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~Comparative Evaluation Strategies in Mergers
and Acquisitions




Business Organizations while going Ior corporate restructuring in the Iorm
oI Mergers or Acquisitions do test the water Irom various perspectives. This
is where arises the importance oI conducting an exercise Ior evaluating
strategies Ior the project and then a comparison has to be made so that the
interest oI the stakeholders oI both the entity is not disturbed.

To do the evaluation method oI valuing a Iirm and the impact oI merger in
the organization, primary data and analytical discussion was obtained Irom
KPMG and Mr. Anindo Dutta (C.A). Further analysis oI recent mergers was
done to arrive at the conclusion. This thesis is an attempt made to Iind out
the optimum evaluative strategies used by companies in mergers and
acquisition, which commences Irom valuing the Iirm to evaluating the
merged entity.

To do the evaluation the capital budgeting decision has to be done by very
careIully estimating the projected Iree cash Ilows. For doing so, one has to
have an in-depth knowledge to Iorecast the market the merged entity is
entering into. Once this is done then comes the mode oI paying the acquired
Iirm. The optimum strategy Ior paying the acquired Iirm will depend upon
the nature oI acquisition.

Once the payment mode is determined then an evaluation is to be done to
Iind out whether the brand, the organization culture strategically Iits each
other. Then once all these evaluations are done then only the M&A deal
should be Iinalized, Ior which, a team has to be Iormed with representative
comprising Irom both the corporation.

In Indian Inc M&A activity has grown to unprecedented level and will grow
even Iurther. Companies will merge with each other in and particularly - the
textile, FMCG, IT & BPO sector in India have witnessed maximum business
restructuring Ior the year 2006. However, with more than halI oI these deals
Iails to deliver their expected results, and so comparison oI evaluation
strategies in M&A is central to merger and acquisition decision making.



I take this opportunity to express my deep sense oI gratitude to my thesis
guide ProIessor Ramakrishna Ior his valuable guidance, keen interest and
helpIul criticism during the course oI study.

I express my sincere thanks to Project Guide Ms. Rashmi Sundriyal, Ior
providing all necessary help during the project work.


Table of Contents

Introduction & Literature Review
Mergers and Acquisition: An overview
Background oI the Problem
BeneIits and Scope oI the Research

Problem Context
The Corporate perspective
Case Study
Valuing Synergy
Evaluation Strategies in M&A
Tata Tea ties the knot with Tetley



Thesis Response Sheet

Mergers and Acquisition: An overview

Merger is an inevitable phenomenon oI the nature, which is very promptly
reIlected in the Iormation oI the universe itselI. Even the human race started
with a merger oI two cells only and since human civilization started we Iind
lot many examples where kings, came out Irom the kingdom and dreamed
about merging other territories to gain strength and power.

Business world has also been not an exceptional Irom this phenomenon.
Every day we Iind news Irom diIIerent sectors oI industries about mergers
and acquisitions taking place to enhance synergy or to achieve speciIic
Iinancial goal either in the Iorm oI cost saving and economies oI scale. At
the same time, it is obvious that there is an increase in access to capital or
believes that undervalued company can be turned around.

However, with more than halI oI the deals Iails to deliver their expected
results, a comparison oI evaluation strategies in M&A is central to merger
and acquisition decision making. Each deal is so unique in terms oI size,
industry Iocus, or geographical orientation and the evaluation strategies that
there cannot be only one-evaluation strategies, which is uniIormly

One must see that the deal must deliver the long-term growth and sustained
proIitability. Emphasis should be on how the two companies Iit together in a
practical or Iinancial sense, and not on whether they could truly combine to
make a whole that was greater than the sum oI its parts.

As the world becomes a truly global market place, more and more overseas
mergers take place and India is not an exceptional too. Globalization,
privatization and relaxation oI controls have triggered unprecedented
upsurge in cross border M&A by Indian companies. However, the process oI
restructuring oI Indian industry did not commence immediately aIter
liberalization. It was the industrial slow down since 1996 to 1998, which
squeezed the proIit margins oI Indian corporate entities and Iorced them to
restructure their operations to achieve grater competitiveness

India has acquired 120 Ioreign companies between 2001-02 Ior consolidated
amount oI $1.6 billion Iollowed by 305 in 2003 worth $4.4 billion, 316
overseas acquisitions worth $9.3 billion in 2004 and in 2005 the number has
gone up to 355 acquisitions worth around $11 billion.

The continuing popularity oI mergers and acquisitions is probably a
reIlection oI the wide spread belieI that acquisitions provide an easy route to
achieve growth. And when it comes to mergers, unlike traditional organic
growth, it enables companies to radically alter the dynamics oI business by
achieving growth, cost savings and competitive advantage.

While conducting a comparison exercise oI evaluation strategies in M&A
the Iollowing issues should duly be considered:

IdentiIication oI the sources oI the Iirm`s current and Iuture competitive
How sustainable and unique the identiIied strengths are?
Will the competitor replicate the strategy Iollowed?
Will the strategy create shareholder value?
Various components oI corporate governance such as the independence oI
the board oI directors, the activism oI large shareholders.
However, to make a merger Iully successIul one cannot ignore the human
and cultural issues as M&A result in meeting oI two autonomous corporate
cultures. When companies are acquired or combined, people almost
immediately start to Iocus on diIIerences in the companies. Employees
initially perceive the other company`s culture as external inIluence` and
Irequently reject it. Especially this applies in an acquisition where the
acquiring company see themselves as the winners, and the acquired
company, the losers.

In addition to this when a merger takes place, company employees become
concerned about job security and rumors start Ilying. Combining two
companies can create interpersonal conIlict, role conIusion, uncertainty
about change and worry oI redundancy.
Another aspect that should duly be considered is that in order to grow and
expand companies must go Ior M&A in businesses that they understand

Leading corporate houses have undertaken restructuring exercises and M&A
is one oI the most eIIective methods oI corporate restructuring. Hence,
M&A has become an integral part oI the long-term business strategy oI
corporate enterprises. Even Indian financial services industry has
recognized the need for corporate restructuring and many banks in
the country are moving in this direction.

However, there is always an argument against convergence,
suggesting that increasing competition, the arrival of the global
companies means in future a handful of global institutions will
dominate. Some felt that the ndian corporate would become
polarized, with global giants at one-end and niche players at
another.[Refer to:M & As in Banking Industry. A tool for Competitiveness by S.P.R.

M&A: A conceptual discussion

Business combination or business restructuring can take in the Iorms oI
mergers, acquisitions, amalgamation and takeovers and all have played an
important role in the external growth oI a number oI leading countries in the

There is a great deal oI conIusion and disagreement regarding the exact
meanings oI all these terminologies mentioned above. In Iact, some oI them
are used interchangeably. Although the term Merger and Acquisition are
oIten uttered synonymously, but the terms merger and acquisition mean
slightly diIIerent things. Again all these terms has a separate legal deIinition.

