TERM PAPER

OF
Business environment

SUBMITTED TO
Bhavdeep singh kochar

SUBMITTED BY
NAME: Abhishek Arora
MBA IST SEM
SEC: RT1001
ROLL NO: A20
REG No: 11000839
Topic: Merger and Acquisition In India From Last Five
Years

Merger:-
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.

ACQUISITION:- A corporate action in which a

company buys most, if not all, of the target company's ownership stakes
in order to assume control of the target firm. Acquisitions are often made
as part of a company's growth strategy whereby it is more beneficial to
take over an existing firm's operations and niche compared to expanding
on its own. Acquisitions are often paid in cash, the acquiring company's
stock or a combination of both.

MRGER AND ACQUISITION:

Mergers and acquisitions (M&A) and corporate restructuring are a big
part of the corporate finance world. Every day, Wall Street investment
bankers arrange M&A transactions, which bring separate companies
together to form larger ones. When they're not creating big companies
from smaller ones, corporate finance deals do the reverse and break u
Not surprisingly, these actions often make the news. Deals can be worth
hundreds of millions, or even billions, of dollars. They can dictate the
fortunes of the companies involved for years to come. For a CEO,
leading an M&A can represent the highlight of a whole career. And it is
no wonder we hear about so many of these transactions; they happen all
the time. Next time you flip open the newspaper’s business section, odds
are good that at least one headline will announce some kind of M&A
transaction. Sure, M&A deals grab headlines, but what does this all
mean to investors? To answer this question, this tutorial discusses the
forces that drive companies to buy or merge with others, or to split-off or
sell parts of their own businesses. Once you know the different ways in
which these deals are executed, you'll have a better idea of whether you
should cheer or weep when a company you own buys another company
- or is bought by one. You will also be aware of the tax consequences for
companies and for investors.

Advantages and disadvantages of mergers and acquisitions (M&A) are

determined by the short-term and long-term company strategic outlook
of the new and acquiring companies. This is due to a host of factors
including market conditions, differences in business culture, acquisition
costs and changes to financial strength surrounding the corporate
takeover.

BENEFITS OF MERGER AND ACQUISITION:

Benefits of Mergers and Acquisitions are manifold. Mergers and
Acquisitions can generate cost efficiency through economies of scale,
can enhance the revenue through gain in market share and can even
generate gains.
The principal benefits from mergers and acquisitions can be listed as
increased value generation, increase in cost efficiency and increase in
market share.
Benefits of Mergers and Acquisitions are the main reasons for which
the companies enter into these deals. Mergers and Acquisitions may
generate tax gains, can increase revenue and can reduce the cost of
capital. The main benefits of Mergers and Acquisitions are the
following:
Greater Value Generation

Mergers and acquisitions often lead to an increased value generation for

the company. It is expected that the shareholder value of a firm after
mergers or acquisitions would be greater than the sum of the shareholder
values of the parent companies. Mergers and acquisitions generally
succeed in generating cost efficiency through the implementation of
economies of scale.

Merger & Acquisition also leads to tax gains and can even lead to a
revenue enhancement through market share gain. Companies go for
Mergers and Acquisition from the idea that, the joint company will be
able to generate more value than the separate firms. When a company
buys out another, it expects that the newly generated shareholder value
will be higher than the value of the sum of the shares of the two separate
companies.

Mergers and Acquisitions can prove to be really beneficial to the

companies when they are weathering through the tough times. If the
company which is suffering from various problems in the market and is
not able to overcome the difficulties, it can go for an acquisition deal. If
a company, which has a strong market presence, buys out the weak firm,
then a more competitive and cost efficient company can be generated.
Here, the target company benefits as it gets out of the difficult situation
and after being acquired by the large firm, the joint company
accumulates larger market share. This is because of these benefits that
the small and less powerful firms agree to be acquired by the large firms.

Gaining Cost Efficiency

When two companies come together by merger or acquisition, the joint

company benefits in terms of cost efficiency. A merger or acquisition is
able to create economies of scale which in turn generates cost efficiency.
As the two firms form a new and bigger company, the production is
done on a much larger scale and when the output production increases,
there are strong chances that the cost of production per unit of output

gets reduced.
An increase in cost efficiency is affected through the procedure of
mergers and acquisitions. This is because mergers and acquisitions lead
to economies of scale. This in turn promotes cost efficiency. As the
parent firms amalgamate to form a bigger new firm the scale of
operations of the new firm increases. As output production rises there
are chances that the cost per unit of production will come down
Classifications of mergers

Horizontal merger:-

In horizontal merger, the two companies are direct competitors who

represent the same market and also sell the same products/services.

