Module 2 Mergers and Acquisitions: A Strategic Perspective

Share Holders Wealth Maximization perspective Managerial Perspective
Managerial Motives: The Empire building syndrome The self-fulfillment motive Diversify the Risk Job security Motive

Cotton textile industry) ‡ Growth rate comes down ‡ Accumulation of excess capacity ‡ Prices and profits declines ‡ The decline stage( -10 to 2%) (eg.g.Jute industry.g. Aviation & Insurance industry) ‡ Sales Expand rapidly ‡ High profitability ‡ Entry of competitors ‡ The maturity stage(4 to 6%) (e. Audio Cassette) ‡ Introduction of new products ‡ Decline in sales . Health and Fitness) ‡ Time and money required ‡ Product development problems ‡ Losses to innovative products ‡ The growth stage(8 to 20%) ( e.‡ Analysis of Industry life cycle in M&A ‡ The development stage( 1 to 2%) ( e.g.

‡ Analysis of Product life cycle in M&A Introduction Stage ‡ Risk of Non-acceptance ‡ Product development problems Growth stage Demand increases Faster growth Maturity Stage Growth Stabilizes Sales grow at lesser rate Accumulation of stock Decline stage Negative Out dated product .

‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Strategic Approaches to Mergers and Acquisitions SWOT Analysis: Strengths Underutilization Technological edge R&D facility Sound financial position Weaknesses Inefficiency Lack of innovation Lack of foresightedness Opportunities Underutilized resource Growth potential Monopoly powers Faster growth Entry into new industry .

‡ Threats ‡ Entry of competitors ‡ Change in technology ‡ Govt intervention .

‡ Michael Porters Five Forces Model Potential Entrants Threat of New Entrants Suppliers Bargaining power of Suppliers The industry Rivalry Among Existing Firms Bargaining power of Buyers Buyers Threat of Substitute Products Substitutes .

‡ BCG Matrix ‡ Market ‡ Growth ‡ Rate Market Share High High Low Stars Cash Cows Low Question Marks Dogs .

‡ Meaning And Objectives ‡ Methods of Restructuring ‡ Expansions ‡ Mergers & Acquisitions ‡ Tender offers ‡ Joint Ventures ‡ Sell-offs or Contraction ‡ ‡ ‡ ‡ ‡ Spin.offs Split.offs Divestitures Equity curve outs .‡ Corporate Restructuring ‡ Restructuring.

‡ Corporate Control ‡ ‡ ‡ ‡ ‡ ‡ Premium buybacks Stand still Agreements Antitakeover Amendments Proxy contests Exchange offers Share Repurchases ‡ Change in Ownership Structure ‡ Going Private ‡ ‡ ‡ ‡ Leveraged Buyouts Management buyouts ESOP MLP¶s .

having substantial business interests in UK. around 35 kms from Bangalore. Alliance Group Canada & Duff& Phelps of US) Tatra Vectra Motors Limited (TVML). The manufacturing plant is located in Hosur. is a joint venture between Tatra a. a UK based NRI company. Slovakia. The fully integrated manufacturing facility includes an engine assembly and testing plant. CIS. Singapore and India. Tamil Nadu. ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Rationale/Motives behind JV¶s Increase insufficient financial& technical abilities Share technology Diversify risk Obtain Distribution Channel or raw material Expand activities with smaller investment Take Tax advantage Pooling of complimentary resources Economies of scale . USA) and the Vectra group.s. formerly known as Tatra Trucks India Limited. a cabin welding shop. a frame fabrication shop and a test track. the Czech Republic. of Czech Republic (a part of Terex corporation.‡ Joint Ventures ‡ ‡ General Motors & Toyota Duff & Phelps Credit Rating India Ltd ( JV Between JM Financials.

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