An acquisition occurs, when one company takes over another and palpably
emerges as the new owner; the purchase is called an acquisition. From legal
point oI view, the target company ceases to exist and the buyer's stock
continues to be traded.
A merger occurs when two or more companies combine into one company
or one or more companies may merge with an existing company. Merger or
amalgamation may take two Iorms: 1) Merger through absorption
2) Merger through consolidation

1) Merger through absorption
Absorption can be deIined as the process oI combining two or more
companies into an existing company where all the companies except one
lose their identity. For example absorption oI Tata Fertilizers Ltd by Tata
Chemicals Ltd.

2) Merger through consolidation
On the contrary consolidation is a combination oI two or more companies
into a new company and in this Iorm oI merger, all companies are legally
dissolved to Iorm a new entity. In a consolidation, the acquired company
transIers its assets, liabilities and shares to the acquiring company.

Mergers can be again broadly classiIied in the Iollowing way:

Horizontal merger: This is a combination oI two or more Iirms in similar
type oI production or merging oI Iirms in the same stage oI industry or same
area oI business is known as horizontal merger.

Vertical merger: Combination oI two or more Iirms involved in diIIerent
stages oI production or distribution, in order to reduce the cost oI
production, is known as vertical merger.

Conglomerate merger: This is a combination oI Iirms engaged in unrelated
lines oI business activity. Example ITC with Tribeni Tissues.

However whatever be the Iorm oI merger it`s undertaken with the Iollowing
motives or in order to achieve the Iollowing beneIits:

1) Limit competition
2) Utilize under-utilized market power
3) To grow and enhance proIitability in the industry
4) To achieve economies oI scale
5) Establish a transnational bridgehead without excessive start- up costs.


ackground of the Problem

In today`s world oI intense global competition all corporate behemoths
resort to M&A with an attempt to attain surges in inorganic growth. But
there are enormous reasons oI why such M&A Iails to add value or to
achieve the desired synergy. Some oI them are penned down below:

Improper valuation: The key to a successIul M&A is when the right price
and not a penny more are paid, but in most oI the cases companies end up in
paying more. While the share holders oI the acquired company, particularly
iI they receive cash, do well but the continuing shareholders end up with the
obnoxious burden oI overpriced assets which with deIinite conviction dilute
their Iuture earnings. Such being the milieu what becomes important is
proper valuation oI the business and specially intangible assets.

Boasting overstated synergies: There is no doubt that an acquisition can
create synergy but many times companies with uncontrollable palpitations
end up in over stating this so called synergy. This occurs mainly due to over
estimating the rate oI cost reduction and over valuing the net working
capital. Overestimating such synergies leads to a Iailure oI the merger.

Cultural clash: Lack oI proper communication acts as a disaster in case oI
overseas mergers where many cultural diIIerences exist. Moreover, cultural
diIIerences do result in Iailure oI plans implementation and thereby paves
the way Ior the Iailure oI the merger.

Poor Business Fit: When the product or services does not Iit naturally into
the acquirer`s marketing, sales, distribution system and not to be leIt out the
demographical requirements oI the product or services oI the merged entity,
then it may creep in delays in eIIicient integration.

Over Leverage: Cash acquisitions Irequently result in the acquirer assuming
too much debt. Future interest costs consume a great portion oI the acquired
company`s earnings. An even most serious problem results when the
acquirer reports to cheap short-term Iinancing options and then has diIIiculty
reIunding on a long-term basis.

Boardroom Split: When mergers are structured with 50/50 Board
representation or with substantial representation Irom the target, due
attention should be given to determine the compatibility oI the directors
Iollowing the merger. For example when global IT services giant Electronic
Data Systems Corporation(EDSC) acquired Bangalore based Mphasis BFL
Ltd on June 23, 2006 Jerry Rao continued to remain chieI executive at
Mphasis because oI his expertise in management and understanding the

Some oI the problems are aIorementioned but the list is endless. Such being
the milieu beIore M&A these problems should be duly addressed. But this
study Comparative Evaluation Strategies in Mergers and Acquisitions` will
be addressing the Iirst two problems that is Iinding out a proper valuation
model Ior the Iirm to be acquired on the one hand and on the other hand it
will also Iocus on to Iind out a proper model Ior valuing synergy.

Objective oI the Research
The present Research is planned to study the measures that can be discerned
as could probably engineer a success in M&A and identiIy the ingredients
that are required to be Iollowed to better a deal as it can be done or
negotiated. For this the objectives are as Iollows:
(1) To compare the processes like valuation oI the Iirm and synergy
(2) To Iind out an adequate strategy Ior paying the acquired Iirm so that
there is no over leverage problem in the Iuture.
(3) To determine an optimum evaluation strategy in M&A.


enefits and Scope of the Research

With India waking up into a new millennium, M&A have become essential
Ior inorganic growth. This is palpable in textile industry which in the May
and June oI 2006, witnessed lots oI overseas acquisitions; like Malwa
Industries acquiring mill major Tintolavanderie Irom Italy and Raymond`s
acquired Portugal based Regency Textiles Portugesa Limittada. As stated in
The Temerity oI Textiles` oI Business& Economy, 16
June, 2006- the new
mantra Ior Indian textile majors to go global is cross border acquisitions .
Agrees, Ajai Sahai, Director General, Federation oI Indian Export (FIEO),
'More and more overseas acquisition will continue in the acquisition

In such a milieu, the present Research becomes extremely important, as the
primary Iocus oI the study is to evaluate strategies in Merger & Acquisition
and Iinding out an optimum mix oI making payment to the acquired Iirm.
Even analyst Ieels that the M&A route is an ideal way Ior corporate
restructuring. Starting Irom small independent organizations to global
behemoths all is trying this option oI growth.

The reason can be anything but one core reason is M&A means
improvement in capital structure, which enables to take new and diversiIied
activities. However, a major bottleneck to improve the capital structure is
poor payment made to the acquired company during the pre-merger. In other
words, it weakens the Iinancial position oI the company. To avoid this
problem oIten companies acquire a major stake earlier and later do the
complete acquisition. Like Ior example International Marketing & Sales
Group Plc (IMSG) acquired major stakes in India`s Candid Marketing and
the remaining they are going to acquire by 2010.

The Iollowing cases will be analyzed with respect to arrive IruitIul

Takeover by Tata Tea oI Tetley: It has been more than a decade oI Tata Tea-
Tetley Group engagement and the matrimony is now brewing sizzling hot
opportunities Ior both oI them. Tata Tea`s UK based collaborator Tetley
Group is the innovator oI the concept oI tea bag` and by value and volume
among the top 20 grocery brands in UK. In mid 2000, Tata Tea bought UK
based Tetley Ior 271pound.

