• Loss of experienced workers aside from workers in leadership positions. This kind of loss

inevitably involves loss of business understand and on the other hand that will be worrying to

exchange or will exclusively get replaced at nice value.

• As a result of M&A, employees of the small merging firm may require exhaustive re-skilling.

• Company will face major difficulties thanks to frictions and internal competition that may

occur among the staff of the united companies. There is conjointly risk of getting surplus

employees in some departments.

• Merging two firms that are doing similar activities may mean duplication and over capability

within the company that may need retrenchments.

34
• Increase in costs might result if the right management of modification and also the

implementation of the merger and acquisition dealing are delayed.

• The uncertainty with respect to the approval of the merger by proper assurances.

• In many events, the return of the share of the company that caused buyouts of other company

was less than the return of the sector as a whole.

35
1.2 OBJECTIVES OF THE STUDY

➢ To understand the process of mergers and acquisitions.

➢ To analyse the reasons why companies go for mergers and acquisitions.

➢ To know about the awareness of customers of the M&A of the mentioned case studies.

1.3 SCOPE OF THE STUDY

➢ The study is limited to ONGC, Imperial, Vodafone, Idea, Hutch.

➢ The case study is mainly related to process of mergers and acquisitions and effects on markets

after mergers and acquisitions.

➢ Discuss about the process, types, advantages and disadvantages of merger and acquisition.

1.4 LIMITATIONS OF THE STUDY

➢ Time constraint.

➢ Only 3 cases are studied.

36
CHAPTER TWO: RESEARCH METHODOLOGY / DESIGN

37
DATA COLLECTION

This study is based on primary data and secondary data

The primary data was collected with the help of a Google Form as a survey to know about the

awareness of the users or customers of Vodafone, Idea, ONGC and Imperial about their respective

mergers and acquisitions.

The secondary data was collected from different websites and company websites of the respective

companies mentioned in the study

The data was also collected from researches conducted on similar topics.

SAMPLING

The data was collected from individuals living in Mumbai Suburban

The sample size was 75 responses from the age group of 20 to 40

TOOLS

The tool used by the researcher is Questionnaire which consisted of a combination of Close

ended to the target population.

SAMPLING TECHNIQUE

The sampling technique used by the researcher is simple random sampling which is the basic

sampling technique where we select a group of subjects (a sample) for study from a larger

group (a population). The researcher made a Random selection of 75 respondents from the

Mumbai suburban region for the purpose of research.

SCORING PATTERN

The scoring pattern used by the researcher was percentage (%) as it gives a better

understanding of the responses of the target population.

38
CHAPTER THREE: LITERATURE REVIEW

39
1) L P Beena in the report (2004) studies that the main focus is on studying the operating performance

and shareholder value of acquiring companies and comparing their performance before and after the

merger. He analyzed that merger does not improve financial performance in the immediate short term.

2) In economic times studies that in (2007) the world’s largest Telecom company in terms of revenue.

Vodafone p/c made a major foray into the Indian. Telecom market by acquiring a 52% stake in the

Indian Telecom company. Indian had emerged as the fastest growing Telecom market in the world

outpacing China but still had a low penetration rates.

3) Digital journal in its (2007) report focus on the global mergers and acquisitions advisory market

states, Data validation, growth, supply demands and trade analysis. The study covers important

players such as Goldman Sachs, Morgan Stanley, JP Morgan.

4) In Economic Times the article (2008) investigates that the enforcement director at officials say that

they have found are alleged money laundering in connection with the merger of air India & Indian

airlines along with the acquisition of 11aircraft by the two airlines during the UPA regime.

5) Chanchani Madhav (2008) studies shows that the deal was manly recommended by the board of

imperial. Deutsche bank was the financial advisor and corporate broker to OVC. The view was to

have important opportunity to expand on the continuing co-operation between Russia and India in

the energy sector.

6) Bedi Singh harpet in his (2010) studies that the process of merger and acquisition has gained

substantial importance in today’s corporate world. The various factors that played their parts in

facilitating that mergers and acquisitions in India are favourable government policies, buoyancy in

economy, additional liquidity in the corporate sector and dynamic attitudes. This article seeks to

explore the trends and progress in merger and acquisition in India.

7) Dr P. Natarajan in his report (2011) according to this article tells us about the design of the study

of merger and acquisition. The search showed wider framework for understanding the implications

of merger from varied perceptions. In this article is carried out in order to enhance the present level

40
of understanding in the area of merger and acquisition, gain insight into the success of failure of

mergers.

8) Arora Mani & Kumar Anil in their report (2012) examines the purpose of this paper to study the

concept of merger and acquisition in detail by taking examples of some companies. The study tells

us that nowadays many companies are acquiring more and more firms in order to expand their

business and with lots of reasons.

9) DiLi in its report on (2012) analyzed that acquiring managers overvalue targets by 63% of target

capitalization which results in acquiring managers pick targets that provide no synergy gain in 17%

of takeovers and overbid by 13% of target capitalization in the rest. The report tells us that are

independent board can reduce private benefits and mitigate agency conflicts for a acquiring firms.

10) Kar Narayan Rabi and Soni Anil in their report (2013) studied that merger and acquisition have

become a common phenomenon. It tells us that companies have used merger and acquisition to grow

and now, Indian corporate competence, market share, global competitiveness and consolidation.

11) Dongnyoung Kim in his report on (2013) examines the link between CEO’S political ideology –

conservatism – and their firms investment decision. The study shows the increase in political ideology

distance between acquirer and target leads to greater risks/costs associated with the integration

process. This report suggests that corporate political ideology plays an important role in completing

deals and determining amount cement returns.

12) Faizan Muhammad and Khan Shehzad in the report (2014) the motivation to recognize either the

assumed benefits of the deal of merger and acquisition. The study scrutinizes the issues by using the

perspective of history, waves, motives and methods to determine merger and acquisition values.

13) The Economic Times in their article (2014) studies that the acquisition of Myntra by Flipkart

through together two of the biggest E-tailors in India made possible by common investors, the

acquisition would enable Myntra to leverage or Flipkart infrastructure while allowing Flipkart to

strengthen its portfolio of products offering.

41
14) Tripathy Amit in research (2015) has analysed the study on deal between Snapdeal and

Freecharge. With its acquisition of free charge, India’s fastest growing and leading mobile. It has

brand base of 25million customers and 150000 sellers. Now Snapdeal has sold Freecharge to Axis

Bank for 90percent cover.

