DATE : 09/10/2019

MERGERS & ACQUISITIONS

GROUP 10
 AGENDA

 Mergers
 Acquisitions
 Strategic Alliance
 Joint Ventures
 Vertical Integration
MERGERS
 MERGER

 An agreement that unites two

existing companies into one new
company
 The combination of two companies
into one either by closing the old
entities into one new entity or by
one company absorbing the other
 To expand company’s reach, expand
into new segments or gain market
share
 EXAMPLES OF MERGERS

 Merger of Vijaya Bank and Dena

Bank with Bank of Baroda (April 1,
2019)
 Merger of Vodafone India and Idea
Cellular into Vodafone Idea Limited
(August 31, 2018)
 Merger of ICICI Ltd with ICICI Bank
(after 1994)
 TYPES OF MERGERS

 Conglomerate Merger
 Pure
 Mixed
 Horizontal Merger
 Vertical Merger
 Upstream
 Downstream
 CONGLOMERATE MERGER

 Merger between the companies in

totally unrelated businesses
 Within different industries or in
different geographical locations
 Example(s):
 Merger between the Walt Disney
Company and the American
Broadcasting Company in 1995
 Merger between Lockheed
Corporation and Martin Marietta
into Lockheed Martin in 1995
 HORIZONTAL MERGER

 A merger occurring between two companies in

the same industry
 A business consolidation that occurs between
two firms which operate in the same space
offering the same goods or services
 Increased synergies and potential gains in
market share
 Examples:
 Merger of Vodafone India and Idea Cellular
 Merger of Indiabulls Housing Finance Ltd and
Lakshmi Vilas Bank
 VERTICAL MERGER

 A merger between firms in the

same industry but at the different
stages of production
 In other words, a vertical merger
occurs where one buys or sells
something from or to the other
 TYPES OF VERTICAL MERGER

 Upstream Merger: Merger of a

subsidiary into the parent
company
 Example: Merger of
Bhadrachalam Paperboards Ltd
with its parent firm ITC in 2001
 TYPES OF VERTICAL MERGER

 Downstream Merger: A type of

vertical merger where the
parent firm is absorbed with one
of its subsidiaries
 Example: ICICI Ltd, a parent
company, merged with its
subsidiary ICICI Bank after 1994
 BENEFITS OF MERGER

 Synergies
1. Cost Synergies
2. Revenue synergies
 Economies of scale
 Increased market share
 Increased distribution capabilities
 Enhanced financial resources
 WHY DO MERGERS FAIL?

 Culture differences
 Job loss
 Regulatory issues
 Inadequate due diligence
ACQUISITIONS
 ACQUISITIONS

 Acquisition means to acquire or to

takeover. It could be acquisition of control,
leading to takeover of a company. It could
be acquisition of tangible assets, intangible
assets, rights and other kinds of obligations
 It is the buying of one company by another
 Example
 Company A + Company B = Company A
 An Acquisition can be friendly or hostile
 EXAMPLES

 Amazon Acquires Whole Foods

 In 2017, Amazon generated $177.9 billion
in Net Sales
 It is the 3rd largest ecommerce giant in the
world
 Amazon acquires Whole Foods on 28 August
2017
 Deal Price $13.7 billion.
 EXAMPLES

 Facebook Acquires WhatsApp

 In February 2014, Facebook announced the
firm’s biggest acquisition ever
 In October 2014, Facebook finally closes
$19 billion WhatsApp deal
 This acquisition was the sixth biggest in
technologies and biggest ever in history of
acquisition of software companies
 TYPES OF ACQUISITIONS

 Friendly Acquisition
 In this type, the target company’s board negotiates or accept the
offer in the friendly or welcoming manner
 For example: Facebook takeover to WhatsApp is a big example of
a Friendly Takeover where Facebook bought WhatsApp in $19 Billion
 TYPES OF ACQUISITIONS

 Hostile Acquisition
 In this type, the target company’s board is not willing to be bought
or the target company has no prior knowledge of this offer
 On November 13 1999, Vodafone AirTouch announced a takeover of
Mannesmann AG. This offer was the largest unsolicited takeover bid
at that time
 The deal was valued at approximately $180 billion
 BENEFITS

 To gain opportunities of market growth

 To gain a more dominant position in the
market
 To acquire the skills or strengths of
another firm to complement existing
business
 To diversify its products or service range
in the market
 Reduction of Competition
STRATEGIC ALLIANCE
 STRATEGIC ALLIANCE

 Strategic Alliance are agreements

between companies to reach
objective of a common interest
 Alliances are among the various
options which companies can use
to achieve their goals
 They are based on cooperation
between companies
 ADVANTAGES

 Improve organization efficiency

 Offer to access new market and
technologies
 Reduce the impact of risk
 Learning from partners
 It expands your customer base
 DISADVANTAGES

 It can create conflicts in ownership

claims
 It may cause delays in
implementation
 Significant differences between
the objectives
 Poor allocation of resources
 Lack of trust
 Cultural and Language barriers
 EXAMPLES

 Bharti Airtel and Samsung

 ICICI Bank and Vodafone India
 Apple and IBM
JOINT VENTURES
 WHAT IS JOINT VENTURE?