Hypothetical case study: With the help oI Charter Accountant and KPMG a
hypothetical case study has been developed which covers almost all the
problems associated to valuation in today`s corporate world.

Problem Context


The Corporate Perspective

On June 23, 2006 global IT giant Electronic Data Systems Corporation
acquired million shares of Bangalore based Mphasis BFL Ltd for Rs
1,74 crore.

Indian haute couture bigwigs are going shopping; the new mantra` for
Indian textile majors to go global is through cross-border acquisitions;`
The Temerity oI Textiles`, Business& Economy, 16
June, 2006. Malwa
Industries acquired mill major Tintolavanderie Irom Italy and Third
Dimension Ior a total consideration oI about $11 million on May 2006. On
the same league, Gujarat Heavy Chemicals acquired Dan River Raymond on
May 27, 2006 and Raymond`s acquired Portugal based Regency Textiles
Portugesa Limittada.

Apart Irom these over seas acquisitions by Indian Inc, the year 2000
witnessed the largest ever-overseas acquisition by an Indian company, as
Tata Tea acquired the Tetley group for 271million pounds. However, during the
past decade lots oI global behemoth has also acquired companies Irom the
homely milieu. Like, in 2001, Frito-Lay India took over Uncle Chipps Irom
Amrit Banaspati group Ior an undisclosed price. As per the acquisition
agreement, Frito-Lay, along with the Uncle Chipps brand also acquired a
Iew unused assets Irom Amrit Banaspati.

With so many M&A happening, what becomes important is valuation oI the
target company and the estimated synergy in post merger. When it comes to
valuation oI the acquired company oIten problem arises in valuing the Swap
ratio. Now the question arises what is a swap ratio.

'Swap ratio is the ratio oI the share exchange rate oI one oI the merging
company with the share exchange rate oI the other company, replies
ProIessor A.Sandeep, IIPM. II company A and company B is merging, then
Swap ratio would be:

Swap ratio Exchange Rate oI Company A / Exchange Rate oI Company B

Through diIIerent case studies and discussions, an attempt has been made to
evaluate the various strategies used Ior valuing the target Iirm and synergy,
which are discussed in later chapters.

Case Study


Based on inIormation gathered Irom KPMG and going through the recent
business new the hypothetical case study on Mergers and Acquisitions has
been developed. I took the help oI my project guide (ProIessor
Ramakrishna) and C.A Mr. Anindo Dutta to make the valuations as practical
as possible. Some oI the valuation strategies that has been incorporated, is
extract Irom my M.Com classes oI Dr. Malayendu Shah H.O.D oI Iinance,
Calcutta University

The assumptions, which are the keystone oI the case study, are enumerated
It is assumed that the existing undertakings are operating at a level
below optimum but when they combine their resources and eIIorts,
they can reduce the cost oI production including selling and
administrative expenses. It will take 4-5 years to achieve this synergy.

Both the companies do not have any PreIerence Share Capital.

All the shares are Iully paid up and authorized share capital oI Mittal
Food ltd. is oI 157497 shares oI rupees 10 each and oI Mahanagar
Restaurant Ltd is oI 25000 shares oI Rs 10 each.

Depreciation is calculated on Diminishing Balance Method.

There is no interest to be paid by Mahanagar Restaurant Ltd aIter
merger on debt capital, as the loan taken Irom Mittal Food ltd would
be adjusted.

The earnings oI both the Iirm Ior the year 2005 has been taken Ior
calculating the E.P.S aIter merger.

Both the companies are listed companies.

Financial year Ior both the companies closes at 31

Point to be noted: The prevailing tax rate Ior each year has changed

Mittal Food ltd. (M.F.L) was established in 1995 to manuIacture steel
generally used Ior producing home appliances and machines. The company
invested Rs.4 lacks in a small concern called Mahanagar Restaurant Ltd
(M.R.L). During the past 5 years, M.F.Ls sales have grown at an average oI
about 10\year, which is below the industry benchmark, and P.A.T have
grown at about 8. The Iluctuating proIit oI the company has caused its P.E
ratio to be much low.

To reduce its earning instability M.F.L is now planning to acquire 51
ownership in M.R.L, which has a poor management, and to make it, its
subsidiary. Currently M.F.Ls share is selling Ior Rs. 75 in the market. The
synergies Ior acquiring M.R.L are enumerated below:

1. The target company belonged to the related business so it will help in
vertical merger and penetrate in newer area.
2. It has generated a stalwart goodwill among the consumer and is time
honoured as a good Quick Service Restaurant (Q.S.R).
3 It had 50 outlets in Delhi and Mumbai. The revenue generated
Irom these outlets will help in maintaining a stable PE ratio.

MRL is known Ior its quality oI products and services including. It has a
strong logistic throughout its 50 outlets spread across the capital and
Mumbai. The company is planning to make its maiden entry in Kolkata.
Due to poor management and lack oI innovative dishes, the company`s
perIormance was bogged down with the entry oI new kids in the block. The
company could not pay heed to product innovation due to the high cost oI
raw material and processed items required Ior such Endeavour.
MRL`s sales have grown at an average oI 6 per year. The company`s
earning has been low due to decline in sales and the average market price
oI company` s shares in recent times has been lower than its book value.
The board oI MRL thinks that when they took a loan Irom MRL, it helped
them to deal with their Iinancial inadequacy and now iI they join with
M.F.L, they can get raw material and process ingredients at lower costs
Irom the humungous product portIolio oI MFL. Moreover, MFL`s supply
chain will enable easy availability oI the products in all the outlets.

The current price oI MRL`s share is Rs. 28 only. MFL thinks that iI they
could acquire MRL, they could turn around the company and increase its
share value in the market. However, M.R.L Iavoured merger with M.F.L
instead oI becoming a subsidiary. According to shareholders oI M.R.L, iI
one company is made a subsidiary oI other the idea behind the synergy
would Iall and there will not be any uniIied command as it tantamount to be
dominated by the parent company.

But M.F.L wanted to acquire M.R.L and claimed to grow their sales by 8
within 3-4 yrs but as M.R.L has so low growth rate in sales, MFL will be
paying them Ior each share an amount much lower than their current market
price. MRL agreed to that but their condition was to get raw materials at a
much more lower costs which will help to reduce cost oI goods sold at least
64 oI sales. MFL anticipates that to support sales growth oI 8 oI M.R.L,
they have to bear a capex equal to 5 oI sales Ior the Iirst 5 yrs.
Now the million-dollar question arises whether both the companies will
have an increased E.P.S in the post merger milieu and what price M.F.L
should pay to M.R.L iI they merge with each other. From M.R.L`s point oI
view, a vertical integration oI upstream suppliers like Reliance
Petrochemicals ltd. with Reliance Industries ltd in the year 1992 will help
the company to achieve the desired result oI synergy and reduce the cost oI
The Iinancial statement (in a summarized Iorm) issued by both the
companies Ior the year ended 31
December 2005 are given below.