15) Kumar Ajit in his research from (2015) analyzed that the shareholder value of acquires and target

in India during the period 2007-2013.In the report we analyze that using acquisition data of 54 deals

involving. Change in control during this period, we find that acquires do not create value to their

shareholders at the time of the acquisition announcement. This report is developed markets.

16) In the Economic Times Mukherjee Riddhi in her article (2017) studies that the merger was carried

out on a Debt- free- cash – free basis: one exception: Airtel have to pay a part of Tata’s unpaid

spectrum liability to the department of Telecom on a deferred basis. It said that Tata tele service will

continue operation as usual till the transaction is completed.

17) Kotak Hetan (Leader of M&A tax PWC India in his research (2017) analyzed that ever since

Vodafone tax litigation took the Indian M&A landscape by storm in 2007, tax aspects surrounding

any M&A in India came to forefront. Re The report tells us that on an allied front practically all laws

which could impact M&A transactions are in 9 state of evolution. It tells us about changing towers,

and that conflicts and business impact are minimal.

18) Dubey sonam in her report” (2018) studies the purpose of concept of merger and acquisition and

how do they play a role in value creation. The study is upon past 3years merger and acquisition

transaction by number of deals and values across the world. This paper ultimately aims for

restructuring efficiency improvement and cost reduction for a company.

19) Aevoae and Eugenia Lullana George in their paper (2018) studies the perspective of the players

on the economic markets, merger and acquisition, known as M&A are external growth strategies that

enables entities to develop their business by leveraging the financial, human or economic resources

of their companies. They analyzed the merger projects, published in the official gazette of Romania

42
PART IV; the data on merger were extracted, processed and then interpreted taking into account

economic, legal, geographical criteria.

20) F E Bureau analysis the article (2018) analyzed that idea cellular Ltd & Vodafone Plc announced

complete of the USD 3.2 billion merger of their India operation to create the country’s largest

Telecom operator to take on competition from Reliance Jio. The merger put Vodafone India and idea

in a strong position to cut costs and thus compete effectively with Reliance Jio. Savings from the deal

are estimated at Rs. 14000 cr. The article says Vodafone Idea will have a fax India revenue market

share of 32.2 percent and the No.1 position in 9 circles.

21) Sankara Keshav analysis the article (2018) and tells us that it is the second biggest merger and

acquisition transaction involving an Indian company, after the merger between Vodafone India and

idea cellular.

This deal was followed by 2017 deal where essar group sold its energy unit to Russia’s rosueft and a

consortium of commodities trade trafigura and Russian put investment group United capital partners.

22) Bhan weiduo source published in Global times article (2018) analyzed India’s policy uncertainty

could see its merger and acquisition glory be temporary says Chinese. Merger and acquisition

targeting Indian companies reached $93.7 billion this year up 52% year on year, it is the highest

figure. According to experts the frequent policy shifts could be potentially risk for foreign companies

that do business in India.

23) Parigrahi Kumar Ashok, Shah Shambhavi, Rathore Amarsingh in their report (2018) has analysed

about OLA acquires taxi for sure for $200 million in cash and equity deal. Now OLA has personal

transportation space with over 1 lakh vehicles on its platform. Though OLA and TaxiForSure will

continue to operate as separate entities they are not separate. Acquisitions add both value on the

supply and demand side for OLA and TaxiForSure.

24) Lapointe Jacqueline in her research (2019) analyzed that increasing financial pressures has made

the provider and non-provider entities to engage in healthcare merger and acquisition. Providers alone

engaged are 115 healthcare merger and acquisition transaction.

43
25) Signal Astha in her Bandhan bank acquires Gruh Finance (2019) analyzed in her report that Gruh

Finance is merging with it in all share snap deal valued at approximately INR11,800 cr. The merger

is going to be jinxed as Gruh investors.

26) Dan Eberhart in his report (2019) studies that how merger and acquisition activity falling down

still last year was still most active for deals in US upstream since the price collapse of 2014. It studies

about the foundation for robust M&A activity in the oil and gas industry is re-establishing itself and

how it could result in aggressive dealing this year.

27) Taylor Charlie in the paper from “the Irish time” the article (2019) tells us the value of Irish

mergers and acquisitions rose 370per compared with 2017, with a record 163transaction taking place

worth a combined €76 billion. It tells us 2019 gave a positive start; with Galway based Hantic

therapeutics announcing a €28 million series B founding round just last week.

28) In Daily Sabah the article (2019) studies that there is still a productive year in merger and

acquisition deals which recorded in 17percent increase in total with 256 transactions. According to

this article Vardar said we expect some large scale transaction in the technology, financial services,

other sectors will also be active.

29) Mehta Aaron in his report (2019) according to this article the acquisition made public in

September has made SAIC the second largest government service contractor. SAIC CEO Tony

Moraco said engilitys multi intelligence agency portfolio along with the company’s space programs

made engility an ideal target for SAIC.

30) Singal Astha studies in the article (2019) according to this article Gruh Finance is merging with

it in all share swap deal valued at approximately INR 11,800cr. The merger is going to be jinxed as

Gruh investors are not happy as Gruh Finance stock fell down around17percent to adjust to the merger

swap ratio whereas Bandhan’s stock fell over 5%.

44
CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION

45
CASE STUDY 1:

Vodafone and Hutchison Essar case study (USD 10.9 BILLION)

Background of Hutch

• 1992: Hutchison Whampoa and Max Group established Hutchison Max.

• 2000: Acquisition of Delhi operation Entered Calcutta and Gujarat markets through

ESSAR acquisition

• 2001: Won auction for licences to operate GSM services in Karnataka, Andhra Pradesh and

Chennai.

• 2003: Acquired AirCel Digilink (ADIL – Essar Subsidiary) which operated in Rajasthan Uttar

Pradesh East and Haryana Telecom circles and renamed it under Hutch Brand.

46
• 2004: Launched in three additional Telecom circles of India namely ‘Punjab', ‘Uttar Pradesh West'

and ‘West Bengal’.

• 2005: Acquired BPL, another mobile service provider in India.

Background of Vodafone

• 2007: Vodafone acquires a67% stake in Hutchison Essar for $10.7 billion. The company is renamed

Vodafone Essar. ‘Hutch’ is re-branded to ‘Vodafone’

• 2008: Vodafone acquires the licences in remaining 7 circles and starts its pending operations in

Madhya Pradesh circle, as well as in Orissa, Assam, North East and Bihar.

• 2011: Vodafone Group buys out its partner Essar from its Indian mobile phone business. It paid

$5.46 billion to take Essar out of its 33% stake in the Indian subsidiary. It left Vodafone owning 74%

of the Indian business.

