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Mergers and Acquisitions
Khushboo Dattani
Harshita Agrawal
Mohit Talreja
Baneet Singh Kohli
Presented by:
What is 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.
• Example:
Company A+ Company B= Company C.
MERGERCase study- NTT DoCoMo and Tata
• 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.
What is ACQUISITION?
ACQUISITION
Case study- Tata Steel and Corus
THE FIRST CLASSIFICATION
ACQUISITION
PUBLIC (IF ACQUIREE LISTED IN PUBLIC
MARKETS)
PRIVATE (IF ACQUIREE NOT LISTED IN PUBLIC
MARKETS
THE SECOND CLASSIFICATION
ACQUISITION
FRIENDLY HOSTILE
Why Mergers And Acquistion are done??
Mergers and Acquisitions are pursued for a variety of reasons:1.Economies of scale in operations2.Consolidation in saturated markets3.Improving competitive position through
larger asset base
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.
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.
• Cultural Difference
• Flawed Intention
• No guiding principles
• No ground rules
• No detailed investigating
• Poor stake holder outreach
Why Mergers and Acquisitions Fail?
PROBLEM WITH MERGER
i. Clash of corporate cultures
ii. Increased business complexity
iii. Employees may be resistant to change
MERGER:WHY & WHY NOT
WHY IS IT IMPORTANT
i. Increase Market Share.ii. Economies of scaleiii. Profit for Research and
development.iv. Benefits on account of
tax shields like carried forward losses or unclaimed depreciation.
12
PROBLEM WITH ACUIQISITION
i. Inadequate valuation of target.
ii. Inability to achieve synergy.
iii. Finance by taking huge debt.
WHY IS IMPORTANT
i. Increased market share.
ii. Increased speed to market
iii. Lower risk comparing to develop new products.
iv. Increased diversification
v. Avoid excessive competition
ACQUISITION:WHY & WHY NOT
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
shareImage: 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 hutchImage: The then CEO of Vodafone Arun Sarin visits Hutchison Telecommunications head office in Mumbai.
3. 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.
Impact of Mergers and Acquisitions
Impact
Employees
Competition
Management
Public
Shareholders
MOTIVES OF MERGERS AND ACQUISITIONS
Economy of scale:This refers to the fact that the combined company can often reduce its fixed costs by removing duplicate departments or operations, lowering the costs of the company relative to the same revenue stream, thus increasing profit margins.
Economy of scope: This refers to the efficiencies primarily associated with demand-side changes, such as increasing or decreasing the scope of marketing and distribution, of different types of products.
Synergy:For example, managerial economies such as the increased opportunity of managerial specialization. Another example are purchasing economies due to increased order size and associated bulk-buying discounts.
• 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
How to Prevent the Failure
THANK YOU