Mittal Foods Ltd
Summarized P/L statement Ior the last Iive years (Rs in 000)

Year 2001 2002 2003 2004 2005

Net Sales 5470 6150 6642 7529 8056

Cost oI good sold 3900 4500 5467 5480 5975

Depreciation 110 155 139 125 143

Selling & Admin 671 788 970 1003 1020

TotaI expenses 4681 5443 6576 6608 7138

EBIT 789 707 66 921 918

Interest 132 152 160 191 284

EBT 657 555 94 730 634

Tax 353 292 - 368 226

PAT 304 263 - 362 408

!07 sha70 data

Year 2001 2002 2003 2004 2005

EPS (Rs) 1.93 1.67 1.81 2.3 2.59

Book Value (Rs) 25.28 26.00 26.41 26.75 27.55

Market Value (Rs) 54.34 61.25 57.5 71.25 75.00

Summarized alance Sheet
As on 31
December 2005

abItes (Rs. In thousand)

Sources oI Funds

SharehoIders Fund
Paid up capital (1, 57, 497 shares
OI Rs. 10 each) 1575
Reserve and surplus 3155 4730
Borrowed Funds
Secured 1203
Unsecured 967 2170
Current abItes 1860


Gross lock 474
Less depreciation 143

Net Block 4605


Loan to MSUL 400
Other Deposit 29 5034

Current Assets 726


Mahanaga7 R0stau7ant's Ltd
Summarized P/L statement Ior the last Iive years (Rs in 000)

Year 2001 2002 2003 2004 2005

Net Sales 1442 1490 1580 1721 1823

Cost oI good sold 995 1055 1150 1244 1323

Depreciation 37 40 45 45 85

Selling & Admin 260 275 280 292 302

Total expenses 1292 1370 1475 1581 1710

EBIT 150 120 105 140 113

Interest 19 20 20 30 35

EBT 131 100 85 110 78

Tax 45 34 25 35 27

PAT 86 66 60 75 51

!07 sha70 data

Year 2001 2002 2003 2004 2005

EPS (Rs) 3.44 2.64 2.40 3.00 2.12

Book Value (Rs) 23.76 25.00 26.28 27.65 30.00
Market Value (Rs) 30.84 44.04 42.25 25.48 28.0


Summarized alance Sheet
As on 31
December 2005

abItes (Rs. In thousand)

Sources oI Funds

SharehoIders Fund
Paid up capital (25000 shares
OI Rs. 10 each) 250
Reserve and surplus 320 570
Borrowed Funds
Loan Irom MSL 400

Current abItes 178


Gross lock 457
Less depreciation 85

Net Block 372

Investment 23

Current Assets 753


Now M.F.L is trying to Iind out the value oI M.R.L in order to determine whether it`s
worth to merge with M.R.L. For this we will use the D.C.F approach to determine the
value oI M.R.L. and try to Iind out the valuation oI synergy.

D.C.F approach

On the onset oI this method, we estimate the Iree Ilow by projection oI sales. As stated
earlier M.S.U.L in the last 5 years has grown at an average rate oI 6 but M.S.L claims,
they can increase the sales to 8. As conspicuous Irom the Q1 Result, 2006 oI the home
grown FMCG giant, Dabur India Ltd, it took 1 year to achieve the desired sales growth
Irom acquired brands Odonil, Odomos, Odopic and SaniIresh Irom the stable oI Balsara.
ThereIore, we assume M.R.L`s sales would remain at 6 Ior 1
2 years, 7 on the 3

year (2008) and thereaIter 8. So the sales will be Rs 1932, Rs 2048, Rs 2191, Rs2366,
and Rs 2555 respectively Ior the year 2006, 2007, 2008, 2009, and 2010.

Availability oI raw materials at cheaper costs and due to the operating eIIiciencies (as
observed in case oI Reliance Industries ltd with Reliance Polypropylenes ltd). The cost
oI goods sold (COGS) will be reduced to 64. Lets assume it will take sometime Ior
M.S.U.L to reduce this cost. So COGS can be assumed to be 66 in 2006, 2007 and
65 Ior 2008 and thereaIter 64. Regarding selling and admin expenses generally it has
been seen it reduces in the 1
2 years but due to inability oI the merged organization to
cope up with the increase in the volume oI sales it increases and then it Ialls
dramatically. Depreciation can be estimated keeping in mind the anticipated capex in
each year (which is 5 oI the sales) and average annual depreciation rate. As stated
earlier depreciation will be calculated by diminishing balance method at 11. Thus
depreciation Irom 2006 to 2009 is

DEP06 0.11 (372CAPEX06)





The 2
step is to estimate the cost oI capital. Since we are determining
MRL`s value, the discount rate should be MRL`s average cost oI capital. For the year
2005, the outstanding debt oI the company is 4 lacks and interest paid 8.75/ annum
is Rs 35 thousand. We assume higher marginal rate oI interest, say 15 on the aIter tax
basis. The cost oI debt would be 0.15(1-0.35) 0.0975 9.75, where 35 is the tax
rate including VAT and Service Tax oI 12.5 applicable Irom 31.04.06. II we assume
that the company has been paying about 80 oI its earning and retaining 20, there Iore
prevailing cost oI equity

80 oI 2.12
(Ke) 0.0605 or 6.05

The average return on equity (PAT/NETWORTH) (53000/570000) 9 Thus the
company`s growth rate 0.20*0.090.018 or 1.8

ThereIore MRL`s Iuture Ke 6.051.8 7.85


Amount (RS in 000) Weight Cost W
Eighted cost

Equity 570 0.587 0.0785 0.046
Debt 400 0.413 0.0975 0.041

970 1.000 0.087

9 (approx)
Increase n N.W.C:

Present W.C 753000-178000 575000
Percentage oI W.C to sales 575000/1823000 32

Year 2005 2006 2007 2008 2009 2010
(Rs. In thousand)

W.C 575 618 655 701 757 818
In N.W.C 43 37 46 56 61
Mahanagar Steel Utensils
Estimation of Cash Flows for next five years