• 2014: On 11April Vodafone acquires 100 percent stake in Vodafone India. On 6August Vodafone

India launches Vodafone RED 4. New post-paid plans across India was launched.

• 2015: On 17 January Vodafone launches its IPhone plans across India

PAST AND PRESENT OF THE DEAL

Parties to the deal:

Mumbai based Hutchison Essar was India’s fourth largest mobile operator with 16%market share.

Other three were Bharati (22%), BSNL (20%) & Reliance Infocomm (18%).Vodafone came into

picture and picked up 67% stake in Hutchison Essar for $11.1 billion(Rs48,752 crore) in February

2007. In the process, Vodafone edged out Essar Group, Anil Ambani’s led Reliance Communication

(R Com) and London based Himbuja Group. Indian acquisition fits into Vodafone focus on the

EMAPA markets.

With operation in 25 countries, across five countries, 36 network partners and over200 million

customers base, Vodafone is considered as world’s leading international mobile communication

47
group. In 2006, Vodafone was world’s largest Telecom operator, with revenue to the tune of over $58

billion. After Hutchison Essar’s acquisition its revenue rose to $64.3billion ending March 2010 with

net profit of $12.5 Bn. In 2009, Vodafone’s net profit was $4.45 billion. Vodafone’s earlier presence

in India includes its venture after its merger with US based AirTouch had stakes in India’s RPG

Cellcom that had operations in Madhya Pradesh & Chennai. Vodafone had also picked up 10% in

Bharati Tele venture in2005 for $1.5 billion (Rs. 6,700 crore).

Vodafone – Essar call history

1992- Hutchison Whampoa and Max group established Hutchson Max.

1995- Hutchison partners with Essar to launch orange in Mumbai.

2003-06 – Hutchison buys operations of AirCel Digilink, Essar spacetel & BPL.

2006 – Orange named Hutch Nation Wide.

Dec’06 – Hutchison plans to divest its 52% stake & sets floor price at $14 billion.

Jan’07 – Due diligence undertaken by prospective suitors.

Feb’07 – Vodafone emerges as to bidder for 67% stake of 11.1 billion.

Vodafone – Essar call drops

Sep’07 - Income tax department of India sent $2.5 billion tax notice to Vodafone

Sep’07 – Vodafone served show cause notice by Income tax department.

Oct’07 – Vodafone moves Bombay high court against income tax notice.

Dec’08 – High court rules Vodafone Hutch deal is taxable in India.

Jan’09 – Supreme Court asks income tax to decide issue of jurisdiction.

Jan’09 – Supreme Court allows Vodafone to move high court.

31 May’10 – Income tax department claims jurisdiction to tax the transaction issue orders

7 Jan’10 - Vodafone challenges the order in Bombay High Court

8 Sep’10 – High Court discuss Vodafone plea, uphold income tax department action.

48
14 Sep’10 – Vodafone challenges Bombay High Court order in Supreme Court.

Oct’10 – Income tax department hands Vodafone $5.2 Billion tax bill.

MERGER DETAILS

➢ The partners have agreed that Hutchison Essar will be renamed Vodafone Essar

➢ On February 11, 2007 Vodafone agreed to acquire the controlling interest of 67% in Hutch-

Essar for US$11.1 billion.

➢ Deal size and stake Fourth largest deal of the year 2007(to date) at $13.3 billion ($11.1 Billion

plus $2 billion debt). Hutchison Essar valued at $18.8 billion.

➢ The sale of its interests in India will enable Hutchison Telecom to become one of Asia’s best

capitalized companies

➢ The Hutch Essar deal has netted him a neat $8.48 billion.

➢ As Telecom valuation in India started rising, Essar tried to increase its stake in the joint

venture.

➢ The key players looking to acquire Hutchison Essar were the Essar Group, Anil Ambani

owned Reliance Communications , the UK-based Vodafone, and a string of private equity

(PE) players.

Why Vodafone wanted to acquire Hutch?

➢ It is the fastest growing cellular market in the world.

➢ Largest mobile operator in India with 24.41 million subscribers.

➢ Present in 16 of 23 circles. Has license for six others barring in Madhya Pradesh.

➢ Revenues of $908 million (Rs 4086 crore) in H1 2006 against $1.29 billion (Rs 5800 crore)

in 2005

➢ Operating profits of Rs 1017 crore, EBITDA margins at 32.7 percent in H1 2006.

49
 ➢ Hutch was top industry in India in terms of ARPUs and also revenues. So to control

➢ Vodafone acquired 67% of Hutch-Essar and renamed as Vodafone Essar. But products are

branded in name of Vodafone.

➢ By this Vodafone can expand its market share and can have big growth in industry.

Valuation of the deal

➢ Hutch Essar’s value appeared so high was that it had the highest ARPUs – Rs 374, against the

national average of Rs. 335 and Bharti’s Rs348.50.

➢ While during 2005 (January – December), Hutch Essar had revenue of Rs 5,800 crore, it

notched Rs. 4,086 crore in the first half of 2006.

➢ The key advantage was that during 2006, Hutch added 10.67 million subscribers.

➢ The $54.8 billion Vodafone bagged Hutchison Essar, it valued the company at $18.8 billion

or $770 per subscriber.

Valuation of Hutch

• Hutch Essar 100% enterprise value: 18.8

• Hutch Essar debt: 1.33

• Equity Value: 17.47

• Value of 67% stake: 11.10

• Other Debt: 0.63

• Net Value: 11.08

• Value from Bharati stake sale: 1.62

• Net outflow for Vodafone: 9.46

50
Interpretation of the Valuation

➢ The increasing subscribers base has also meant that while average revenues per user (ARPU)

are falling, revenues are on the rise.

➢ The cellular Operators Association of India (COAI) data shows that though ARPU fell by

10.66per cent in the July-September 2006 quarter over the same period last year, revenues

went up by 57.85 per cent.

➢ By then Vodafone expects to control 20-25 per cent of the market against 16 per cent now.

➢ The enterprise value per subscriber that Vodafone paid at $770.2 is much lower than the

$1,066 it valued each Bharati subscriber in 2005.

➢ Most importantly, the ARPU of Us 374 for a Hutch is higher than Bharti’s Rs. 349.

➢ For 24.41 million subscribers, that works out to annual revenues of Rs. 10,955 crore

Financing the Deal

➢ Vodafone has $5 billion from the sale of its Japanese unit for $15 billion last year (the

remaining $10 billion is expected to go back to shareholders).

➢ It will also get $1.62 billion cash from its 5.6 per cent stake sale in Bharati.

➢ In addition, Vodafone has free cash reserves (for the first six months of 2006) in excess of $3

billion.

