MERGERS & AQCUSITION

In 2006

Left Parties and Opposition together Prevented Congress to Pass Banking ,Insurance and Pension fund reforms in Parliament. a result companies like AIG, CitiGroup, Merrill lynch, Lehman Brothers, Bear Sterns, Bank of America, Wachovia, RBS and many others were restrained to acquire stakes in Indian banks and Insurance Companies.

  As

Foreign banks had been allowed to take over 74 %
• If foreign banks had been allowed to take over 74 per cent interest in Indian banks, our banks would have collapsed.


• If pension funds had been privatized, crores of employees would have been ruined.


• Similarly, if the insurance cap had gone up to 49 per cent, the collapse of American Insurance Group (AIG) would have made Tata-AIG far more vulnerable.
 

Bank Collapse

NOW, WE WILL ANALYSIS THE VARIOUS REASONS WHY MERGERS AND ACQUISITION FAILS BIG TIME.

Bullish Stock Market

Leads to Over Valuation

TATA & CORUS
5th largest steel producer in the world

TATA & CORUS

•A premium of 68.7% on Corus’s share price of 360.5 pence •The deal size implies a multiple of 7-9 times that of EBITDA

•Tata Steel’s share price declined by 11.35%.

HIN DA LC O & NO VE The deal involved LIS

transaction of

$5,982

million

Quaker Oats & Snapple Beverage Co

Cultural Difference

In the year 1994, Quaker Oats purchased Snapple Beverage Co. for a total cost of $1.7 billion

DIFFERENCE IN WORKING CULTURE “us versus them"

S

L O

O D

T U

DAIMLER & CHRYSLER

WORTH $37 billion

IN 2007
deal wort h only 21.5% $7.4 billion total acquisition value!

A R 100 Cmillion ELtonne Osteel R MI TT AL

   L.

N. Mittal became……..

But does that mean it has added value to Mittal Steel’s stakeholders’ wealth?

ARCELOR MITTAL
 net

income in billion dollars
$2.9 billion $2.3 billion

ARCELOR MITTAL
 Earnings

per Share

ARCELOR MITTAL
 P/E

Ratio


Vodafone paid a smashing $190 billion for Germany’s Mannesmann. Biggest operator in the whole of Europe.


Vod afon eman nes man n

World’s fourth largest company overnight.  Combined entity was valued at $365billion.

$365billion
 On
• • • • •

July 24, 2008 $203.6 billion, a fall of 53%!

Vodafone has become the biggest loss making company ever in the history of mankind!


The loss: $86 billion!

Citi stock prices have tumbled by 25%!
 $140

billion merger

TI M E W A R N ER

Richard Parsons oversaw the brilliant supernova of a merger between Time and AOL.

Time-Warner
 The    Today,

companies had a combined value of $247 billion at the time of the deal.

the combined entity is worth a mind numbingly low $58 billion.

Alcatel-Lucent
 At

the time of the merger of Alcatel and Lucent, the entity had a share price of $15.4 (March 31, 2006). 24, 2008, the price is $6.09

  July   Patricia

Russo, CEO Alcatel-Lucent, has a history of destroying shareholder wealth.

Skype & ebay

eBay - Skype
CEO Meg Whitman, who ensured eBay bought Skype.  Also ensured eBay’s price fell from close to •$40 Sep 9, 2005


$25 Jul 24, 2008

MURDERS & AQCUSITION

value on the stock market deteriorates
 Studies

reveal that approximately 40% to 80% of mergers and acquisitions prove to be disappointing. The reason is that their value on the stock market deteriorates afterwards.

Erode shareholders wealth
 According

to J. Thunuguntla, Head (Equity) at NexGen Capital,  “Around 70-80% M&As still erode shareholders wealth .

Thank you

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