8/8/2019 Mergge l

1/40

MERGERS AND ACQUISITIONS

8/8/2019 Mergge l

2/40

MEMBERS

KAJAL SUDANI 112MANSI SHAH 104

JUHI PATEL 87

USHA SADHU 99

SHIMALI MEHTA 75

SURBHI KEDIA 37

8/8/2019 Mergge l

3/40

MERGER

Amerger is a combination of

two companies into one larger

company, which involvesstock

swap or cash payment to thetarget.

Example: Company A+Company B = Company C.

Mittal Steel +Arcelorsteel

=ArcelorMittal

8/8/2019 Mergge l

4/40

Acquisition.

When one company takes overanother and clearlyestablished

itself as thenew owner, the

purchaseis called an

acquisition.

It also known as a takeover or a

buyout

Example: Company A+

Company B= Company A.

Vodafone + Hutch =Vodafone

8/8/2019 Mergge l

5/40

DIFFERENCE BETWEEN MERGER AND ACQUISTION:

i. Merging of two organization

in to one.

ii. Merger is expensive than

acquisition(higher legal

cost).

iii. Through merger

shareholders can increasetheir net worth.

iv. It is time consuming and the

company has to maintain so

much legal issues.

i. Buying one organization

by another.ii. Acquisition is less

expensive than merger.

iii. Buyers cannot raisetheir enough capital.

iv. It is faster and easier

transaction.

MERGER ACQUISITION

8/8/2019 Mergge l

6/40

MERGER:WHY & WHY NOT

6

i. Increase Market Share.

ii. Economies ofscale

iii. Profit for Research anddevelopment.

iv. Benefits on account of taxshields like carried forward

losses or unclaimeddepreciation.

v. Reduction of competition.

vi. Managerial effectiveness

i. Clash of corporate cultures

ii. Increased business

complexity

iii. Employees may be

resistant to change

WHY IS IMPORTANT PROBLEM WITH MERGER

8/8/2019 Mergge l

7/40

ACQUISITION:WHY & WHY NOT

7

i. Increased market share.

ii.

Increasedspeed tomarket

iii. Lower risk comparing to

develop new products.

iv. Increaseddiversificationv. Avoidexcessive

competition

i. Inadequatevaluation of

target.

ii. Inability to achievesynergy.

iii. Finance by taking huge

debt.

WHY IS IMPORTANT PROBLEM WITH ACUIQISITION

8/8/2019 Mergge l

8/40

TYPES OF MERGERS.

Horizontal merger

Vertical merger

Conglomeration

Market-extension merger

Product-extension merger

Product extension merger

8

8/8/2019 Mergge l

9/40

8/8/2019 Mergge l

10/40

3. Deferred payment plan

Here the acquiring firm, besides making an initialpayment, also undertakes to make additional payments infuture years to the target firm. Since the future payment islinked to the firms earnings, this plan is also known asearn out plan.

4. Tender offer

In this approach purchaser approaches the shareholders

of the firm rather than the management to encourage themto sell their shares generally at a premium over the currentmarket price. Since the tender offer is a direct appeal to theshareholders, prior approval of the management of thetarget firm is not required.

10

8/8/2019 Mergge l

11/40

8/8/2019 Mergge l

12/40

CASE STUDY

12

8/8/2019 Mergge l

13/40

ACQUISITION

13

Case study- Tata Steel and

Corus

8/8/2019 Mergge l

14/40

Tata acquired Corus on the 2nd of April 2007 for aprice of $12 billion.

Tata paid 608 pence( Rs 484)pershare to Corus

shareholders, which is 33.6% higher than the first offer

which was 455 pence.

Tata acquired Corus, which is four times larger thanits

size and the largest steel producerin the U.K.

Contribution from Tata Steel $3.88 Billion & $2bnequity .

Lead financer of Tata steel was Suisse, ABN AMRO

and Deutsche Bank- $ 8.12 billion(combinelly )

14

8/8/2019 Mergge l

15/40

PROFILEPRE MERGER 15

TATA STEEL CORUS

102 years in steel bazaar Worlds 56th largest

Capacity of 30 Million

Founder:J.N. Tata

Presence in 26 nations

On thedate of

announcement 536.60

Worlds 6

th

largest 2nd in Europe,1st in UK

371st rank in fortune list

50,000 people worldwide.

