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Merger & Acquisition

Group #3:

Merger between HDFC Bank & Centurion Bank of


Punjab
Merger Date : February 25th 2008

(CBoP)

Value of the Merger : $ 2.5 billion


HDFC Bank was one of the first private-sector banks to get off the ground when
Indian regulators began giving out new private-sector banking licences in the
early 1990s.
Meanwhile, CBoP, a floundering new-generation private bank, was taken over in
2003 by a group of investors spearheaded by Sabre Capital, a fund started by Mr
Talwar, a former Standard Chartered Bank chairman.
CBoP share holders would get one share of HDFC for 29 shares of CBoP.

Nature of the Merger


Horizontal Merger
Objectives :
Economies of Scale
Wide Line of Products
Dominance in the competitive Banking Industry in India

The merger was important to face competition from foreign banks looking to
enter the Indian Banking front.
Both banks had a strong foothold in various sectors like SME & retail Segments
and Retail deposit franchise, vehicle financing, etc.

Benefits of the Merger


Regional strength is one of the benefits that HDFC Bank was looking for, but the
merger will also offer several others.
Organic growth with a merger that would add scale, geographical reach and
experienced staff, which are in short supply.
The deal will add 394 branches and 452 ATMs to HDFC Bank's existing 754 branches
and 1,906 ATMs
The new entity will have assets of about Rs1.5trillion, the merged entity will also have
a deposit base of around Rs1.2trillion and net advances of around Rs850bn.

Side effects of the Merger


HDFC Bank shares fell 3.5% to close at Rs1,422.70 a share, reflecting investor
concerns that CBoP's valuation was too high.

CBoP's asset quality and resource profile, though healthy, are slightly weaker than
HDFC Bank's own and could impact HDFC Bank adversely in the short term.

Strategic Impact of the Merger


Increased presence in Metros
7th largest bank with assets worth Rs. 1097 billion
Rise by :
Net Profit 44.6%
Interest Income 74.9%
Advances and Deposits grew by 60.4%

Tata motors acquisition


of Jaguar

Why to acquire JLR?


Long term strategic commitment to automotive sector.
Opportunity to participate in two fast growing auto
segments.
Increased business diversity across markets and products.
Jaguar offered a range of performance/luxury vehicles
to broaden the brand portfolio.
Benefits from component sourcing, design services and
low cost engineering

Post merger
Following Cost Rationalisation initiatives were taken to
improve cash flows:
1.Single shifts and down time at all three UK assembly plants.
2. Supplier payment terms extended from 45 to 60 days in line
with industry standard.
3.Receivables reduced by 133 million from 38 to 27 days.
4. Inventory reduced by 217m between June 2008 and March
2009 from 70 to 50 days .

5] Labor actions
- Voluntary retirement to 600 employees.
- Agency staff reduced by 800.
-Offered leaves to 300 workers of Bromwhich and solihull plant.
-Additional 450 job cuts including 300 managers.
6] Agreement with Unions to implement pay freeze and longer working hours
(equivalent to approximately 20% reduction in labor costs.)
7] Engineering and capital spending efficiencies.
8] Fixed marketing and selling costs reduced in line with sales volume.
9] Reduction in all other non-personnel related overhead costs.

Problems
Drop in share prices
Failure of rights issue
Huge debt burden
Sales volume decreased by 35.2%
Lack of consumer loans
Issue of timing
Operational freedom slows pace of change

Jaguar/Land Rover lost 306 million pounds ($504


million) for the fiscal year ending March 2009
Tata Motors reported a net loss of Rs3.29bn ($67
million) for the quarter to end-June
Tatas core commercial vehicles market in India is also
suffering from slower sales
Extremely high manufacturing costs in Britain
Eliminated more than 2,200 jobs

Benefits
Tata wanted to make a global impact and it thinks that
buying these brands at a lower rate now, will give better
value later on.
This acquisition also eases the entry of Tata in European
market which it has been eyeing for long. A previous JV
with FIAT took place, this would further help them
penetrate EU market.
Reduce the company dependence on the Indian market
which accounted for 90% of its sales
Increase sales in emerging markets

Reduce dependence on mature markets


Opportunity to spread its business across different
customer segment
At the price staring from 63 lakh and going upto 93
lakh, it seems Tata has just got the right place to
compete with the current market leaders BMW, Audi,
Mercedes
Publicity on an international scale
Access to large distribution network

JLR had many new models lined up for next 3 years, so


no much work just profits
Strong R & D culture and facilities
Component sourcing, engineering and design benefits

Strengths:
Tatas strong management capability
Strong monetary base to invest

Weaknesses:
Jaguars declining sales record
Inexperience of handling such luxury
brands
Jaguar

Tatas
Land Rover
Acquisition
Market is volatile and driven by new

Opportunities:
Support from Ford in terms of
Technology,Engine, IT, Accounting
Adding up of luxury brands in the
product line
Access to European Market

products
Strong presence of competitors like
Mercedes, BMW, Lexus and Infinity