Particulars 2005 2006 2007 2008 2009 2010
Net Sales 1823 1932 2048 2191 2366 2555
COGS 1323 1275 1351 1424 1514 1635
Selling & Admin Exp 302 302 302 328 355 332
Depreciation 85 52 57 63 69 75
Total Exp 1710 1629 1710 1815 1938 2042
PBT 113 303 338 376 428 513
Tax 35 106 118 132 150 180
PAT 197 220 508 278 333
Add Depreciation 52 57 63 69 75
Funds From
Operation 249 277 571 347 408
Less Increase in N.W.C
( 32 oI net sales) 43 37 46 56 61
Cash Irom operation 206 240 525 291 347
Less Capex 97 102 110 118 128
Net Cash Ilow to M.S.L 109 138 415 173 219
P.V.F 9 0.92 0.84 0.77 0.71 0.65
Present Value 100 116 320 122 142

Total Value oI MRL 100 116 320122142 Rs 8, 00,000

Present value oI M.R.L is Rs. 8, 00,000.00
Value oI M.R.L`s shares Rs.
M.R.L`s value 8, 00,000.00
Less debt 4, 00,000.00
ThereIore value oI MRL`s shares 4, 00,000.00

Value per share Rs. (4, 00,000.00/25000) Rs.16

The maximum price per share M.F.L is prepared to pay Ior M.R.L`s share is Rs.16,
which is below the current market price Rs.28. But MFL`s market price per share is Rs
75 so there is a possibility that market value oI MRL will also increase.
Now the question arises, how should M.S.L Iinance acquisition oI M.S.U.L?
It can be done in two ways either in cash oIIer or exchange oI shares.
Cash oIIer: a cash oIIer is a straightIorward means oI Iinancing a merger. It does not
cause any dilatation in E.P.S and the ownership oI the existing shareholders oI the
acquiring company MSL will have to pay Rs.4, 00,000.00 Ior acquiring M.S.U.L.

Share exchange: A share exchange oIIers will result into the sharing oI ownership oI the
acquiring company M.F.L between its existing shareholders (Existing shareholders oI
M.R.L`s). The earnings and beneIits would also be shared between these two groups oI
shareholders. The precise extent oI net beneIits that accrue to each group depends on
exchange ratio. Like in case oI Reliance de-merger owner oI 40shares, got 40 Shares of
Reliance Energy Ventures Ltd and the existing share holders did not have to

To pay Rs.4, 00,000 as its current market price per shares Rs.75, the company must
exchange 5333 shares and hence post merger, M.F.L would have 1,62,830(1,57,497
5333)shares. In the combined Iirm, M.R.L`s shareholders would hold 3.3 oI shares.
M.S.L would be oIIering 5333 shares Ior 25,000 out standing shares oI M.R.L, which
means 0.21 shares oI M.F.L Ior one share oI M.R.L. The book value oI M.F L`s and
MRL`s share in 2005 is respectively Rs.27.55 and Rs.30. So Irom the book value point oI
view, M.F.L could oIIer 0.92 (27.55/30) shares Ior each outstanding share oI M.R.L
without diluting present book value so M.F.L wont have a problem iI they oIIer 0.21 oI
its shares to M.R.L.

Impact on E.P.S: Let`s now Iind out iI E.P.S be diluted iI it exchanged 5333 shares to
M.S.U.L? As assumed earlier we take the earnings oI both the Iirms Ior the year 2005 Ior
computing E.P.S aIter merger.

Mittal Foods Ltd: - Impact oI mergers on E.P.S
Rs (in thousand)
M.F.L`s PAT beIore merger (P.A.Ta) 408
M.R.L`s PAT iI merged with M.S.L (Pat) 53
PAT oI the combined Iirms oIIer merger
(PATaPATb P.A.Tab) 461

M.F.L`s E.P.S beIore merger (E.P.Sa) Rs.2.59
ax2u2 no of .F.s shares 2antanng E.P.S of Rs.2.59
That is (4, 61,000/2.59) 1, 77,992
M.F.L`s outstanding shares beIore merger 1, 57,497
Maximum number oI shares to be exchanged without diluting E.P.S
(1, 77,992-1, 57,497)
ThereIore M.F.L could exchange (20,495/25,000) 0.81 oI its shares Ior one share oI
M.R.L with out diluting its E.P.S aIter merger. Since, it is exchanging 0.21 shares. Its
E.P.S aIter merger would be as shown below: -
P.A.Tab 4, 61,000
Total no oI shares aIter merger 1, 62,830
ThereIore E.P.Sab (4, 61,000/1, 62,830)
Merger oI M.F.L with M.R.L: - Impact on P.A.T

(BeIore merger) (AIter merger)

PAT (Rs in 000) 408 53 461
No. OI Shares 1, 57,497 25,000 1, 62,830
EPS (Rs) 2.59 2.12 2.83
Mkt value 75 28.10 75
Total Mkt
(Rs in lack) 118.12 4 122.12
1, 57,497* Rs.75 1, 18, 12,2754, 00,000
(1, 22, 12,275/1, 62,830)

Impact on P/E ratio: The P/E ratio oI combined Iirm would decline Irom MFL P/E ratio
P/E ratio oI MFL (75/2.59)
And combined Iirm would be (75/2.83) 26.5
But, M.R.L will have an increase in P/E ratio
As its P/E ratio (28.1/2.12) 13.25



Synergy is the magical Iorce that allows Ior enhanced cost eIIiciencies oI the new
business, which can take in the Iorm oI revenue enhancement and cost savings.
The Iorm oI synergy is enlisted below:

StaII reductions To some extent merger reduces labor.
Economies oI scale - Whether it is purchasing a small stationery or acquiring a
brand, Economies oI scale can be achieved any way. Economies oI scale help to
reduce cost oI production.
Acquiring new technology Synergies might occur by acquiring new technology.
Improved market reaches and market share- OIten Companies to penetrate in
newer areas acquire a local company. And synergy can be achieved by the beneIits
oI the marketing and distribution oI local company.
There ought to be economies oI scale in the combined Iirm, but in many cases,
one and one add does not equal to two. Not necessarily every merger will result in
synergy. First oI all there has to be a cultural Iit between the two merging
organization and then only synergy can be achieved. But to have a synergy in long
run what requires is that the product or service delivered by the organization might
Iit the organization product portIolio. Agrees, Samarjit Singh, MD oI Candid
Marketing, 'See acquisition has to be strategically Iit both in terms oI brand and
culture. HLL`s acquisition oI Modern Ioods Iitted the brand but there was no
cultural Iit between the two organizations. According to 4Ps- Business and
Marketing`s article, Not Just anybody, please.` unable to sustain losses HLL is
putting up Modern Food Ior sale.

