2. Mergers and Acquisitions have become the mostfrequently used
methods of growth for companiesin the twenty first century. They
present a companywith potentially larger market share and open it
upto a more diversified market. Mergers andAcquisitions refers to
the aspect of corporatestrategy, corporate finance and
managementdealing with the buying , selling, dividing andcombining
of different companies and similarentities that can help an
enterprise grow rapidly inits sector. Kankus 3. The growth of the
firm can occur either externally orinternally. The firm may grow by
purchasing theassets of another firm i.e., growth by acquisitions
orby agreeing to join with that other firm under singleownership
i.e., growth by merger. In everyday languageAcquisition tends to be
used when a larger firmabsorbs a smaller firm and Merger tends to
beused when the combination is portrayed to bebetween equals.Kankus
4. Merger is a financial tool that is used forenhancing long-term
probability by expandingtheir operations. Mergers can be classified
into thefollowing based on the nature of mergingcompanies-
Horizontal Mergers Vertical Mergers Conglomerate Mergers
Product-Extension Mergers Market-Extension Mergers Kankus 5.
Horizontal Mergers refers to the merger of twocompanies who are
direct competitors of oneanother and they serve the same market and
sellthe same product. Vertical Mergers are effected either between
acompany and a customer or between a companyand a supplier.
Conglomeration refers to the merger ofcompanies which donot sell
any relatedproducts to any related market. Kankus 6.
Product-Extension merger is executed amongcompanies which sell
different products ofrelated category. They also seek to serve
acommon market. Market-Extension merger occurs between twocompanies
that sell identical products indifferent markets.Kankus 7. An
acquisition is the purchase of one business orcompany by another
company or other businessentity. There maybe either hostile or
friendlytakeover. In the course of a bidder may purchase theshare
or the assets of the target company. Kankus 8. The process of
taking control of the assets andliabilities by a company of another
firm is termedas takeover. In the event when the offer is
approvedby the Board of Directors, the process oftakeover commence.
There maybe two instanceswhen a takeover takes place- Hostile
Takeover Friendly Takeover Kankus 9. When the tender offer is
placed before the Board,the Board of Directors evaluates the same
to see if itwill be advantageous for the shareholders or will
goagainst them. Decision is not only taken keeping inmind the
interests of the shareholders but otherareas are also scanned
through, if the Board feelsthe tender is not agreeable it turns
down the offer. Ifthis is not agreed by the management team of
theacquiring company and they wish to continue withthe same , this
takeover takes the nature of hostilityand hence a Hostile Takeover.
Kankus 10. In case of friendly takeover the Board approvesof the
offer put forward by the acquiring firm.Both the companies oversee
each other interestand agree to merge. This sort of merger
isexpected to increase the productivity of thisnewly formed company
and have several addedfeatures by the amalgamation of the
specialitiesof both the merging companies. Kankus 11. It gets a
larger set of resources at its disposalwhich includes manpower ,
inventory and otherassets. With the larger set of resources
,efficiency is increased which in turn increasesthe output. The
increase in output leads to lower cost ofproducing service or
products , which is theinput. Kankus 12. The increased output or
lowered input definitelytranslates to better business growth for
anyentity. Another advantage of a takeover is that brandawareness
increases as the business expandsallowing more advertising products
and services.Kankus 13. The bigger the business the harder to
control. More decision making and more risks. More expensive. For
example more runningcosts , more demand , more supplies ,
moreproducts need to be made , new location. Kankus 14. Merger and
Acquisition process is the mostimportant thing in a merger or
acquisitiondeal as it influences the benefits andprofitability of
the merger or acquisition. Thisprocess is continued in the
following sixsteps- Preliminary Assessment or Business Valuation-
In thisfirst step , the market value of the target isassessed. In
this process of assessment not only thecurrent financial
performance of the company isexamined but also the estimated future
marketvalue is considered. The product of the firm , itscapital
requirement , organizational structure ,brand value everything are
reviewed strictly. Kankus 15. Phase of Proposal- After complete
analysis and reviewof the target firms market performance , in
thesecond step , the proposal for merger and acquisitionis given .
Generally this proposal is given throughissuing an non-binding
offer document. Exit Plan- When a company decides to buy out
thetarget firm and the target firm agrees , then the latterinvolves
in Exit Planning. The target firm plans the righttime for exit.
Structured Marketing- After finalizing the exit plan ,the target
firm involves in the marketing process andtries to achieve highest
selling price. Here the targetfirm concentrates on structuring the
business deal.Kankus 16. Organization Of Purchase Agreement or
MergerAgreement- In this step , the purchaseagreement is made in
case of an acquisitiondeal. In case of merger also , the
finalagreement papers are generated in this stage. Stages Of
Integration - In this final stage , thetwo firms are integrated
through Merger orAcquisition . In this stage , it is ensured that
thenew joint company carries same rules andregulations through out
the organization.Kankus 17. 1. By Merger
:ArcelorArcelorMittalMittal steel 2. By Acquisition :Proctor &
Gamble Co.(P&G)P&G KankusGillette Company 18. Kankus 19.