Presence in 50 nations

On thedate of

announcement 360.5

Pence/share

8/8/2019 Mergge l

16/40

PROFILEPOST MERGER 16

y On thedate of Acquisition-

464.90

Production capacity of tata

steel increase from 5.3

thousand tonnes to

23.3thousand tonnesToday tata steel is on 5th

ranks in world

CORUS was named

as TATA STEEL

U.K. Ltd.

TATA STEEL CORUS

8/8/2019 Mergge l

17/40

17Tata Steel Background

Tata Steel a part of the Tata group, one of the largest diversified businessconglomerates in India.

Founded in 1907,by Jamshedji Nusserwanji Tata.

Started with a production capacity of 1,00,000 tones, has transformed intoa global giant

In the mid- 1990s, Tata steel emerged as Asias first and Indias largestintegrated steel producer in the private sector.

Tata steel acquired the Singapore based steel manufacturerNatSteel, and

Thailand based Millennium Steel Tata Steel generated net sales ofRs.175 billion in the financial year 2006-

07.

8/8/2019 Mergge l

18/40

CORUS BACKGROUND 18

Corus Group was formed on 6th October 1999, through themerger of two companies, British Steel (38.3%) and

Koninklijke Hoogovens,(61.7%) Corus has manufacturing operationsin many countries with

major plants locatedin the UK, The Netherlands, Germany,

France, Norway and Belgium

It has widevariety of products andservices

Largest steel producerin UK with 10,142 million annual

8/8/2019 Mergge l

19/40

19 19Reasons forTata Steel to Bid

Tata want to tap European Mature Market because Cost of

acquisition is lower than setting up of Gr een field plant &

marketing and distribution channel.

TATA manufactures Low Value ,long and flat steel products ,whileCorusproduce High Value Strippedproducts.

Helped TATA to feature in Top 10 players in world.

Technology Benefit.

Corus holds number of patents and R&D facilities.

8/8/2019 Mergge l

20/40

20

To get access to low cost materials.

The total debt of Corus was 1.6bnGBP, due to that the

market share and profit had decline.Corus wanted to reduce its employees cost(15%) and

TATA (9%)is well known for handling its laboursefficiently.

Though the Corus had a revenue of $ 18.06bnits profit wasjust $ 626mn on against Tata revenue was $ 4.84bn & profit

$824 mn

REASONS FOR CORUS FOR ACCEPTING

BIDS

8/8/2019 Mergge l

21/40

MERGER 21

Case study- NTT DoCoMo and Tata

8/8/2019 Mergge l

22/40

TATA DOCOMO22

Tata and NTT Docomo had merged in Nov.2008 under Tata

Teleservice Ltd.(TTSL) NTT Docomo have 26%equity stake in TTSL forRs.13,070($2.7 bn)

Tata Docomo had launced GSM service on 24 June 2009 inSouth India.

First mobile service provider to have second pulse tariff

Reason for Merger:

Docomo has a good promoting techniques and its is largestmobile operator in Japan with 50% market share

Docomo want enter in world's fastest growing mobile market

Tata want to increaseits market share.

8/8/2019 Mergge l

23/40

TOP 11M&A DEALS

8/8/2019 Mergge l

24/40

1. TATASTEEL-CORUS: $12.2 BILLION

January 30, 2007

Largest Indian take-over

After thedeal TATAS

became the 5th largest

STEEL co.

100 % stakein CORUS

paying Rs 428/- pershare

Image: B Mutharaman, Tata Steel MD; Ratan Tata,

Tata chairman; J Leng, Corus chair;

and P Varin, Corus CEO.

8/8/2019 Mergge l

25/40

2. VODAFONE-HUTCHISON ESSAR:

$11.1 BILLION

11th February 2007

TELECOM sector

2nd largest takeover

deal

67 % stake holding in

hutch

Image: The then CEO of Vodafone

Arun Sarin visits Hutchison

Telecommunications head office in

Mumbai.

8/8/2019 Mergge l

26/40

3. HINDALCO-NOVELIS: $6 BILLION

June 2008Aluminium and copper

sector

HindalcoAcquired

Novelis

Hindalco entered the

Fortune-500 listing of

world's largestcompanies bysales

revenues

Image: Kumar Mangalam Birla

(center), chairman of Aditya Birla

Group.