Market-extension merger:-
Here participating companies sell same products in different markets
Product-extension merger:-
In product-extension merger, the participating companies sell different
products of related category.

Mergers and Acquisitions in India

The practice of mergers and acquisitions has attained considerable
significance in the contemporary corporate scenario which is broadly
used for reorganizing the business entities. Indian industries were
exposed to plethora of challenges both nationally and internationally,
since the introduction of Indian economic reform in 1991. The cut-throat
competition in international market compelled the Indian firms to opt for
mergers and acquisitions strategies, making it a vital premeditated
option.
Why Mergers and Acquisitions in India?
The factors responsible for making the merger and acquisition deals
favorable in India are:

• Dynamic government policies

• Corporate investments in industry
• Economic stability
• “ready to experiment” attitude of Indian industrialists

Sectors like pharmaceuticals, IT, ITES, telecommunications, steel,

construction, etc, have proved their worth in the international scenario
and the rising participation of Indian firms in signing M&A deals has
further triggered the acquisition activities in India.

In spite of the massive downturn in 2009, the future of M&A deals in

India looks promising. Indian telecom major Bharti Airtel is all set to
merge with its South African counterpart MTN, with a deal worth USD
23 billion. According to the agreement Bharti Airtel would obtain 49%
of stake in MTN and the South African telecom major would acquire
36% of stake in Bharti Airtel.
Mergers and Acquisitions in different
sectors in India
Sector wise, large volumes of mergers and mergers and
acquisitions in India have occurred in finance, telecom,
FMCG, construction materials, automotives and metals. In
2005 finance topped the list with 20% of total value of
mergers and acquisitions in India taking place in this
sector. Telecom accounted for 16%, while FMCG and
construction materials accounted for 13% and 10%
respectively.
In the banking sector, important mergers and
acquisitions in India in recent years include the merger
between IDBI (Industrial Development bank of India) and
its own subsidiary IDBI Bank. The deal was worth $ 174.6
million (Rs. 7.6 billion in Indian currency). Another
important merger was that between Centurion Bank and Bank
of Punjab. Worth $82.1 million (Rs. 3.6 billion in Indian
currency), this merger led to the creation of the Centurion
Bank of Punjab with 235 branches in different regions of
India.
In the telecom sector, an increase of stakes by SingTel
from 26.96 % to 32.8 % in Bharti Telecom was worth
$252 million (Rs. 10.9 billion in Indian currency). In the
Foods and FMCG sector a controlling stake of Shaw
Wallace and Company was acquired by United Breweries
Group owned by Vijay Mallya. This deal was worth $371.6
million (Rs. 16.2 billion in Indian currency). Another
important one in this sector, worth $48.2 million (Rs 2.1
billion in Indian currency) was the acquisition of 90%
stake in Williamson Tea Assam by McLeod Russell India In
construction materials 67 % stake in Ambuja Cement
India Ltd was acquired by Holcim, a Swiss company for
$634.9 million (Rs 27.3 billion in Indian currency).

Mergers and Acquisitions in India in 2007

Some of the important mergers and takeovers in India in 2007 were -

• Mahindra and Mahindra acquired 90% stake in the German

company Schoneweiss.
• Corus was taken over by Tata
• RSM Ambit based at Mumbai was acquired by
PricewaterhouseCoopers.
• Vodafone took over Hutchison-Essar in India.
Ten biggest Mergers and Acquisitions deals in India

• Tata Steel acquired 100% stake in Corus Group on January 30, 2007.
It was an all cash deal which cumulatively amounted to $12.2 billion.

• Vodafone purchased administering interest of 67%

owned by Hutch-Essar for a total worth of $11.1 billion on February
11, 2007.

• India Aluminum and copper giant Hindalco Industries

purchased Canada-based firm Novel’s Inc in February 2007. The total
worth of the deal was $6-billion.

• Indian pharma industry registered its first biggest in 2008 M&A deal
through the acquisition of Japanese pharmaceutical company Daiichi
Sankyo by Indian major Ranbaxy for $4.5 billion.
• The Oil and Natural Gas Corp purchased Imperial Energy Plc in
January 2009. The deal amounted to $2.8 billion and was considered
as one of the biggest takeovers after 96.8% of London based
companies' shareholders acknowledged the buyout proposal.

• In November 2008 NTT DoCoMo, the Japan based telecom firm

acquired 26% stake in Tata Teleservices for USD 2.7 billion.