ARCELOR pre-merger was the worlds largest steelproducer in terms of
turnover and second steeloutput. Headquartered in Luxembourg, the
merger ofthree steel companies- Aceralia, Arbed and Usinorled to
the creation of ArcelorRevenue 32.611 billionOperating income:$4.1
billion.Net income:$2.65 billion.Employees 94,000Kankus 20. LONDON,
June 25,2006 A new steel giant is beingcreated out of a bitter
battle, after Arcelor agreedto a merger with its rival Mittal Steel
in a deal valuedat 26.8 billion Euros, or $33.5 billion. Kankus 21.
January 2006 - Mittal Steel May 2006 - Mittal Steelproposed a $22.7
billion offer announces US antitrustthe shareholders of Arcelor to
clearance for Arcelor bid andcreate the worlds first 100million
tonne plus steel the approval of the offerproducer. The deal was
split documents by Europeanbetween Mittal Shares
(75regulators.percent) and cash (25 June 2006 - Mittal Steel
andpercent). Under the offer,Arcelor shareholders would Arcelor
reach an agreementhave received 4 Mittal Steel to combine the
twoshares and 35 Euros for every 5companies in a merger ofArcelor
shares they held. equals. September 2006 - Arcelor February 2006 -
Mittal Canadacompletes the acquisition of Mittal announces newthree
Steel.co subsidiaries, the dividend policy, under which itNorambar
and Steel fil plants, will pay out 30% of net incomelocated in
Quebec, and theStelwire plant in Ontario. annually. And hence
ArcelorMittal was formedKankus 22. The merger resulted in theThough
competitors theycreation of the worlds exhibited little overlap
inlargest steel company.terms of their operations.2007 revenue -
$105 billion Arcelors attributes provedSteel production - 10 to be
highlypercent of global outputcomplementary with Mittal320,000
employees owning much of its rawPresence in 60 countries Amaterials
such as iron oreglobal leader in all of its and coal and
Arcelortarget marketshaving extensivedistribution and servicecenter
operations. Unlikemany mergers involvingdirect competitors,
arelatively small portion ofcost savings would comefrom eliminating
duplicatefunctions and operations.Kankus 23. Kankus 24. Procter
& Gamble (P&G) is a Americanmultinational company
headquartered indowntown , Ohio and manufactures a widerange of
consumer goods. P&G recorded $82.6billion dollars in sales.
Revenue US$ 82.6 billion operating income US$ 15.8 billionnet
income US$ 11.8 billion Total assets US$ 138.3 billion total equity
US$ 68 billionEmployees 129,000Kankus 25. The original Gillette
Company was founded byKing Camp Gillette in 1895 as a safety
razormanufacturer. Under the leadership of Colman M. MocklerasCEO
from 1975 to 1991, company faced downthree takeover attempts, from
Ronald Perelmanand Coniston Partners. Kankus 26. As per the P&G
and Gillette Proctor & Gamble Co.s in 2005 merger deal, P&G
wouldannounced $57 billion acquisitionexchange 0.975 shares of
P&Gof Gillette Co. According to The common stock for each share
ofGillette chairman and chiefGillette. It represented an
18%executive officer James Kilts will premium to Gillette
shareholdersearn more than $153 million if the based on the closing
share pricesdeal goes through, including gains on January 27, 2005.
However, theon his stock options and stock merger was subject to
approvalrights, an estimated $23.9 million by the shareholders of
bothpayment from P&G, and aGillette and P&G. The merger
waschange-in control payment of expected to get regulatory$12.6
million. The transaction,clearance by 2005. P&G plannedwhich is
subject to certainto buy back $18-22 billion of itsconditions
including approval by common stock immediately afterGillettes and
P&Gs shareholdersthe merger. The buy back processand regulatory
clearance, wascould take around 18 months toexpected to close in
the fall of complete. This would make the2005.deal structure a 60%
stock and 40% cash deal, although on paper it was a pure
stock-swap. On October 1, 2005, Procter & Gamble finalized its
acquisition with The Gillette Company.Kankus 27. P&Gs
acquisition of Analysts said the mergerGillette, formed the largest
was a brave move byconsumer goods company Lafley who had led
P&Gand placing Unilevir intoduring difficult times aftersecond
place. This added he joined the company inbrands such as
Gillette2000. Lafley changed therazors, Duracell, Braun, and
companys focus fromOral-b to their stable.household products to the
fast growing health and beauty products. The company bought hair
care firm Clairol from Bristol Myers Squibb in 2001 for $4.9
billion and German hair care firm Wella AG (Wella) in 2003 for $7
billion. Kankus 28. THANKS A LOT...........THE END!!!!! Kankus