8/8/2019 Mergge l

27/40

4. RANBAXY-DAIICHI SANKYO: $4.5 B

June 2008Pharmaceuticalssector

Acquisitiondeal

largest-everdeal in theIndian pharma industry

Daiichi Sankyo acquired

the majoritystake of more

than 50 % in Ranbaxy forRs 15,000 crore

15th biggest drugmakerImage:Malvinder Singh (left), ex-CEO ofRanbaxy, and Takashi Shoda, president

and CEO of Daiichi Sankyo.

8/8/2019 Mergge l

28/40

5. ONGC-IMPERIAL ENERGY:$2.8BILLION

January 2009Power sector

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 marketImage: Imperial Oil

CEOBruce March.

8/8/2019 Mergge l

29/40

November 2008Telecom sector

Acquisition deal

Japanese telecom

giant NTT DoCoMoacquired 26 per cent

equity stake in Tata

Teleservices for about

Rs 13,070 cr.

Image:A man walks past a signboard ofJapan's biggest mobile phone operator NTT

Docomo Inc. in Tokyo.

Tata -NTT Docomo $ 2.7bn

8/8/2019 Mergge l

30/40

7. HDFC BANK-CENTURION BANK OF

PUNJAB: $2.4 BILLION

February, 2008

Banking sector

Acquisitiondeal

CBoP shareholders gotoneshare of HDFC Bank

forevery 29 shares held

by them.

9,510 crore

Image: Rana Talwar (rear) Centurion

Bank of Punjab chairman, Deepak

Parekh, HDFC Bank chairman.

8/8/2019 Mergge l

31/40

8. TATAMOTORS-JAGUAR LAND ROVER:

$2.3 BILLION

March 2008 (just a year

after acquiring Corus)

Automobilesector

AcquisitiondealGave tuff competition to

M&M aftersigning the

deal with ford

Image: A Union flag flies behind a

Jaguar car emblem outside a

dealership in Manchester, England.

8/8/2019 Mergge l

32/40

9. STERLITE-ASARCO: $1.8 BILLION

May 2008

Acquisition deal

Sector copper

Image: Vedanta Group chairman

Anil Agarwal.

8/8/2019 Mergge l

33/40

10. SUZLON-REPOWER: $1.7 BILLION

May 2007Energy sector

Acquisition deal

Suzlon is now thelargest wind

turbine maker in

Asia

5th largest in the

world.

Image: Tulsi Tanti, chairman &

M.D of Suzlon Energy Ltd.

8/8/2019 Mergge l

34/40

11. RIL-RPL MERGER: $1.68 BILLION

March 2009

Merger deal

amalgamation of its

subsidiary ReliancePetroleum with the

parent company

Reliance industries

ltd.Rs 8,500 crore

RIL-RPL merger

swap ratio was at

16:1

Image: Reliance Industries'

chairman Mukesh Ambani.

8/8/2019 Mergge l

35/40

WHY

INDIA

?

Dynamic government policies

Corporate investments in industry

Economic stability

Ready to experiment attitude of

Indian industrialists

8/8/2019 Mergge l

36/40

AMONGST BRICNATIONS, INDIA SECOND MOST

TARGETED COUNTRYFOR MERGERS &ACQUISITIONS(2010):

8/8/2019 Mergge l

37/40

MERGER & ACQUISITION(2009-10) :

37

8/8/2019 Mergge l

38/40

RECENT M&A HAPPENINGS

Godrej acquires Argentine firm

Oil India eyesshale gas acquisition overseas

RIL acquires Pioneerstake for $1.32 bn Hyderabad-based HBL Power Systemsisset to take over

Igarashi Motors India Ltd, a Japanese-owned company

GCPL (Godrej Consumer Products) hasdecided to buy two

domestic brands Genteel (a liquiddetergent) and Swastik(soaps)

8/8/2019 Mergge l

39/40

CONTD

Dabur completes merger ofFem Care

Ebay India ties up with Adidas forFIFA World Cup.

Abbott buys Piramal unit

Eurocoptersigns two joint ventures with Pawan Hans

Mahindra to buy out Renaultsstakein India, revive Logan

sales.

Pharma major Dr Reddy's Laboratories Ltd will buy oral

penicillin facility and product portfolio of GlaxoSmithKlineplc in the US

8/8/2019 Mergge l

40/40