➢ It has also sold its 25 per cent stake in Swiss com Mobile and exited Belgium.

Taxation of the Deal

➢ Finance bill 2008 also propose to ensure that capital gains tax should be levied on acquisition

in India.

➢ Buyer will be responsible for paying the tax after purchasing any capital asset – a share or

debenture of a company in India.

51
 ➢ The buyer will have to deduct TDS and failure to do so would leave him liable to pay the tax.

The tax will have to be paid with a retrospective effect from June 2002.

➢ Department sent a notice to Vodafone, asking for about $1.7 billion as capital gains tax in the

sale of 52% stake in Hutchison Essar to Vodafone.

➢ It argues that the company should deducted tax at source while making payment to HTIL.

Strategic Goals behind the Deal

➢ Emerging market focus.

➢ Large players and competition in the market.

➢ To provide superior shareholder returns.

➢ To delight it customer.

➢ To leverage global scale and scope, especially in deliver 3G services.

➢ To expand market boundaries.

➢ To build the best global Vodafone team.

➢ To be a responsible business and manage its impact on society, the environment and economy.

Synergies claimed

➢ Vodafone gets access to the fastest growing mobile phone market in the world that is expected

to touch 500 million subscribers by 2010.

➢ Cellular penetration in rural India is below 2% , but 67% of India’s population lives in rural

India.

➢ 3G is set to take off in India, allowing data and video to ride on cellular networks.

➢ India is key to Vodafone strengthening its presence in Asia, a region seen as the big Telecom

story.

➢ Hutchison-Essar is not just the #4 player but also one of the better-run companies with higher

average revenue per subscribers.

52
Conclusion

➢ The study has concluded that Merger and Acquisition indeed had effect on the operating

performance of the entities involved. One significant aspect that emerges while analysing

Vodafone – Hutch Essar deal was that macro-economic variables has played a significant

contribution to the operational aspect of company post-merger and acquisition.

➢ In Vodafone – Hutch Essar deal legal and tax issues worked as deterrent to achieve success.

SURVEY QUESTIONS

1. Were you aware about the Vodafone and Hutch Essar merger?

66.7% of the population was aware of the merger of Vodafone and Hutch, whereas 33.3% of the

population was completely unware of this merger.

This means that majority of the population was aware of the Vodafone and Hutch merger.

2. Which year did Vodafone and Hutchison Essar merge?

53
 54.7% of the population was aware about the year of the merger of Vodafone and Hutch, whereas

45.3% of the population did not know about the year of the Vodafone and Hutch merger.

This means that out of those who were aware of the merger, only half of the population was aware

about the year of the merger.

3. Who had a better holding in the merger?

76% of the population knew that Vodafone had a higher sharing in the merger between Vodafone and

Hutch, whereas 24% of the population thinks that Hutch Essar had a higher holding in the said merger.

54
This means that majority of the population was aware of the higher holding in the Vodafone and

Hutch merger.

To conclude the survey conducted for this Case study, the said population was aware of the Vodafone

and Hutch Essar merger with the basic information on the same.

55
CASE STUDY 2:

ONGC and Imperial case study ($2.58 Billion)

Introduction:

The oil and gas sector is an important industry in India and plays a vital role in decision making for

all other important section in economy. India was the third largest consumer of oil in the world in the

year 2015.The Oil and Natural Gas Corporation Limited (ONGC) was the largest oil exploration and

production company in India. The company enjoyed a dominant position in the country’s

hydrocarbon sector with 84% market share of crude oil and gas production. Around 57%petroleum

exploration licenses in India for over 588000 sq. Km. belong to ONGC.

ONGC’s major products included petroleum, crude natural gas, liquefied petroleum gas(LPG),

kerosene and petrochemical feedstock. The company was the first to achieve rupees 100billion net

profits in the Indian corporate history. For the fiscal year ended 2002-03, the company reported gross

revenues of RS.353.872 Billion and net profit of RS. 105.293 billion.

With market capitalization of US $15 billion, ONGC was ranked 260 in Business Week’s Global1000

list of the world’s top companies by market value for 2003-2004. Since the mid 1990s, ONGC had

faced the problem of declining crude oil and gas production. Company made efforts to consolidate

56
its position in the business by acquiring foreign oil equity through its wholly owned subsidiary,

ONGC Videsh Limited (OVL)

Background of ONGC Videsh

➢ ONGC Videsh, a Miniratna Schedule “A” Central Public Sector Enterprise (CPSE) of the

Government of India under the administrative control of the Ministry of the Petroleum &

Natural Gas is the wholly owned subsidiary and overseas arm of Oil and Natural Gas

Corporations Limited (ONGC), the flagship national oil (NOC) of India. The primary business

of ONGC Videsh is to prospect for oil and gas acreages outside India, including exploration,

development and production oil and gas.

➢ ONGC was incorporated as Hydrocarbon India Pvt Ltd on 5march 1965 to carryout

exploration and development of Rostam and Raksh oil fields in Iran and undertaking a service

contract in Iraq. The company was rechristened as ONGC Videsh Limited on 15th June 1989

with the prime objective of marketing the expertise of ONGC board. The nineties saw the

company engaged in limited exploration activities in Egypt, Yemen, Tunisia and Vietnam.

Background of Imperial

➢ Imperial Energy Group is a part of Indian National Gas Company, ONGC Videsh Ltd (OVL).

Imperial Energy includes 5 Independent enterprises operating in the territory of Tomsk region

including 2 oil and gas producing enterprises.

➢ Imperial Energy is a modern company focusing on efficient oilfield development and long

term oil production growth. Scope of activities and core assets of the company are clustered

in the North and West part Tomsk region.

➢ The head office of Imperial Energy is located in Tomsk. The company is run by the skilled

management team with working experience in more than 18countries. Executives and

57
 specialists of the company ensure successful implementation of advanced technologies,

project and corporate management and the best practices.

➢ Imperial Energy employee 725 people, the majority of whom are working at the oilfields of

the company

Motives of the merger

➢ The motives behind every merger and acquisition are often numerous. Corporations may

merger because they want to increase the market share, spread their cost, spread their costs

and risks, become more international and also for the need to transform their corporate

identity.

➢ India’s explorers have been outbid by Chinese rivals as the two most populous nations

compete for energy assets globally. The south Asian nations is looking to invest in oil projects

in Russia, Kazakhstan, Iran and Africa as the government expects economic growth accelerate

to as much as 10 percent by 2012, fuelling demands for vehicle and electricity. India imports

more than three quarters of its oil requirements.