• India's financial industry saw the merging of two prominent banks -

HDFC Bank and Centurion Bank of Punjab. The deal took place in
February 2008 for $2.4 billion.
 • Tata Motors acquired Jaguar and Land Rover brands from Ford Motor
in March 2008. The deal amounted to $2.3 billion.

• 2009 saw the acquisition Asarco LLC by Sterlite Industries Ltd's for
$1.8 billion making it ninth biggest-ever M&A agreement involving
an Indian company.

• In May 2007, Suzlon Energy obtained the Germany-based wind

turbine producer Repower. The 10th largest in India, the M&A deal
amounted to $1.7 billion.

Acquisitions since 2005

Date company Bussiness

January 7, Systems Research &

Identity management USA
2005 Development
March 16,
Corio Application Services USA
2005
April 29, Ascential Software Enterprise Information
USA
2005 Corporation Integration
May 10, 2005 Gluecode Software Application Server USA
 USA,
June 23, 2005 Meiosys Application Management
FRA
PureEdge Solutions,
July 25, 2005 Electronic Forms CAN
Inc.
July 27, 2005 Isogon Corporation Asset Management USA
August 2, Enterprise Information USA,
DWL
2005 Integration CAN
October 14, DataPower Service Oriented
USA
2005 Technology, Inc. Architecture (SOA)
November 1, Information management
iPhrase Systems, Inc. USA
2005 software
November 10, Network Solutions
IT Services IND
2005 Pvt Ltd
November 15,
Collation, Inc. Network management USA
2005
December 20,
Bowstreet, Inc. Portal-based tools USA
2005
ARGUS
January 27, Semiconductor Semiconductor
USA
2006 Software From Manufacturing software
INFICON
January 20, Application
CIMS Lab, Inc. USA
2006 Virtualization
February 8, Supply chain
Viacore, Inc. USA
2006 optimization
February 14,
Micromuse, Inc. Network management USA
2006
March 16, Language Analysis
Identity management USA
2006 Systems
May 2, 2006 BuildForge, Inc. Software Development USA
Unicorn Solutions,
May 5, 2006 Metadata management USA
Inc.
June 27, 2006 Rembo Technology Installation Software SUI
August 1, Webify Solutions, Service Oriented
USA
2006 Inc Architecture software
September 6, Global Value
IT Services BRA
2006 Solutions
DORANA product
October 4,
line from Ubiquity Asset Management AUS
2006
Pty Limited
October 5,
MRO Software Asset Management USA
2006
October 12, Content management
FileNet Corporation USA
2006 software
October 20, Internet Security
Information security USA
2006 Systems (ISS)
October 20, Palisades
Management consulting USA
2006 Technology Partners
January 22, Consul Risk
Information security NED
2007 Management, Inc.
February 13, Telecommunications
Vallent Corporation USA
2007 Management
March 1, Softek Storage Data Mobility USA
2007 Solutions
 Corporation
April 20,
Unicible IT Services SWI
2007
Watchfire Security Software
July 20, 2007 USA
Corporation Testing
August 21, Web conferencing and
WebDialogs USA
2007 communications
August 31, DataMirror
Change Data Capture CAN
2007 Corporation
September 10, Princeton Softech,
Business Intelligence USA
2007 Inc.
October 24, Storage Consulting and
NovusCG USA
2007 Technology Services
January 2,
XIV Enterprise storage ISR
2008
January 18,
AptSoft Corporation Business Intelligence USA
2008
January 29, Solid Information USA,
Database Software
2008 Technology FIN
January 31,
Cognos Business Intelligence CAN
2008
January 31, Arsenal Digital
Data backup services USA
2008 Solutions
February 15, Net Integration Business Server
CAN
2008 Technologies Inc. Software
March 11, Enterprise Single Sign-
Encentuate, Inc. USA
2008 On
 Enterprise software
April 3, 2008 Telelogic AB SWE
development
April 18, Diligent
Data De-duplication USA
2008 Technologies
April 21, Application Recovery USA,
FilesX
2008 Software ISR
April 29, InfoDyne
Data Feed Connectors USA
2008 Corporation
Mainframe, System Z
July 2, 2008 Platform Solutions USA
technologies
Business Rules
July 28, 2008 ILOG FRA
Management Systems
November 18,
Transitive Virtualization Software USA
2008
January 15, Outblaze's E-Mail Online messaging and
HKG
2009 Service Assets collaboration
May 5, 2009 Exeros Assets Data Discovery Software USA
Statistical analysis
July 28, 2009 SPSS Inc. USA
software
July 28, 2009 Ounce Labs Source code analysis USA
September 22, Analytics and
RedPill Solutions Singapore
2009 Optimisation
November 30, Database monitoring and USA,
Guardium
2009 protection ISR
December 16, Business Process
Lombardi USA
2009 Management
January 20, National Interest Public sector consulting USA
 Security Company,
2010
LLC
February 3,
Initiate Systems Data integrity software USA
2010
February 16, Network Automation
Intelliden Inc. USA
2010 software
May 3, 2010 Cast Iron Systems Cloud Integration USA
Business software
May 24, 2010 Sterling Commerce USA
integration
June 15, 2010 Coremetrics Web Analytics USA
Security and IT
July 1, 2010 BigFix, Inc. USA
automation software
July 29, 2010 Storwize Data Compression ISR
August 10, Data capture and Content
Datacap USA
2010 Management
August 13, Marketing planning
Unica Corporation USA
2010 software
September 15, Integrated risk
OpenPages USA
2010 management solutions
September 20, Data warehousing and
Netezza USA
2010 analytics
October 13,
PSS Systems Legal risk management USA
2010
October 21,
Clarity Systems Financial governance CAN
2010

