MERGER AND ACQUISITION

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Mergers and Acquisitions
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MEMBERSKHALID JASNAIKFAIZ KAZIRAMEEZ
KADRISAIMA KHANMEHNAAZ ANSARIFAIZAN KHAN
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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.

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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.

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DIFFERENCE BETWEEN MERGER AND
ACQUISITION

• ACQUISITION

• MERGER

1. Merging of two organization in to one.
2. It is the mutual decision.
3. Merger is expensive than acquisition(higher legal
   cost).
4. Through merger shareholders can increase their
   net worth.
5. It is time consuming and the company has to
   maintain so much legal issues.
6. Dilution of ownership occurs in merger.

1. Buying one organization by another.
2. It can be friendly takeover or hostile takeover.
3. Acquisition is less expensive than merger.
4. Buyers cannot raise their enough capital.
5. It is faster and easier transaction.
6. The acquirer does not experience the dilution of
   ownership.

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MERGERWHY WHY NOT

• WHY IS IMPORTANT

• PROBLEM WITH MERGER

• Increase Market Share.
• Economies of scale
• Profit for Research and development.
• Benefits on account of tax shields like carried
  forward losses or unclaimed depreciation.
• Reduction of competition.

1. Clash of corporate cultures
2. Increased business complexity
3. Employees may be resistant to change

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ACQUISITIONWHY WHY NOT

• WHY IS IMPORTANT

• PROBLEM WITH ACUIQISITION

1. Increased market share.
2. Increased speed to market
3. Lower risk comparing to develop new products.
4. Increased diversification
5. Avoid excessive competition

1. Inadequate valuation of target.
2. Inability to achieve synergy.
3. Finance by taking huge debt.

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REASONS /ADVANTAGES

• Size and Synergy
• Increased revenue/Increased Market Share
• Economies of Scale
• Helps to face competition
• Revival of sick units
• Faster growth rate
• Taxes Advantages
• Finance related advantages

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Different Types Of Mergers

• Horizontal Merger 
• Conglomeration  merger
• Vertical Merger
• Product-Extension Merger
• Market-Extension Merger 

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TOP 5MA DEALS
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1. Tata Steel-Corus 12.2 billion

• January 30, 2007
• Largest Indian take-over
• After the deal TATAS 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.
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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.
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3. Ranbaxy-Daiichi Sankyo 4.5 b

• 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

Image Malvinder Singh (left), ex-CEO of Ranbaxy,
and Takashi Shoda, president and CEO of Daiichi
Sankyo.
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4. Tata Motors-Jaguar Land Rover 2.3
billion

• March 2008 (just a year after acquiring Corus)
• Automobile sector
• Acquisition deal
• Gave tuff competition to MM after signing the
  deal with ford

Image A Union flag flies behind a Jaguar car
emblem outside a dealership in Manchester,
England.
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5. 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 ratio was at 161

Image Reliance Industries'
chairman Mukesh Ambani.
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Why India?

• Dynamic government policies
• Corporate investments in industry
• Economic stability
• Ready to experiment attitude of Indian
  industrialists

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Deals in India for first financial quarter
2010
Sector No. of Deals Value in USD million Share in per 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
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PROCESS OF MERGER ACQUISITION IN INDIA

• The process of merger and acquisition has the
  following steps
• Approval of Board of Directors
• Information to the stock exchange
• Application in the High Court
• Shareholders and Creditors meetings
• Sanction by the High Court
• Filing of the court order
• Transfer of assets or liabilities
• Payment by cash and securities
• Maximum Waiting period210 days from the filing
  of notice(or the order of the commission -
  whichever earlier).

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  Impact of Mergers and Acquisitions
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Why Mergers and Acquisitions Fail?

• Cultural Difference
• Flawed Intention
• No guiding principles
• No ground rules
• No detailed investigating
• Poor stake holder outreach

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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

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MERGER ACQUISITION(2009-10)
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