CENTRAL UNIVERSITY OF SOUTH

BIHAR

School of Law and Governance

ASSIGNMENT OF MERGER AND ACQUISITION

ON
Acquisition of Land Rover and Jaguar with Tata Motors

SUBMITTED BY: SUBMITTED TO:

1. GAURAV RAJ MANI PRATAP
E.No CUSB1813125030 Assistant Professor
2. KUMAR AYUSH School of Law and Governance
E.No. CUSB1813125046
3. PAWAN KUMAR
E.No. CUSB1813125064
Section-B
BA LL.B(Hons.)

1
 ACKNOWLEDGMENT
The project work of Merger and Acquisition on Acquisition of Land Rover and Jaguar with.
Tata Motor. This assignment is given by our honourable subject professor “Mani Pratap Sir”.
First of all we would like to thank him for providing me such a nice topic and making us
aware as well providing us a lot of ideas regarding the topic and the methods to complete the
project.
We would like to thank to our seniors as well as class mates who helped us in the completion
of this project. Last but not the least, thanks to all who directly or indirectly helped us in
completing of this assignment.
We have made this assignment with great care and tried to put each and every necessary
information regarding the topic. So at the beginning We hope that if once you will come
inside this project you will be surely glad.

-Kumar Ayush
Gaurav Raj
Pawan Kumar

2
 TABLE OF CONTENTS
1. INTRODUCTION……………………………………………………………....……4
2. HISTORY OF LAND ROVER AND JAGUAR………………...……..…..….........5
3. ACQUISITION OF LAND ROVER AND JAGUAR BY TATA MOTORS…....…..6
4. BENEFITS OF ACQUISITION….....…………………………………………...…….7
5. SWOT ANALYSIS……………………….………………………………...…………..8
6. MAJOR CHALLENGES OF ACQUISITION………………………………...……..9
7. CONCLUSION………………………………………………………………... ……..10
8. BIBLIOGRAPHY……………………………………………………………....…..…11

3
 INTRODUCTION
The automobile industry in India is one of the most successful stories of post liberalization
manufacturing space in India and entirely based on prudent policy support of the Government.
However, the recent economic changes have not only been unfavourable but they have been inhibitor
for the automobile industry. Some of the critical factors which is affecting the automobile sector are
GDP, inflation rates, interest rates, Exchange rates along with the some qualitative factors like
recession. These factors are continuously changing which affect the demand of the product. In such
scenario only strong strategies will help the company to survive in market. Tata motors strategy of
diversification, acquisition, and merger will be an best example for the survival and growth. This
paper covers the Strategy adopted by Tata motors to enter into premium class segment by acquiring
Jaguar Land Rover. Although the company was in trouble right after the acquisition of Jaguar and
Land Rover (JLR) in June 2008 due to the arrival of global financial crisis. The bridge loan of US$ 3
billion which used to fund the acquisition of JLR was due on June 2009 and yet at the end of the year
2008, Tata was only able to repay the US$ 1billion. The declining revenues and a tight credit
conditions was hurting the company’s cash flow. But due to the management competencies &
changing economic situation help the company to not only to overcome the situation but also to grow.

4
 HISTORY OF LAND ROVER AND JAGUAR

Jaguar Cars Limited which is based in the UK is one of the world’s premier manufacturers of sports
saloons and sports cars. It was originally founded in 1922 by Sir William Lion as Swallow Sidecar
Company but following a merger with British Motor Corporation in 1968, it was subsequently
acquired by Ford in 1989. Land Rover is currently a luxury type 4-wheeled drive, all terrain vehicle
manufacturer based out of Gayden, Warwickshire England. After developments, this became a porch
of a variety of four-wheel drive models such as Discovery, Defender, Range Rover and Freelander. In
its history this company has had a number of ownership. In 1967 Leyland Motor Corporation
absorbed the Rover Company. Leyland then formed a merger with the British Motor Holdings and
formed British Leyland. The new company broke up in the 1980s but in 1988 the Land Rover (Rover
Group) was purchased by British Aerospace. The Rover Group was acquired by BMW in the year
1994 but the merger broke down in 2000 where The Rover Group was taken up by Ford Motor
Company. After its acquisition of both Jaguar and Land Rover, Ford setup Jaguar Land Rover to
manage the operations of both Jaguar and Land Rover as a single entity.