Spinoffs
• 1934 Dayton Scale Division is sold to the Hobart Manufacturing
Company.
• 1942 Ticket graph Division is sold to the National Postal Meter
Company.
• 1958 Time Equipment Division is sold to the Simplex Time
Recorder Company.
• 1972 SAP, world-leader in collaborative business software,
founded by five former IBM employees (then System Analyse und
Programmentwicklung)
• 1984 Prodigy, formerly a joint venture with Sears, Roebuck and
Company.
• 1985 Satellite Business Systems sold to MCI Communications
• 1988 Copier/Duplicator business, including service and support
contracts, sold to Eastman Kodak. [2] [3]
• ARDIS mobile packet network, a joint venture with Motorola.
Now Motient.
• 1991 Lexmark (keyboards, typewriters, and printers). IBM retained
a 10% interest. Lexmark has sold its keyboard and typewriter
businesses.
• 1991 Kalieda, a joint Multimedia software venture with Apple
Computer.
• 1992 Taligent, a joint software venture with Apple Computer.
• 1992 IBM Commercial Multimedia Technologies Group, spun off
to form private company Fairway Technologies.
• 1992 IBM sells its remaining 50 percent stake in the Rolm
Company to Siemens A.G. of Germany.[103]
• 1994 Xyratex enterprise data storage subsystems and network
technology, formed in a management buy-out from IBM.
• 1995 Advantis (Advanced Value-Added Networking Technology
of IBM & Sears), a voice and data network company. Joint
Venture with IBM holding 70%, Sears holding 30%. AT&T
acquires the infrastructure portion of Advantis in 1999, becoming
the AT&T Global Network. IBM retained business and strategic
outsourcing portions of the joint venture.
• 1994 Federal Systems Division sold to Loral becoming Loral
Federal Systems. The Federal Systems Division performed work
for NASA. Loral was later acquired by Lockheed Martin.
• 1996 Celestica, Electronic Manufacturing Services (EMS).
• 1998 IBM Global Network sold to AT&T to form AT&T Business
Internet.
• 1999 Dominion Semiconductor (DSC) IBM sells its 50% share to
JV partner Toshiba. DSC becomes a wholly-owned subsidiary of
Toshiba.
• 2001 Information Services Extended department, developer of
specialized databases and software for telephone directory
 assistance, is spun off to form privately-held company ISx, Inc
(later sold to Local Matters).
• December 31, 2002 IBM sells its HDD business to Hitachi Global
Storage Technologies for approximately $2 billion. Hitachi Global
Storage Technologies now provides many of the hardware storage
devices formerly provided by IBM, including IBM Hard drives &
The Micro drive. IBM continues to develop storage systems,
including tape backup, storage software and enterprise storage.
• December 2004 Lenovo Group acquires 90% interest in IBM
Personal Systems Group, 10,000 employees and $9 billion in
revenue.
• April 3, 2006 Web analytics provider Coremetrics acquires Surf
Aid Analytics, a standalone division of IBM Global Services. The
deal was said to be in the "eight-figure" range, making it worth at
least $10 million.
• January 25, 2007 three-year joint venture with IBM Printing
Systems division and Ricoh to form new Ricoh-owned subsidiary,
Info Print Solutions Company, for $725 million.
• September 2009 IBM launches online business IT video advice
service in association with Guru Online.
 BIBLOGRAPHY

• http://www.economywatch.com/mergers-acquisitions/

• http://www.investopedia.com/university/mergers/

• http://www.scribd.com/doc/19421359/Merger-and-Acquisition-in-India

• http://finance.mapsofworld.com/merger-acquisition/india.html