➢ Imperial would be biggest overseas acquisitions for ONGC, which has as much as6.8 million

barrels of oil equivalent in reserves. The explorer paid $ 1.7 billion to buy a stake in Exxon

mobile corporate Sakhalin – I field in Russia and $785million for stake in the greater Nile

project in Sudan, both in 2003. State run ONGC owns 20 percent of Sakhalin which began

pumping oil and produced 250000 barrels a day in February 2000.

➢ ONGC shares gain 1.3 rupees or 0.3 percent to 1,015.9 at the close in Mumbai trading.

Imperial energy declined 2 percent to 1,215 pence in London after reaching a seven month

high last week.

➢ Imperial energy has 450 millions of barrels of Russian registered reserves, according to July

company statement. The company is seeking to bring these figures closer in line with its

58
 estimates based on society of Petroleum Engineers standards after the country’s government

raised questions about differences between the two.

➢ The company which operates primarily in the Siberian region of Tomsk had 920million of

barrels of oil equivalent of proven and probable reserves as of December 2007.

Key supplier

➢ Drilling successes at the Kiev Eganskoye field on the east side of the Ob river came after the

yearly DeGolyer and MacNaughton audit and will likely to increase valuations when they are

included in the next report, Artem Konchin, an oil and gas analyst at UniCredit Aton in

Moscow said August 21.

➢ Imperial energy said in April it pumped 7000 barrels a day in first quarter. The company plans

to produce 25000 barrels of oil a day by the end of the year and expects to start output at the

Kiev Eganskoye field in September.

➢ ONGC reported a drop in output in the year through March, India’s oil minister Murli Deora

told lawmaker April 15. India estimates demand for oil will rise 62percent over the next five

years to 241 million tons of year, or 4.8 million barrelsa day.

Profile booster

➢ One state controlled Russian energy company, either OAO Gazprom or OAO Rosneft, is

likely to be involved in any transaction involving Imperial Energy, the Financial Times

reported August 22.

➢ Large Russian oil companies are looking to diversify downstream internationally,

“Renaissance Capital Chief strategist David Aserkoff said today. They may be able to strike

a deal where they could partner with a company like ONGC.

➢ Imperial Energy is far from being a strategic asset, Konchin said in response to concern that

the Russian state may insist on controlling the company.

59
 ➢ It is a collection of small fields. It’s nice because it is young and it may give your production

profile a yearly boost instead of a decline, “ he said.

Investment plans

➢ ONGC plans to invest a total 240 billion rupees ($6 billion) to boost Output from its domestic

and overseas fields, Chairman R.S.Sharma said in April. The company expects output of 8.5

million tons of oil and gas from overseas field sand production of 9 million tons in the year

ending March 2009.

➢ The explorer plans to produce about 20 million metric tons a year of oil equivalent by 2020

from its overseas fields from 8.76 million last year, Sharma said in June. The company has

increased its overseas assets to 38 from a single one seven years ago.

➢ ONGC Videsh limited. OVL is a wholly-owned subsidiary of Oil & Natural Gas Corporation

Limited (ONGC), a company listed on the National Stock Exchange and Bombay Stock

Exchange in India. The Government of India is ONGC’s major or controlling shareholder,

having a share of 74% interest.

➢ Imperial Energy Corporation PLC. Imperial Energy corporations are focused on the

Commonwealth of Independent States and in particular the Russian Federations. Imperial

Energy is listed on the Official List of the London Stock Exchange.

➢ On 26 August 2008, the boards of OVL and Imperial Energy announced the terms of

recommended cash offer to be made by a wholly owned subsidiary of OVL, Jarpeno, for the

entire issued and to be issued share capital of Imperial Energy. The offer was valued at

Imperial Energy at £1.4 billion.

➢ The offer was preconditioned cash offer. It specificed only two preconditions to the posting

of the offer document. These related respectively to Russian anti-monopoly and Russian

foreign investment clearances. No mention was made of any need for Indian Government

approval.

60
➢ On 11 November 2008, OVL announced that the pre-condition to the offer specified in the

announcement had been satisfied. Accordingly, pursuant to rule 30.1 of the code, the 28 days

period within which the offer document should normally be posted to Imperial Energy

shareholders due to expire at midnight on Tuesday 9 December 2008.

➢ On 4 December 2008, OVL sought an extension from the Executive on behalf of the panel of

the time limit for posting the offer document to 19 December 2008 to enable of the Indian

Government to the posting of the offer document to be obtained.

➢ Having considered the application and discussed it with OVL’s advisers, the Executive

refused OVL’s application late on 4 December 2008. On Friday 5 December 2008, OVL

stated its intention to appeal against the Executive’s decision to the hearings committee of the

panel (the “Committee”). The appeal was heard on Monday 8 Decenber 2008.

61
AFTER ACQUSITION EFFECTS

• The price dipped sharply.

• Their oil output was estimated at 80,000 bpd at the time of purchase but now reduced to

15,000 bpd.

SWOT ANALYSIS

STRENGTH

• Growing Demographics

• Hard industry for competitor to enter.

• Strong Infrastructure

WEAKNESSES

• Ever changing laws

OPPORTUNITIES

• Alternatives fuels before competitors.

• Expanding into more areas.

THREATS

• Threat of alternative fuels.

62
SURVEY QUESTIONS

1. Were you aware about the ONGC and Imperial acquisition?

61.3% of the population was not aware about this acquisition, whereas 38.7% of the population was

aware about this acquisition.

This means that majority of the population was unware about this acquisition.

2. Which year did ONGC acquire Imperial?

63
Only 44% of the population knew about the year ONGC acquired Imperial but the rest 56% did not

know about the year of acquisition.

This means that the majority of the population was unaware of the year of acquisition.

3. Did this acquisition affect the oil industry positively?

64
56% of the population was unsure the effects of this acquisition, 20% of the population believed that

there was no positive impact of this acquisition whereas only 24% of the population was right about

the positive impact of the ONGC- Imperial acquisition.

This means that the said population was not aware about the acquisition impact.

To conclude the survey conducted for this Case study, the said population was NOT aware of the

ONGC – Imperial acquisition with the basic information on the same.

65
CASE STUDY 3:

VODAFONE AND IDEA CASE STUDY

On 31 August 2018, Vodafone India merged with Idea Cellular and was renamed as Vodafone Idea

Limited. However, the merged entity continues using both the Idea and Vodafone brand. Currently,

the Vodafone Group holds a 45.1% stake in the combined entity, the Aditya Birla Group holds 26%

and the remaining shares will be held by the public. Kumar Mangalam Birla heads the merged

company as the chairman, with Balesh Sharma as the CEO.

