Joint venture Mergers and

Acquisitions
 MEMBERS
RUCHIKA MOHANTY
SANDEEP SINGH SRA
SHAHID KHURSHEED KHAN
SARATH MOHAN
SAURABH GHOSH
 JOINT VENTURE
A joint venture is the long-term commitment of
funds, facilities and services by two or more
legally separate interests, to a combined
enterprise for their mutual benefits.
A joint venture need not be a separate legal
entity or company. Other forms of joint ventures
include an agreement to work together
formalised through a Heads of Agreement or a
Strategic Cooperation Agreement.
 A Manufacturing Joint
Venture
 Joint ventures are most commonly entered into to
get around a trade barrier that is preventing
your entry into a target market.
 Another way of circumnavigating a trade barrier is to
establish a wholly owned manufacturing or assembly
subsidiary in an overseas market, however, many
companies find the joint venture route a better
option. A joint venture achieves many of the
advantages of a fully owned operation, without the
long lead-time and at a fraction of the cost.
 What a Joint Venture
Involves
A joint venture involves:
 
1. A high level of commitment, funds, time
2. A degree of risk
3. A management voice for both parties
4. Equity participation by each partner
 
 Critical Success Factors
1. Personal rapport between the two partners – get to know
each other and fully recognise,
understand and accept the other’s requirements in advance
 
2. Communication channels must be kept open and
agreed reporting timetables and format
adhered to
 
3. Positive results for both partners with a
reasonable and agreed timeframe
 
 Benefits
 There must be real benefits for both partners. If
the partnership is
 successfully established, it will provide:
 Shared financial commitment
 Shared risk
 Growth
 Mutual learning & professional development
 Increased research capacity
 Widening markets / programs / opportunities
 The Disadvantages of a Joint
Venture
 Potentially high capital cost plus ongoing
 financial support are required
 Profitable returns may take some time to achieve
 High level of commitment of staff and management
 Time consuming (especially where a new venture is involved)
 Potential for conflict with your joint venture partner
 Cultural differences and communications difficulties
 A minority equity position may work against you
 Difficult to get out of quickly
 Working in a different legal and commercial system
 Political risks in the country where the joint venture is based
 
 Bajaj auto plans JV in
Indonesia
Bajaj has set up a joint venture in Indonesia
with PT Abdi Raharja to expand its presence
in south-east Asia. PT Abdi Raharja, owned
by the Gobel group, is the sole distributor of
Bajaj’s two-and three-wheelers in Indonesia.
Bajaj Auto’s technology partner Kawasaki also
operates in Indonesia through subsidiary
company Kawasaki Motors Indonesia (KMI).
 The three-member team had discussions with
shareholders of the Indonesian company and also
meet representatives form local industry
associations and banks. The team has prepared a
comprehensive business strategy for the region
which will be presented to the company’s board,
which plans to increase its exports by 33.7%
 Besides, for Bajaj Auto, its proposed
manufacturing unit in Indonesia will open up big
opportunities in adjoining countries. The plant has
also enabled the company escape the high import
duties that are levied in Indonesia.
MEANING
Merger
•A transaction where two firms agree to integrate their
operations on a relatively co-equal basis because
they have resources and capabilities that together
may create a stronger competitive advantage.
•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
•Example: Company A+ Company B= Company C.
 ACQUISITION
 A transaction where one firms buys another firm with
the intent of more effectively using a core
competence by making the acquired firm a
subsidiary within its portfolio of business
 It also known as a takeover or a buyout
 It is the buying of one company by another.
 In acquisition two companies are combine together
to form a new company altogether.
 Example: Company A+ Company B= Company A.
DIFFERENCE BETWEEN MERGER AND
ACQUISITION:
MERGER
i. Merging of two organization in
to one.
ii. It is the mutual decision.
iii. Merger is expensive than
acquisition(higher legal cost).
iv. Through merger shareholders
can increase their net worth.
v. It is time consuming and the
company has to maintain so
much legal issues.
vi. Dilution of ownership occurs
in merger.
ACQUISITION
i. Buying one organization by
another.
ii. It can be friendly takeover or
hostile takeover.
iii. Acquisition is less expensive
than merger.
iv. Buyers cannot raise their
enough capital.
v. It is faster and easier
transaction.
vi. The acquirer does not
experience the dilution of
ownership.
 MERGER:WHY & WHY NOT
WHY IS IMPORTANT PROBLEM WITH MERGER

i. Increase Market Share.

ii. Economies of scale i. Clash of corporate cultures
ii. Increased business complexity
iii. Profit for Research and iii. Employees may be resistant to
development. change
iv. Benefits on account of
tax shields like carried
forward losses or
unclaimed depreciation.
v. Reduction of
competition.

