Mergers And Acquisitions

By: Anisha Saraf Anku Sharma Anuja Aparajita Archana Arjoo

What is Merger?
It is the combining of two or more companies , generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock.
Company A + Company B = Company C

What is acquisition?
Acquisition, also known as a takeover , is the buying of one company (the target) by another. Acquisition usually refers to a purchase of a smaller firm by a larger one.

Company A + Company B = Company A

Types of Mergers and Acquisition

Horizontal merger Vertical merger

Conglomerate merger
Concentric mergers

Differences

Reasons for M & A

Staff Reductions Economies of Scale Improved market need and industry visibility Overcoming entry barriers Lower risks

Problems of M & A
Inadequate evaluation of target

Large or extraordinary debt

Cultural Difference

FOREIGN ACQUISITION AND MERGER

Foreign Acquisition
Advantages Access to targets local

knowledge Control over foreign operations Control over own technology

Disadvantages Uncertainty about targets value Difficulty in absorbing acquired assets Infeasible if local market for corporate control is underdeveloped

merits
Reducing costs Enhancing quality Accelerating speed Creating business agility

demerit
Surrender of power risky because the political situation in some
countries can change in an instant the cultural differences between different countries lead to several disagreements, and ultimately a failed business venture

TOP 11 M&A DEALS

1.Tata steel- corus: $12.2 billion

January 30, 2007 Largest Indian take-over

After the deal TATAS

became the 5th largest STEEL co.

100 % stake in CORUS

Image: B Mutharaman, Tata Steel MD; Ratan Tata, Tata chairman; J Leng, Corus chair; and P Varin, Corus CEO.

paying Rs 428/- per share

2. Vodafone-Hutchison Essar: $11.1 billion

TELECOM sector th 11 February 2007 nd 2 largest takeover deal 67 % stake holding in hutch

Image: The then CEO of Vodafone Arun Sarin visits Hutchison Telecommunications head office in Mumbai.

3. Hindalco-Novelis: $6 billion
June 2008 Aluminium and copper
sector Hindalco Acquired Novelis Hindalco entered the Fortune-500 listing of world's largest companies by sales revenues

Image: Kumar Mangalam Birla (center), chairman of Aditya Birla Group.

4. Ranbaxy-Daiichi Sankyo: $4.5 b

Pharmaceuticals sector June 2008 Acquisition deal largest-ever deal in the Indian pharma industry Daiichi Sankyo acquired the majority stake of more than 50 % in Ranbaxy for Rs 15,000 crore 15th biggest drugmaker

Image: Malvinder Singh (left), ex-CEO of Ranbaxy, and Takashi Shoda, president and CEO of Daiichi Sankyo.

5. ONGC-Imperial Energy:$2.8billion
January 2009 Acquisition deal Imperial energy is a biggest chinese co. ONGC paid 880 per share to the shareholders of imperial energy ONGC wanted to tap the siberian market

Image: Imperial Oil CEO Bruce March.

6.Ntt docomo-Tata Tele: $2.7 b

November 2008 Telecom sector Acquisition deal Japanese telecom giant
NTT DoCoMo acquired 26 per cent equity stake in Tata Teleservices for about Rs 13,070 cr.
Image: A man walks past a signboard of Japan's biggest mobile phone operator NTT Docomo Inc. in Tokyo.

7. HDFC Bank-Centurion Bank of Punjab: $2.4 billion

February, 2008 Banking sector Acquisition deal CBoP shareholders got one share of HDFC Bank for every 29 shares held by them. 9,510 crore

Image: Rana Talwar (rear) Centurion Bank of Punjab chairman, Deepak Parekh, HDFC Bank chairman.

8.Tata motors-Jaguar Land Rover: $2.3 billion

March 2008 (just a year
after acquiring Corus) Automobile sector Acquisition deal Gave tuff competition to M&M after signing the deal with ford
Image: A Union flag flies behind a Jaguar car emblem outside a dealership in Manchester, England.