Idea cellular limited

Idea cellular is an Indian mobile network operator based in Mumbai, Maharashtra. Idea is a pan-

Indian integrated GSM operator offering 2G, 3G and 4G mobile services. Idea is the third largest

mobile operator by subscriber base

➢ Legal form: Public Limited Company

➢ Industry: Telecommunication

➢ Main product: SIM cards, telecommunication service, Wireless broadband

➢ Headquarters: Mumbai India

66
 ➢ Revenue: 354 billion (2016)

➢ Member: 193 billion (February 2017)

Vodafone Limited

Vodafone India is the second largest mobile network operator in India by subscriber base, after Airtel

with a market share of 18.42% .It is headquartered in Mumbai, Maharashtra. It has approximately

200 million customers as of August 2016.

➢ Headquarters : Mumbai

➢ Revenue : 425 billion INR

➢ Founded : 1994

➢ Parent organization : Vodafone

➢ Subsidiaries : Vodafone mobile services limited, more

➢ Industry : telecommunication

Merger details

➢ On 20th March 2017, Vodafone India and Idea Cellular agreed to merge and create a biggest

Telecom industry in India with a customer base of over 394millions.

➢ Vodafone India own 45.1% entity after transferring 4.9 to the promoters of Idea cellular for

Rs. 3874 crores in cash post the merger. The promoters of idea group will hold 26% and rest

of shares will be owned by public so we can say that it is an 50-50 partnership.

➢ Through this merger both of the companies became the Countries largest payers with revenue

of market share of 43% leaving Bharati Airtel in the second slot with a share of 33%.

Transaction details

The transaction will be structured as follows:

67
➢ Idea will contribute of its assets including its standalone towers with 15.4ktenancies and its

11.15% stake in Indus towers.

➢ Vodafone will contribute Vodafone India including its standalone towers with 15.8k tenancies

but excluding its 42% stake in Indus towers.

➢ The merger ratio is consistent with recommendations from the joint independent valuers.

Based on Idea’s undistributed share price and an enterprise value for Idea’s mobile business

on INR 722 billion, excluding it’s 11.15% stake in Indus. This is equivalent to valuing

Vodafone India at6.4 EBITDA and Idea excluding its stake in Indus Towers at 6.3 EBITDA.

➢ Vodafone’s contribution of net debt will be dependent on Idea’s net debt at completion as

well as customary closing adjustments. Vodafone will contribute INR 25billion more net debt

than Idea at completion. Based on Idea’s net debt on INR 527billion as at 31December 2016,

this would have implied INR 552billion of debt to be contributed by Vodafone.

➢ Vodafone will own 45.1% of the combined company after transferring a4.9% stake to the

Aditya Birla Group for INR 39billion in cash, concurrent with completion of the merger. The

Aditya Birla Group will then own26.0% of the combined company and Idea’s other

shareholders will own the remaining 28.9% .

➢ The Aditya Birla Group has the right to acquire up to a 9.5% additional stake from Vodafone

under an agreed mechanism with a view to equalising the shareholdings over time. If the

Aditya Birla Group does not equalise its stake, Vodafone will reduce its holding in order to

equalise its ownership with that of the Aditya Birla Group. Until equalisation is achieved, the

additional shares held by Vodafone will be restricted and votes will be exercised jointly under

the terms of the shareholders agreement.

68
History

➢ On 20 March 2017, Idea and Vodafone India announced that their respective boards had

approved a merger of the two companies. The merger got approval from Department of

Telecommunications in July 2018.

➢ On August 30, 2018, National Company Law Tribunal gave the final nod to the Vodafone-

Idea merger.

➢ The merger was completed on 31 August 2018, and the newly merged entity is named

Vodafone Idea Ltd. The merger created the largest Telecom Company in India by subscriber

and by revenue. Under the terms of the deal, the Vodafone Group holds a 45.2% stake in the

combined entity, the Aditya Birla Group holds 26% and the remaining shares will be held by

the public.

Need for merger

➢ To get full benefits of synergy and synergy benefits which results in higher profits and

leverage expected to reduce, the combined entities equity valuation also rises through the

merger market share and no. of customers also increase and provide boost in the revenue of

both the firms.

➢ Helps to reduce the effect of tariff war that generally occurs in Telecomarket.

➢ Both companies enjoy benefits in terms of network and also in terms of service.

➢ To become biggest Telecom Sector in India.

Effects of merger

➢ Experts said Vodafone India and idea cellular attempts to unlock synergies across 22 circles

aimed a bruising price war with 4G networks not yet up to market expectations could have

limited success.

69
 ➢ The Vodafone-Idea merger entity expects to extract synergy benefits worth$10 billion in net

present value terms after integration of costs and spectrum liberalization payments and an

estimated $2.1 billion of savings by the fourth year of completion.

➢ Entry of Jio has launched big price war. With its free services, Jio has upset the biggest

players. The Vodafone-Idea merged entity will only add fuel to the fire. Which ultimately

affects the tariff plans price.

➢ Overall consolidation in the debt-ridden Telecom industry will lead to better financial healthy

and sustainability of companies. Since consolidation will leave only three big companies in

industry, there will be less competition and bigger revenue.

➢ Vodafone-Idea merger will results in duplication of resources across the country which

require job cuts too.

➢ The Vodafone-Idea merger in Telecom sector will lead to pooling of vital resource and

infrastructure, which will inevitably lead to better service quality and customer experience.

Benefits of merger

➢ A merger entity will also have reduced financial challenges, which will encourage it to spend

more on quality of services.

➢ Vodafone and Idea No. 2 and No. 3 respectively will become the No. 1players in the Indian

Telecom market, pushing the present No. 1 Bharati Airtel to No. 2

➢ It will beneficial for the Telecom industry, the government as well as consumers.

➢ Customers will also benefits from better infrastructure better services and better tariffs of the

combined entity.

➢ Together Vodafone and Idea will have 400 million customers, and will combine towers,

payments banks and wallets.

70
Benefits to customers

➢ The change of better is more.

➢ Customer was a king in market due to impact on tariff prices.

➢ Chance of better and faster network is more.

➢ Also both the companies start working on better coverage of 4G and 5G,which ultimately

grew the future expectation of customers.

Merger faced hurdles

➢ Spectrum shares –according to TRAI that spectrum holding not be higher than50% in each

band individually. So according to experts, the combine will breach the spectrum capacity in

at least five circles. This means the merged entity would have to sell the excess spectrum to

the competitors such as Airtel.