 Joint Venture is
 A business arrangement
 Two or more independent firms
come together
 To form a legally independent
undertaking
 For a stipulated period
 To fulfil a specific purpose
 Temporary entity
 NEED FOR JOINT VENTURE

 Extend market reach/distribution

network
 Access to new information, resources and
skill sets
 Access to new revenue streams
 To achieve economies of scale
 To overcome insufficient financial or
technical ability to enter a particular line
of business
 ADVANTAGES OF JOINT VENTURE

 New insights and expertise

 Better resources
 Limited time frame
 Both parties share the risks and costs
 Higher chances of success
 Building relationships and networks
 Limitless potential
 Saving of money
DISADVANTAGES OF JOINT VENTURE

 Vague objectives
 Flexibility can be restricted
 Unequal involvement
 Clash of cultures
 FACTORS FOR SUCCESS IN JOINT
VENTURE
 Alignment
 Strong stakeholders
 Risks and Responsibilities
 Flexibility
 Good communication, co-operation and
co-ordination
 FACTORS WHICH HINDER THE
SUCCESS IN JOINT VENTURE
 Lack of co-ordination among partners
 Lower profit among partners
 Difficulty due to location of partners
 Difficulty in management style of partners
 Lack of motivation or patience
EXAMPLES
 DIFFERENCE BETWEEN STRATEGIC
ALLIANCE AND JOINT VENTURE
Sr.
No Parameter Strategic Alliance Joint Venture
.
1 Objective To maximise the returns To mitigate the risk

2 Agreement/contract Not necessary Contract exist

Independent Independent entities

3 No independent entities
organization continue

Delegated management Bilateral form of

4 Management
exist management
VERTICAL INTEGRATION
 WHAT IS VERTICAL INTEGRATION?

 Vertical integration is a business

strategy used to expand a firm by
gaining ownership of the firm's
supplier or distributor
 Vertical integration is when a
company controls more than one
stage of the supply chain
 In other words, vertical integration
involves purchasing a part of the
production or sales process that
was previously outsourced to have
it done in-house.
 TYPES OF VERTICAL INTEGRATION?

 Forward Integration
 It is a method of vertical
integration in which a firm will
gain ownership of its distributors
 Backward Integration
 It is a method of vertical
integration in which a firm will
gain ownership of its suppliers
 ADVANTAGES

 More Control Over the Value Chain

 Potential access to monopolizing suppliers
 It give you more control over your business
 It offers more cost control
 DISADVANTAGES

 It requires a huge amount of money

 It can bring about more difficulties
 It can result in decreased flexibility
 It can cause companies to lose their focus
EXAMPLES
OFFENSIVE AND DEFENSIVE
STRATEGIES

New tools Update Current tools

TYPES OF OFFENSIVE STRATEGY
 TYPES OF OFFENSIVE STRATEGY

 Frontal attack:
Attack with similar products,
price quality promotions and
distribution.

 Flank attack:
Attacking the competitor on
the weak point or blind spot
TYPES OF OFFENSIVE STRATEGY

 Guerrilla attack:
Small hit and run attacks
to destabilize the competitor

 Bypass attack:
It involves overtaking the competitors
by introducing new strategies as well
as diversifying the products
TYPES OF OFFENSIVE STRATEGY

 Encirclement attack:

The challenging firm considers both the

strengths and weakness of the opponent and
then launch the attack simultaneously
 DEFENSIVE STRATEGY
.
 TYPES OF DEFENSIVE STRATEGY

 Position Defence- A firm builds superior brand power

by constant innovations or intensive promotion in
order to maintain their top position.
For ex- Clinic plus and Sunsilk shampoo

 Flanking Defence
A leader should also protect its weak spot or
use them for counter attack.
For ex-In 2016 Nestle India roll-out the first sub-brand
of the Maggi 2-minute noodles under the brand Hot Heads
TYPES OF DEFENSIVE STRATEGY

 Pre-emptive Defence

By Attacking a competitor before

you get attacked by it

 Counter Offensive Defence

The counter-offensive defence
is a retaliatory strategy
TYPES OF DEFENSIVE STRATEGY

 Mobile Defence- A leader broadens and expands its territories

into new market areas by diversifying
Ex- KFC Chizza

 Strategic Withdrawal- A leader gives weaker

territory and reassigns resources to stronger
territories.
Ex- Maruti Kizashi
THANK YOU