14
 ACQUISITION:WHY & WHY NOT
WHY IS IMPORTANT PROBLEM WITH ACUIQISITION

i. Increased market
share.
ii. Increased speed to i. Inadequate
market valuation of target.
iii. Lower risk comparing ii. Inability to achieve
to develop new synergy.
products.
iii. Finance by taking
iv. Increased
diversification huge debt.
v. Avoid excessive
competition

15
TOP 11
M&A DEALS…
 1. Tata Steel-Corus: $12.2 billion
 January 30, 2007

 Largest Indian take-over

 After the deal TATA’S

became the 5th largest
STEEL co.
 100 % stake in CORUS
paying Rs 428/- per share

Image: B Mutharaman, Tata Steel MD; Ratan

Tata, Tata chairman; J Leng, Corus chair;
and P Varin, Corus CEO.
 2. Vodafone-Hutchison Essar:
$11.1 billion
TELECOM sector
11th February 2007
2nd 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
Image: Malvinder Singh (left), ex-CEO
of Ranbaxy, and Takashi Shoda,
president and CEO of Daiichi Sankyo.
 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
 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
Image: Reliance Industries' ratio was at 16:1
chairman Mukesh Ambani.
 Why India?

Dynamic government policies

Corporate investments in industry
Economic stability
“Ready to experiment” attitude of
Indian industrialists
Deals in India for first financial
quarter 2010
Value in USD Share in per
Sector No. of Deals
million cent
Telecom 3 22732.26 67.19

Pharmaceutical 4 3958.29 11.02

BFSI 6 2651.54 7.84

Metal and Mining 4 1483.15 4.38

Energy 4 1320 3.90

Other sectors 39 1919.00 5.67

PROCESS OF MERGER & ACQUISITION IN INDIA:
The process of merger and acquisition has the following steps:
i.Approval of Board of Directors
ii.Information to the stock exchange
iii.Application in the High Court
iv.Shareholders and Creditors meetings
v.Sanction by the High Court
vi.Filing of the court order
vii.Transfer of assets or liabilities
viii.Payment by cash and securities

Maximum Waiting period:210 days from the filing of notice(or the order of
the commission - whichever earlier).
Why Mergers and Acquisitions Fail?

Cultural Difference

Flawed Intention

No guiding principles

No ground rules

No detailed investigating

Poor stake holder outreach

How to Prevent the Failure

 Continuous communication – employees,

stakeholders, customers, suppliers and
government leaders.
 Transparency in managers operations
 Capacity to meet new culture higher
management professionals must be ready to
greet a new or modified culture.
 Talent management by the management
RECENT M&A HAPPENINGS…
 India Inc runs up an M&A bill of Rs 1.8 lakh cr in H1
 M&A deals touch $14 billion in June
 Value of telecom M&A deals touched USD 23
billion in Q1: Assocham.
 Godrej acquires Argentine firm
 Oil India eyes shale gas acquisition overseas
 RIL acquires Pioneer stake for $1.32 bn
 Indian hunger for new technology fuels foreign
acquisitions
 contd…
Dabur completes merger of Fem Care
Ebay India ties up with Adidas for FIFA
World Cup.
Abbott buys Piramal unit, tops table
Eurocopter signs two joint ventures with
Pawan Hans 
Mahindra to buy out Renault’s stake in
India, revive Logan sales.
Amongst BRIC Nations, India second most targeted
country for Mergers & Acquisitions(2010):
MERGER & ACQUISITION(2009-10) :

36
ICICI BANK & BANK OF RAJASTHAN(19th MAY,2010):
ADVANTAGES FROM THIS MERGER:
 This amalgamation would substantially enhance
ICICI Bank's branch network (23 % increase
apprx).
 Strengthen ICICI bank’s presence in northern and
western India.
 ICICI has now moved to a branch-led business
model.
 The acquisition will help ICICI increase CASA
(current and savings account) flows, as also help
in cross-selling products.
 Both banks working on the same platform,
integration will also be less taxing.