Operations

➢ Vodafone Idea Limited competes with others major mobile operators including Airtel, BSNL,

MTNL, and Reliance Jio. Tata Docomo – with whom Vodafone Idea Limited competed is

now in the process of merging their business with Airtel. Vodafone Idea Limited has gone far

ahead of the rest of these competitors with a Revenue Market Share of over 32.2%.

➢ On 19 May 2010, in the 3G spectrum auction Vodafone Idea Limited paid Rs.57.68 billion

for spectrum in 11 circles. Vodafone Idea Limited launched its first 3G service in 2011.

➢ As of September 2018, Vodafone Idea Limited offers 4G LTE services on its own spectrum

in all the Telecom circles.

71
Financial results

➢ Vodafone Idea posted a consolidated loss of Rs 5,005.7 crore for the quarter ending December

2018. The Telecom posted a loss of Rs 4,973.80 crore in these quential quarter ended

September 30.

➢ Since the merger, it’s the first quarterly earnings reported by the combined entity. The total

income was reported at Rs 11,982.8 crore during the same quarter. The income increased by

52 per cent compared to Rs 7,878.6 crore in the previous July – September quarter.

Impact of merger on Telecom Industry

➢ There can be initiatives based on the renewal of price discipline for the disruptive entry by Jio

has caused some serious misbalance.

➢ The poor financial health of the Telecom sector can be observed and through such mergers

there will be infusion of health and life since India is fastest growing market in terms of the

subscriber base.

➢ Through the merger, Vodafone and Idea will overcome their debts and large sum of credit

will be infused in the system.

➢ The deal has also saved both the Telecom companies from selling off their business, as was

being planned by them initially and this would directly impact the quality of services being

provided by different players in the industry.

➢ The merger will surely boost the pace of the Telecom sector. It has also been found that the

savings, synergies and also the spectrum will have substantial impact on the escalating

growth. There will be saving of over 60 percent of the operations cost and this will aid in

improving the quality and performance of the service through investments from the saved

money. Enhancement in network infrastructure will be observed while the operational

efficiencies have a chance to reach excellence.

72
Key highlights

➢ Vodafone is combined to its subsidiary. Vodafone India is combined with Idea which is listed

on the Indian stock exchanges.

➢ Highly complementary combination will create India’s largest Telecom operator with the

country’s widest mobile network and a strong commitment to deliver the Indian government’s

Digital Indian vision.

SURVEY QUESTIONS

1. Were you aware Vodafone AND IDEA merger?

80% of the population was aware about the Vodafone and IDEA merger, whereas only 20%

population was unaware of the said merger.

This means that the majority of the population was aware of the Vodafone and IDEA merger.

73
 2. Which year did Vodafone and IDEA merge?

41.3% of the population thinks that the merger took place in 2020, 9.3% and 8% think that the

merger took place in 2010 and 2011 respectively, whereas only 41.3% of the population know the

correct year of the merger that is 2018.

This means that majority of the population is not aware about the correct year of merger of

Vodafone and IDEA.

3. Who had a better holding in the merger?

74
74.7% of the population is aware that Vodafone holds a higher holding in the Vodafone and IDEA

merger, whereas 25.3% of the population feels that Aditya Birla’s IDEA holds a higher holding in

the said merger.

This means that majority of the population is aware of the correct holdings of the Vodafone and

IDEA merger.

To conclude the survey conducted for this Case study, the said population was aware of the Vodafone

and IDEA merger with the basic information on the same.

75
CHAPTER FIVE: CONCLUSION

76
➢ Merger and Acquisition are considered as important change agents and are a critical

component of any business strategy. The known fact is that with businesses evolving only the

most innovative and nimble can survive. That is why it is an important strategic call for a

business to opt for any arrangements of Merger and Acquisition.

➢ The merger and acquisition have various effects on market and the news of the company

getting merged or acquired gets fluctuations on the customers view.

➢ Vodafone is combined to its subsidiary. Vodafone India is combined with Idea which is listed

on the Indian stock exchanges.

➢ Highly complementary combination will create India’s largest Telecom operator with the

country’s widest mobile network and a strong commitment to deliver the Indian government’s

Digital Indian vision.

➢ The OIL price dipped sharply.

➢ Their oil output was estimated at 80,000 bpd at the time of purchase but now reduced to

15,000 bpd.

➢ The study has concluded that Merger and Acquisition indeed had effect on the operating

performance of the entities involved. One significant aspect that emerges while analysing

Vodafone – Hutch Essar deal was that macro-economic variables has played a significant

contribution to the operational aspect of company post-merger and acquisition.

➢ In Vodafone – Hutch Essar deal legal and tax issues worked as deterrent to achieve success.

➢ The biggest impact of this merger was to improve the telecom infrastructure that existed in

the country. Even though after the entry of Reliance Jio back in 2016, the telecom sector

improved greatly in terms of connectivity but the quality of service had gone down drastically.

➢ This was a major consequence of Jio's cruising dominance in the industry which backed other
major players to take precarious steps to maintain their stand in the Indian telecom market.

➢ Vodafone India was the second largest player of the Indian Telecom Industry in terms of

subscriber base while Idea Cellular Limited has the third largest subscriber base in India. Idea

77
 Cellular was a subsidiary of Aditya Birla Group. This merger did not only create a telecom

giant but has had wide-ranging implications for the industry, services, the staff and consumers

as well as it pushed more merger moves in the telecom sector.

➢ ONGC (Oil and Natural Gas Corporation) in India acquired Imperial Energy, the UK based

firm operating in Russia for $1.9 billion in 2008. This acquisition was the second largest

investment made by ONGC in Russia.

➢ Imperial Energy was an upstream oil and gas exploration and production company which had

oil producing blocks in Western Siberia, which was considered to be the most productive oil

producing part of Russia.

➢ The acquisition deal began in August 2008. 98% of the shareholders of Imperial Energy

approved the deal in December 2008 so the deal became unconditional for ONGC. Raising

finance for this deal was the biggest challenge for ONGC.

➢ The acquisition value in the oil and natural gas industry was normally decided by the

prevailing crude oil prices at the time of the deal. When ONGC made the bid, crude oil prices

were hovering between $115 to $120 per barrel. However, with the subsequent fall in oil

prices due to the global financial crisis, there were concerns regarding profitability of the deal.

With this acquisition ONGC added one more strong asset to its portfolio.

Other successful and recent mergers are the Bank of Baroda, DENA Bank and Vijaya Bank, here is

what the researcher has found out about it’s positive impact:

1) As the three nationalized banks, Bank of Baroda NSE 0.12% Dena Bank and Vijaya Bank merged

to form the second largest public sector bank in the country, the unified management Monday said it

would benefit customers, as well as employees in a big way.