Now the million dollar question arises how to value synergy? Synergy tantamount
to Net Economic Value (NEV) which arises Irom the extra value generated by the
combined Iirm.
II we consider the example oI the two Iirms mentioned in our earlier chapter, then

Lets` say Value oI the combined Iirm is represented by V

Value oI MFL V
Value oI MRL V
( V

Let`s assume acquiring price is paid in cash

Cost oI merger Cash paid - V2

NEV EV Cost oI merger

Evaluation Strategies in M&A

This discussion is based on the primary data collected aIter meeting with Mr.
Anand Vermani, Associate Vice President oI KPMG India Private Ltd. K.P.M.G is
a Switzerland based conglomerate, which mainly acts as Iinancial consultant and
evaluates the Iinancial beneIits oI mergers.

Q) What should be the core issue before finalizing a merger deal?

Ans) Look there is no such hard and Iirst rule that should be given core
importance in a M&A deal. But I Ieel where Indian corporate misses out big
time is avoiding the taxation part. The preliminary and one oI the main things,
which should be taken into account while evaluating the merger deal, is
taxation. Sometimes, iI the taxation deals, especially when Indian companies
go Ior global acquisitions, the taxation norms should be given the core
importance. II Iiling the tax procedure or the host country has a step motherly
attitude then there is no point to continue with the merger.

Q) How does one evaluate the long run benefits provided by the merger deal?

Ans) We mainly Iollow 4 methodologies to determine whether to merge or what
beneIit the project is going to provide in the long run. These are:

1. D.C.F discounted cash Ilow
2. CoCos comparatively company analysis
3. COTRANS company transaction
4. NAV net asset value

D.C.F in M & A, the acquiring Iirm is buying business oI the target Iirm, rather
than a speciIic asset. The acquiring Iirm should appraise merger as a capital
budgeting decision, Iollowing the D.C.F approach. It should try to evaluate the
estimated sales and any other source oI revenue generation Ior at least 5 years iI
the business is not too much capital intensive.

The main drawback oI this method is that, it is very intrinsic and although it
Iocuses in the Iuture value but doesn`t take into Consideration the market values.
In simple words, D.C.F emphasizes more on time value oI money. To counter this
drawback what I suggest is resorting to DCF with probability distribution can give
accurate result. There are three or Iour important variables whose probability
distribution will change the entire valuation oI merger so to be on saIe side, it`s
better to use W.A.C.C oI the acquiring company as the P.V F.

CoCos here the companies on which comparison is done, should ideally be a
listed company, the comparison starts Irom revenue generated by the companies
which are planning to merge, then we determine E.B.D.I.T(Earnings beIore debt,
interest and taxes) because it helps in eliminating error as it diIIerentiates between
cash entry and book entry (as Ior example depreciation).

AIter that, it takes into consideration the enterprise value or E.V, which are
summation oI market capital and the book value oI debt or in other words
summation oI Iixed assets and working capital.

Once the E.V, the EBDIT are determined, the next step is to calculate the
multiples (the ratios). Three broad multiples used Ior valuation are:

To select the companies Ior comparison the companies are short listed
according to which are close representative oI each other in terms oI size, market
capitalization and product portIolio. The identical representative is chosen the
ones which has similar experience, subjective analysis, and risk oI business the
companies are dealing with e.t.c. One oI the main drawbacks oI CoCos is that it
doesn`t takes into account the transaction premium so the next method oI
valuation is used.

Co Transaction or company transaction emphasizes on the amount involved
Ior acquiring the company. This is termed as cost oI merger. The control premium
Irom 49 to 51 will create a strong variation in the cost oI merger as Ior
example Maruti Udyog Ltd, when the company sold its 57 ownership to Suzuki
in 2003,
Suzuki has to pay a huge amount as compared to the amount being paid iI it had
acquired less than 50.

Q)In Indian Inc what are the main areas which have witness maximum M&A
activity and is expected to witness more in the coming future?
Ans) Well it`s the FMCG sector and even the IT and BPO sector. In our country,
during the last decade due to globalization and liberalization lots oI I.T and B.P.O
sectors are emerging. They resort to mergers to derive the beneIit oII shore
sourcing. This is mainly the reason lots oI overseas acquisition is taking place
recently, as Ior example IOC with French Iarms and outbound investments are
taking place. Apart Irom this, another strong motivating Iactor Ior M&A is risk
diversiIication and in this regard the banking sector has witnessed lots oI
horizontal mergers like GTB with OBC.

Q) What should a manager focus first before finalizing a M&A deal?
Ans) The one and only motive oI the manager should be is to see that shareholders
interest is not hampered at any cost, rather a M&A deal should be concerned only
about maximizing shareholders wealth. I mean this Irom a managers perspective.

Q) What factors motivates companies to go for M&A?

Ans) Well, the motivational Iactor depends on the size oI the company and where
they want to grow. Like whether they want to grow in their own line or merge
with other related sector like in case oI vertical mergers. As Ior example, FMCG
companies resort to mergers to penetrate in newer areas. Like in 2004 Wipro
entered in the Iood segment oI FMCG aIter acquiring the Glucovita brand Irom

Even when companies want to go abroad they resort to overseas acquisitions. Like
I.O.C with Maurel and Prom, Essar group in Bangladesh power and steel.


Tata Tea ties the knot with Tetley

This case is analyzed, to determine how an acquisition can help to achieve the
synergy. It has been more than a decade oI Tata Tea-Tetley Group engagement
and the matrimony is now brewing sizzling hot opportunities Ior both oI them. The
second largest seller oI packet tea in India, Tata tea was incorporated in 1983 and
today has 54 estates scattered in Assam, West Bengal, Tamil Nadu and Kerala.
Tata Tea`s UK based collaborator Tetley Group is the innovator oI the concept oI
tea bag` and by value and volume among the top 20 grocery brands in UK.
Way back, in 1993 tea exports was reduced and the resultant surplus had no way
other than the domestic market, which was studded with regional brands and the
premium segment was dominated by Rs 2000 million Taj Mahal brand, Irom the
stable oI Hindustan Lever. Such being the milieu, Tata Tea Iormed a joint venture
with Tetley Group and Tetley division was transIerred to the venture in 1994.
The year 2000 witnessed the largest ever-overseas acquisition by an Indian
company, as Tata Tea acquired the Tetley group Ior 271million pounds. This is a
watershed event Ior both the companies as this deal reIlects the coming together oI
a company with very strong on tea production side and the other one very strong
on the marketing side.
The next logical step was the merger oI the two entities and last year Tata Tea Ltd
merged the wholly owned subsidiary Tata Tetley Limited with itselI. This was part
oI the strategy oI strengthening the Tata Tea portIolio.
The Tetley Group has been a cash cow` Ior Tata Tea and this is palpable in the
recent acquisition oI Jemca by Tata Tea, which is being Iunded by none other than
buddy Tetley group.