Ford bought Jaguar for $2.5 bn in 1989 and Land Rover for $2.7bn in 2000 but received only $1.7bn
from the sale of the two brands. The main reason for selling off Jaguar was that Ford incurred losses
of around $700mn in the recent years prior to selling it off and according to some estimates
cumulative losses of $10bn during the 19 years that it owned Jaguar. One of the main reasons for this
was the increasing competition it faced from luxury carmakers like BMW and Mercedes Benz which
had wider product portfolios as compared to Jaguar. Due to this, while BMW and Mercedes Benz sold
around 1.6mn and 1.3mn units a year respectively, Jaguar’s sales dropped from a peak of 130,334 in
2002 to 60485 in 2007.This prevented it from achieving economies of scale and put it at a severe cost
disadvantage as compared its competitors. The high manufacturing costs in the United Kingdom was
also contributing to its losses. Jaguar had been the main source of losses among the company’s PAG
brands. In2004, Ford restructured Jaguar in 2004 which consisted of closing down a U.K. plant, firing
1,150 employees, scrapping a target to build 200,000 vehicles a year and exiting Formula One auto
racing. It also invested $2.1bn in Jaguar in 2005 which was almost as much as it paid for it in 1989.

Land Rover was much better off compared to Jaguar and is renowned as one of the best four-wheel
drive vehicles in the world. Its new products like Range Rover sport had also achieved considerable
success. But the new and successful Range Rover Sport TVD8 emitted around 294g/km of CO2 even
while Europe was moving towards tighter emission norms which would have required vehicles to cut
down their emissions to 130g/km of CO2 by 2012. According to some experts companies might have
to spend as much as $3000 per vehicle to meet these emission targets. Apart from all this, Land Rover
also needed substantial investment in its R&D efforts in spite of pumping in $400mn the year previous
to the deal. Ford suffered losses worth $12.6bn in 2006 and $2.7bn in 2007 and did not have the cash
reserves required to revive the two brands. In order to revive the Jaguar brand Ford needed to broaden
its product portfolio which would have required it to pump in big money in new product development.
This as well as the requirement for cash by Land Rover caused Ford to sell off its two premier brands.

Ford’s North American automotive operations were the main sources of the record 2006 losses
registered by the company. This was due to the declining sales and profitability of its pickup trucks
and sports utility vehicles which were the main source of revenues for the company. Also the
company’s own Lincoln unit which was No.1 in luxury sales in the US in 1998 dropped to No.7 in
sales in 2006 since it purchased Volvo and Land Rover. Therefore in order to focus more on its core
operations and concentrate its management resources on its core activities, Ford decided to do away

5
with its Jaguar and Land Rover brands. Ford might also have sold the two brands since they are not at
the core of

ACQUISITION OF LAND ROVER AND JAGUAR BY TATA MOTOR

In the year 2007, the Ford Motor Company, a widely respected company which also happened to be
the world’s third largest automaker based on vehicle sales worldwide, reported the largest annual loss
in the history of establishment of the company since 1903. The Company reported a loss of $12.8
billion. It also stated that it would not return to profitability until 2009. Ford stated that weak economy
is the primary reason to sell Jaguar and Land Rover. The two brands were however suffering losses
often resulting in closure of few manufacturing plants and heavy cut in workforce Tata Motors
Limited stood to have both strategic and economic gains form the acquisition of both Jaguar and Land
Rover. First and foremost, the deal would assist the company in acquiring a global footprint as well as
entering the prestigious segment of the worldwide automobile market. After this deal, Tata Motors
owned the cheapest car in the world (The Nano) going at around 2,500 as well as some of the most
expensive and luxurious vehicles such as Land Rover and the Jaguar. Though the deal solicited some
skepticism based on the fact that Tata was an Indian company that was about to display the luxury
brands, ownership should not be a major issue in terms of the sales, service and marketing. Tata
Motors will be promoted to become a major player in this industry after the acquisition of Jaguar and
Land Rover both of which have global presence as well as a good repertoire in terms of established
brands.