78
2) Vijaya Bank was founded in Karnataka's Dakshina Kannada district in 1931 by A B

3) Dena Bank, numbered after its founder Devkaran Nanjee, came into being in 1938 in Mumbai.

4) The consolidated bank, which went into effect from Monday, will be the second largest public

sector bank in the country having wider geographical reach with 9,500 plus branches, the bank

officials said.

5) It would have more than 13,400 Automated Teller Machines and above 85,000 employees to serve

over 12 million customers, said the officials at a press conference here to share details about the

merger.

6) The 120+ million customers will experience superior banking services and benefit from wider

product range including cash management solution, supply chain financing, financial planning,

wealth management," said Birendra Mar, general manager of Bank of Baroda zonal office here.

7) Kumar added that the employees will benefit from the diverse opportunities.

8) "The service conditions of the employees will not be impacted and the interests of employees will

be fully protected.

9) The best of HR practices adopted by cash of the banks will be examined for adoption, Kumar said.

10) Bank of Baroda was established in July 20, 1908 in erstwhile Baroda, now known as Vadodara

in Gujarat.

79
Hence, the researcher concludes that A corporate merger or acquisition can have a profound effect

on a company’s growth prospects and long-term outlook. But while an acquisition can transform the

acquiring company literally overnight, there is a significant degree of risk involved, as mergers and

acquisitions (M&A) transactions overall are estimated to only have less than a 30% chance of success.

80
CHAPTER SIX: BIBLIOGRAPHY

81
WEBSITES:

➢ www.macouncil.org

➢ www.themiddlemarket.com

➢ www.GlobalMA.com

➢ www.Mergermarket.com

➢ www.moneycontrol.com

➢ www.investopedia.com

➢ www.economictimes.com

➢ www.digitaljournal.com

➢ www.dailysabha.com

➢ https://www.researchgate.net/publication/337415348_A_Post-

Merger_Analysis_of_Vodafone-Idea_Ltd

➢ http://www.ibscdc.org/Case_Studies/Strategy/Mergers,%20Acquisitions%20an

d%20Takeovers/MAA0203IRC.htm

REFERECES:

1. Beena P L in the report “A study of recent merger and acquisition in India and their impact on the

operating performance and shareholder wealth” (2004)

2. Madhav A chanchani “ONGC to acquire UK’S imperial energy for $2.58 billion” (2008)

3. Harpet Singh bedi in his “merger and acquisition in India-an analytical study” (2010)

4. Dr P. Natarajan in his report “Efficacy of merger and acquisition in Indian banking industry” (2011)

5. Ms. Mani Arora & Mr. Anil Kumar in their report “ A study on mergers and acquisitions –

it’s impact on management and employees” (2012)

6. DiLi in its report on “structural investigation of acquiring managers incentives in takeovers” (2012)

82
7. Rabi Narayan Kar and Anil soni in their report “merger and acquisition in India : A strategic impact

analysis for the corporate enterprises in the post liberalization period” (2013)

8. Dongnyoung Kim in his report on “the effect of CEO conservatism on merger and acquisition

decisions” (2013

9. Mr Muhammad Faizan and Shehzad Khan has in the report “merger and acquisition a conceptual

review” (2014)

10. Amit tripathy in research “The deal between snapdeal and freecharge- A strategic choice or mere

coincidence” (2015)

11. Ajit Kumar in his research from “who gets what?” (2015)

12. Hetan kotak (Leader of M&A tax PWC India in his research “merger and acquisition : the

evolving Indian landscape” (2017)

13. Dubey sonam in her report “a study on merger and acquisitions – A business strategy for value

creation” (2018)

14. Mr Aevoae and George Lullana Eugenia in their paper “A study on the characteristics of the

Romanian merger market in the European context” (2018)

15. F E Bureau analysis the article “idea, Vodafone complete merger to become country largest

telecom” (2018)

16. Keshav Sankara analysis the article “Walmart-Flipkart deal: How it stacks up against other big-

ticket merger and acquisition (2018)

17. Bhan weiduo source published in Global times article “ India’s merger and acquisition glory could

be short lived as investors way return to China after facing policy uncertainty” (2018)

18. Dr. Ashok Kumar Parigrahi, Shambhavi Shah, Amarsingh Rathore in their report “Success story

of a startup – A case study of OLA cabs” (2018)

19. Jacqueline lapointe in her research “Major Health care mergers and acquisitions making waves

(2019)

83
20. Astha signal in her “A merger of affordable Housing & Loans”. Bandhan bank acquires Gruh

Finance (2019)

21. Dan Eberhart in his report “oil sector primed for major merger and acquisition activity” (2019)

22. Charlie Taylor in the paper from “the Irish time” the article “Irish merger and acquisition up along

with value of deals” (2019)

23. Mehta Aaron (2019) “In case of what DoE really does”

24. Astha Singal studies in the article “ A merger of affordable Housing and loans :Bandhan Bank

acquires Gruh Finance” (2019)

84
ANNEXURE

85
1/2/2021 45209190039- MCom Project - Google Forms

45209190039- MCom Project

Questions Responses 75

A study on mergers and acquisition with the

help of case studies
This survey is conducted to know the awareness about mergers and acquisitions of the case studies
selected for this study

Were you aware about the Vodafone and Hutchison essar merger? *

Yes

No

Which year did Vodafone and Hutchison essar merge? *

2000

2001

2007

2011

Who had a better holding in the merger?

https://docs.google.com/forms/d/17GszkrdO6f8A7NIZAaN4rXoDtnD2lGUPG1hzXlJ5eRo/edit 1/3
1/2/2021 45209190039- MCom Project - Google Forms
Who had a better holding in the merger?
*

Vodafone

Hutchison Essar

Were you aware about the ONGC and Imperial acquisition? *

Yes

No

Which year did ONGC acquire Imperial? *

2000

2001

2008

2010

Did this acquisition affect the oil industry positively? *

Yes

No

Maybe

Were you aware Vodafone AND IDEA merger? *

Yes

No

https://docs.google.com/forms/d/17GszkrdO6f8A7NIZAaN4rXoDtnD2lGUPG1hzXlJ5eRo/edit 2/3
1/2/2021 45209190039- MCom Project - Google Forms

Which year did Vodafone and IDEA merge? *

2010

2011

2018

2020

Who had a better holding in the merger? *

Vodafone

IDEA

https://docs.google.com/forms/d/17GszkrdO6f8A7NIZAaN4rXoDtnD2lGUPG1hzXlJ5eRo/edit 3/3