Mergers and Acquisitions

BIG IT JOBS (DIV: BIG IDEAS HR CONSULTING PVT. LTD.)

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.

MERGER

Case 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 Acquisition are

done??

• Mergers and Acquisitions are pursued for a variety

of reasons:

1.Economies of scale in operations

2.Consolidation in saturated markets

3.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 scale

iii. 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

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

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