9. Sterlite-Asarco: $1.8 billion

May 2008 Acquisition deal Sector copper

Image: Vedanta Group chairman Anil Agarwal.

10. Suzlon-RePower: $1.7 billion

May 2007 Acquisition deal Energy sector Suzlon is now the
largest wind turbine maker in Asia 5th largest in the world.
Image: Tulsi Tanti, chairman & M.D of Suzlon Energy Ltd.

11. RIL-RPL merger: $1.68 billion

March 2009 Merger deal amalgamation of its
subsidiary Reliance Petroleum with the parent company Reliance industries ltd. Rs 8,500 crore RIL-RPL merger swap ratio was at 16:1

Image: Reliance Industries' chairman Mukesh Ambani.

Legal aspect of M & A

The Companies Act , 1956

The Competition Act ,2002

Foreign Exchange Management Act,1999

Legal aspects of M & A

SEBI Take over Code 1994 Mandatory permission by the courts Indian Income Tax Act (ITA), 1961Mandatory permission by the courts

Stamp Duty

RANBAXYs acquisition by DAIICHI- SANKYO

RANBAXY LABORATORIES LIMITED

Ranbaxy Laboratories Limited, India's largest pharmaceutical company.

It was incorporated in 1961,but went public in 1973.

Ranbaxy today has a presence in 23 of the top 25 pharmaceutical of the world. It has a global footprint in 49 countries, manufacturing facilities in 11 countries and serves customers in over 125 countries. Mr. Atul Sobti is the present CEO & MD of Ranbaxy Laboratories.

DAIICHI SANKYO COMPANY, LIMITED

Daiichi Sankyo was established in 2005 through the merger of Sankyo Co., Ltd. and Daiichi Pharmaceutical Co., Ltd. which were century-old pharmaceutical companies based in Japan.

Daiichi Sankyo Co., Ltd. is a global pharmaceutical company and the second largest pharmaceutical company in Japan. It has its presence in 21 countries.
Daiichi Sankyo makes prescription drugs, diagnostics, radiopharmaceuticals and over-the-counter drugs.

RANBAXY-DAIICHI SANKYO DEAL

On 12th June 2008, Ranbaxy entered into an alliance with, Daiichi Sankyo Company Ltd.

Under the deal, Daiichi Sankyo agreed to acquire 34.8 per cent stake for around Rs. 10,000 crore ($2.4 billion) at Rs. 737 ($17) per share, from the promoters Mr Malvinder Singh and family.

Continued..

The deal made Daiichi-Ranbaxy, the 15th largest pharmaceutical company in the world with a market capitalization of around US$30 billion..

After the acquisition, Ranbaxy will operate as Daiichi Sankyos subsidiary but will be managed independently under the leadership of its current CEO & Managing Director Malvinder Singh.

Advantage To Daiichi Sankyo And Ranbaxy With This Deal

Considering that Ranbaxy is a generics company and Daiichi Sankyo an innovator company, both the businesses complement each other with negligible overlap.. Unlike Daiichi Sankyo, Ranbaxy has a geographically diversified presence across US, Europe and emerging markets thus it will be able to provide a wider reach to Daiichi Sankyo' product portfolio, including in India.
Ranbaxys debt will be significantly reduced and will impart more flexibility to pursue growth opportunities. Ranbaxy has a small presence in the Japanese market where the generics market holds good opportunities. This deal will help Ranbaxy tap this opportunity.

Conclusion
Daiichi Sankyos move to acquire Ranbaxy will enable the company to gain the best of both worlds without investing heavily into the generic business. The patent perspective of the merger clearly indicates the intentions of both companies in filling the respective void spaces of the other and emerge as a global leader in the pharmaceutical industry. Ranbaxy has become part of a Japanese corporate framework, which is extremely reputed in the corporate world. As a generics player, Ranbaxy is very well placed in both India and abroad although its share performance belies its true potential