Corporate M&A takes place to enhance synergy by maximizing shareholders
wealth. However, oIten it results in a dent Iinancial goal. AIter going through the
case study and recent acquisitions like Tata Tea, the recommendations are stated
below. But the case was developed based on inIormation derived Irom KPMG so
Iinancial evaluation was possible only Ior that case. For evaluating other
strategies oI M&A, it was resorted to recent M&A.

Evaluating Iinancial data
The economic gains Irom the merger oI M.F.L would come Irom the higher sales
growth and improved proIitability due to the reduction in the cost oI good sold.
From M.F.L`s point oI view, it should merge with M.R.L rather making it a
subsidiary because cost reduction and united command is not there in a subsidiary
and holding relation. Moreover, merging will enable an increase in P.A.T by Rs1,
97,000 Ior the year ended 31
December 2006 Irom Rs 57,000 oI 31
2005 and E.P.S oI Rs.0.24 aIter merger. The risk can be diversiIied too.

From M.R.L`s point oI view, the merger will help them to get processed material
at cheaper cost oI production. The E.P.S oI the company will increase by 33.5.
The market value oI MRL will increase and the supplies oI raw material or
intermediary product will be saIe guarded.

Evaluating the other strategies

For Iuture growth, business organizations have always resorted to M&A. This is
specially applicable in case oI textile and FMCG industry. But what becomes
important is to see whether the acquisition Iits both the companies. To evaluate
such Iit one has to do the SWOT analysis not only Irom Iinancial point, but also
Irom other keystones like cultural, brand perception, domain oI growth etc.

Acquisitions have to be strategically Iitting, in terms oI both brand and culture. II
there are cultural mismatch between two organizations, then no acquisitions can
success and its bound to have a Iailure. Exactly what happened when HLL
acquired Modern Foods. And at the same time Coca Cola, being a MNC Irom the
country oI Uncle Sam took atleast Iive years to match with Indian business
culture and then they acquired Thums Up.

Another core issue that has to be addressed is to Iind out an adequate strategy Ior
paying the acquired Iirm. So that by paying less the acquired Iirm doesn`t suIIer
and at the same the by paying more the acquirer doesn`t have to bear the burden oI
over debt which might result in leverage problem in the Iuture. This is palpable in
case oI Aviva acquiring AmerUS. According to the concept oI European
Embedded Value or EEV, Aviva is paying 1.9 times EEV Ior AmerUS, which is
much more as compared to 1.6 EEV paid by France`s AXA when it acquired
Winterthur. By doing so Aviva is taking a risk as its Iinancial condition, which
only consists oI $2.52 billion cash as per its balance sheet on 31
December, 2005,
is not strong enough.

Then what becomes important is to take a proper capital budgeting decision. This
has to be done by very careIully estimating the projected Iree cash Ilows. Then
multiplying or extrapolating their terminal value. For doing so one has to have a
through knowledge to Iorecast the market the merged entity is entering into. AIter
the terminal value oI Iree cash Ilows are known, then Cost oI Capital in terms oI
Iinancing the merger deal has to be Iind out. As mentioned earlier and one oI the
objective oI this study is to determine the optimum strategy Ior paying the
acquired Iirm. Once the cost oI capital is determined then it has to be converted
into present value by multiplying it with the discounted Iactor. As evinced Irom
the case study its always advice able that the discounting Iactor should be the
Weighted Average Cost oI Capital oI the acquired Iirm.

In Indian Inc M&A deal activity has grown to unprecedented level and will grow
even Iurther in Iuture in Indian corporate world. Companies will merge with each
other in this trend but generally only halI oI these mergers have succeeded in
adding value. To add value the aIorementioned recommendations should duly be
Iollowed. That is the strategies should be evaluated in such a way that it beneIits
both the Iirm. The brand Iitness, cultural Iitness as well as the mode oI payment
should be cross checked several times. At the same time what becomes important
is to evaluate the M&A deal Irom Capital Budgeting point oI view. The amount to
be paid to the target company Ior the M & A must be evaluated by using well
expected valuation methods.

Once the M&A deal is approved, a team has to be Iormed with representative
comprising Irom both the corporation which will be headed by the chieI
inIormation oIIicer (CIO) to evaluate, execute and implement the entire process
The synergies Irom the M& A need to be careIully estimated in diIIerent
scenarios-best, normal and worst case.


With more than halI oI the M&A deal Iailing to deliver their expected results and
as per Business Standard`s article on 14
August, 06 only 2 out oI every 10 M&As
can be coined as successIul. So a comparison oI evaluation strategies in M&A is
central to merger and acquisition decision making. This will enable whether the
two companies Iit together in a practical or Iinancial sense and not on whether
they could truly combine to make a whole that was greater than the sum oI its

But beIore doing such competition, as learnt Irom KPMG what becomes important
is to identiIy the sources oI the Iirm`s current and Iuture competitive strengths. In
other words to determine, how sustainable and unique are the identiIied strengths?
This will enable to stop the Iocus on diIIerences in the companies, which
employees immediately start doing once the deal is implemented. Based on these
identiIied sustainable strengths oI both the organizations, the synergy has to be
estimated and by doing so corporations cab avoid the great expectation` oI the
overstated synergy.

Then the valuation oI the target company is to be done and then other strategies
are to be evaluated. And as assumed while developing the case study the
organization are operating below the optimum level, holds in case oI real
corporate world. Due to Iinancial or any other constraint, no business organization
irrespective oI its size operates to an optimum level. While evaluating the
strategies this has to be considered. Because oI this drawback oI not perIorming in
optimum level organizations comes together to overcome each other`s bottlenecks.
This is synergy takes birth and such synergy takes a time to be achieved. This time
limit depends on the parameters oI the nature oI business, its size and several other

Once the valuation oI the target Iirm is done, then what becomes important is to
Iind out the modem oI payment. This can be done in two ways, one is by cash
oIIer and the second one is by exchanging shares or allotting shares to the
shareholders oI the acquired company. When it comes allotment oI shares, it has
to be remembered that one has to keep in mind the impact on EPS, aIter all the
ultimate objective oI a manager is to maximize shareholders wealth. Then the
taxation issue also becomes important, which according to Mr. Anand Vermani is
one oI the major reasons Ior Iailure oI M&A deals to add value.

In the over all Indian Inc scenario - the textile, FMCG, IT & BPO sector in India
have witnessed maximum business restructuring Ior the year 2006.


Most oI the M&A deals in Indian Inc has Iailed to add value because oI not
conducting a proper comparative evaluation oI the various strategies involved both
in pre-merger scenario and in post merger scenario. Where Indian companies
misses out big time is in checking too quickly and ignoring the SWOT analysis oI
M&A DEAL. Not only that, most oI the managers Iocusing too narrowly on the
impact oI mergers in the day-to-day operation oI the business. With deIinite
conviction, this tantamount to a recipe Ior disaster.

But successIul acquirers take a diIIerent approach. Like Dabur when it acquired
Balsara, they tested all the disciplined prioritization and Iundamental strategies
and principles. Despite being a Finance thesis, strategies that are to be evaluated
cannot ignore another crucial issue- culture. Even in global corporate milieu too
many merger-bound CEOs do not pay heed to this key Iactor, which is so much
potential that it can make or break an M&A deal. Like HLL`s acquisition oI
Modern Food, did not match with the culture oI both the organization and now
HLL has plans to sale Modern Iood. Cultural due diligence can is a systematic
device Ior making Ianatic cost-eIIective assessments oI the cultures oI both
acquirer Iirm and the target Iirm.

Combining two business organization, is a humungous legal and operational
challenge and this is where evaluating all the strategies in M&A becomes
important. The best practice oI this exercise can reduce the risk involve in M&A
largely. Now the million-dollar question arises, how to commence the exercise oI
comparative evaluation strategies oI M&A? It will onset Irom taking a complete
look at all the relevant sources oI value and risk by determining the value oI the
target Iirm. This increases the chances oI a successIul acquisition.

Conventionally, M&A integrations have been undertaken, as a measure to save
costs and to eliminate redundancy. On this keystone, today`s acquirers start over
estimating the synergies. So it is very important to evaluate synergy and then need
to realize (as shown in the case study), it takes some time to achieve the desired
synergy. So companies should not hurry up to achieve the equation oI One plus
One makes three`. And the key principle behind buying a company should be to
create shareholder value and not merely Iocusing on operational synergy. The
market value oI the two companies together should be more valuable than two
separate companies. The case study that has been discussed earlier evinces how
the marketing value oI the combined Iirm has to be determined.

Behemoths will keep on buying smaller companies to create a more competitive
company. And this is palpable in the FMCG world which has witnessed the
maximum M&A deals oI Indian Inc. Not only in FMCG in other domain also
companies will come together hoping to gain a greater market share or to achieve
greater eIIiciency. And this might result in monopoly which can aIIect the overall

OIten a booming stock market encourages mergers, which can create trouble Ior
the country`s economy. Deals done with highly rated stock is easy and cheap, but
there is no proper strategic thinking behind it.
In overall aIter developing the entire thesis, the implications are the M&A deal
must deliver the long-term growth and sustained proIitability. And emphasis
should be on how the two companies Iit together in a practical or Iinancial sense,
rather than on whether they could truly combine to make a whole that was greater
than the sum oI its parts.


Article by ProIessor A.Sandeep.
Articles by Dr.Malayendu Shah, HOD Finance, Calcutta
Articles by ProI. Aswath Damodaran (Guru oI Valuation).
Business Standard (Making marriages work, 14
August, 2006)
Business and Economy ( 16
June, 28
July, 2006)
4Ps- Business and Marketing (4
August, 2006)
ICFAI Iinance Reader Feb 2005.
'Financial Management by ProI. I.M Pandey.
'Merchant Banking by ProI. M.Y Khan.
Public Releases by MTNL.
M & As in Banking ndustry: A tool for Competitiveness by
S.P.R. Vittal




Beat us or join us` is the recent slogan oI today`s corporate world which is
Iiercely competitive. This competition paradoxically, gives rise to threats, cross
Iire and trade rivalry, which paves the way Ior sickness and closure oI corporate
enterprise. So many corporate organizations are resorting to business restructuring
in the Iorm oI mergers and acquisition.

However, companies beIore going Ior mergers or takeover do exercise an
evaluative strategy Ior the project. These evaluative strategies have to be very
Iriendly and not hostile because unless it is a win-win situation Ior both partners
no mergers or acquisition can take place.

Mergers and takeovers are motivated and negotiated based on these evaluation
strategies so one cannot ignore the importance oI evaluation strategies in Mergers
and Acquisition. Unless it is a hostile takeover, the acquirer company should
Iollow a proper evaluation strategy Ior valuing the target company.

The Government also has a policy to saIeguard the interest oI shareholders and
investors beIore going Ior a merger. So the evaluation method used in Mergers and
Acquisitions it has to keep in mind that it should be a win-win situation Ior both
the parties on one hand and at the other hand it should be not against the interest oI
shareholders and investors.

This thesis is an attempt to Iind out the evaluative strategies used by companies in
mergers and acquisition and comparing them based on their ability to IulIill the
parameters mentioned above.

IIPM Iaculty member ProIessor Ramakrishna would guide and assist me in the
thesis. The research methodology would commence Irom collecting data, both
Irom primary and secondary sources Iollowed by an in-depth analysis oI collected



Thesis Response Sheet- 1

O ame- Nitin Sharma
O ID umber- D04002940
O Title of the Study -Comparative Evaluation Strategies in Mergers and
O Date when the Guide was consulted - 29. 06.06
O The outcome of the discussion
The Iormat, data collection method, sources Ior collecting primary data
was determined. We also had a discussion oI the problems that may occur
while evaluating the strategies in M&A

O The Progress of the Thesis
How to overcome the aIorementioned problem was determined and
overall the objective oI my research was palpably established.


Thesis Response Sheet- 2

O ame- Nitin Sharma
O ID umber- D04002940
O Title of the Study -Comparative Evaluation Strategies in Mergers and
O Date when the Guide was consulted - 02.08.06
O The outcome of the discussion
The main problem and core areas to be Iocused like valuation oI the Iirm
and synergy was determined.

Thesis Response Sheet-

O ame- Nitin Sharma
O ID umber- D04002940
O Title of the Study -Comparative Evaluation Strategies in Mergers and
O Date when the Guide was consulted -27.11.06
O The outcome of the discussion
Some changes are made in the case study and the recommendation part was
O The Progress of the Thesis
The problem part was completed.

Thesis Response Sheet- 4

O ame- Nitin Sharma
O ID umber- D04002940
O Title of the Study -Comparative Evaluation Strategies in Mergers and
O Date when the Guide was consulted -25.12.06
O The outcome of the discussion
The recommendation part was changed entirely and my guide did some
value addition to it.

O The Progress of the Thesis
The recommendation part was completed.

Thesis Response Sheet- 5

O ame- Nitin Sharma
O ID umber- D04002940
O Title of the Study -Comparative Evaluation Strategies in Mergers and
O Date when the Guide was consulted -27.01.07

O The Progress of the Thesis
End oI the thesis



1) What should be the core issue before finalizing a merger deal?
2) How does one evaluate the long run benefits provided by the merger deal?

) In Indian Inc what are the main areas which have witness maximum
M&A activity and is expected to witness more in the coming future?

4) What should a manager focus first before finalizing an M&A deal?

5) What factors motivates companies to go for M&A?

6) How are the strategies for M&A to be evaluated?