The deal would also assist Tata Motors in reducing the dependence of the company to the Indian
market which was at 90% of the company’s sales before the acquisition. It is in this view that the
company stands to gain a lot from the deal as its market would be spread out to other geographical
regions across the globe. The opportunities in terms of the diverse customer segments would also be
increased.

There was the possibility of increased in terms of economies of scale which in turn promotes the cost
efficiency. In real sense the deal will appear as an amalgamation of three different companies that
have already gone into the market and as a result, the new firm that will be formed after the
acquisition will have some increased operation scale. This will mean that the output production will
rise and as a result the cost per unit production will be greatly reduced.

Tata Motors Limited prospected that the acquisition of the two Brands would enable it to have an
allinclusive line up of products ranging from cheapest to the most expensive automobiles in the
market. The company has marked its presence in the local market (India) in the low as well as the
mid-class market segments and after the acquisition; the company is likely to experience some of the
segmentation of the markets that it has never plunged into. Jaguar cars are prestigious and luxurious
and as a result the cars have an established market for most of the celebrities especially in the music
world. On the other hand the Land Rover is a heavy duty vehicle and based on the fact that it is a four-
wheel drive it is preferred by most of the governments to carry out different tasks in the rural areas
where the road network is not developed, the vehicles are also famous among the affluent class of
citizens and therefore the deal will enable Tata Motors to plunge into these market segmentations in
which the company was not famous in.

6
It is also worth to note that the other than the product incorporation, the company was facing tight
competition from some of the chief opulence vehicles producers. This segment of the market brought
a lot of profits to the company it was highly competitive in terms of the global market. It was the
prestigious brands that dominated the market based on the fact that they had the support of the big
automobile companies. The German Porsche and the American Volkswagen companies backed some
of the luxurious brands such as Audi and Porsche. Other brands that had the support of big companies
included Mercedes, Lexus, Alfa Romeo, Ferrari and Fiat.

BENEFIT OF ACQUISITION

Through Tata Motor’s acquisition of two of the most respected and iconic British brands that is Land
Rover and Jaguar from the Ford Motors based in the United States, Tata motors stands to enjoy some
gain on several grounds from that deal. This acquisition came in handy for Tata since it helped the
company in acquiring a global foundation hence ushering them into a more extended premier segment
in regard to the global market of auto mobile products. Through this acquisition Tata would slide into
possession of the cheapest car in the world thus the Nano at $2,500 in addition to recognized and well
respected luxurious brands like the Land Rover and the Jaguar.

Tata motors acquisition of these two top brands would help it reduce its over dependence on India as it
formed its capital marker accounting for almost 90 percent of all of its sales. The company was
convinced that this acquisition would present the company with a lot of opportunities to venture its
business across different segments that marked a lot of potential in customer acquisition. In this regard
Tata gained almost a 100 percent stakes in some companies. For instance it gained stakes in three
U.K. pants, approximately twenty six sales companies nationwide, two advanced engineering and
design centers, IP right, allowances for taxes amounting to approximately $1.1 B in addition to $600
worth of pension.

Tata’s main motivation in making this acquirement was based on the fact that they would be now able
to outsource their products to many countries globally. Other than taking technology from these two
brands Tata intended to use their strong markets so that they can introduce their other brands in those
areas where these two brands have already penetrated and established in a bit to expand their market a
bit more.

As highlighted above Tata wanted to build a name outside India and hence make its presence felt in
India. Most of it brands had only established a strong market in India and hence not particularly
popular in the global market. Tata therefore capitalized on its desire to establish a greatly diversified
line up of auto mobiles as this acquisition helped it up grade since it now recognizes as one of the
manufactures that owns the cheapest car to some of the world’s most expensive models. Apart from
this Tata gained in terms of new technological know-how and all the viable networks that can come as
a log with is such a chance hence as earlier stated it will be able to penetrate the global market and
hence compete with other manufactures who have already embraced latest technology. On top of this
Tata would also be able to upgrade its old products that it has been offering in the blooming local or
home market. In addition to using the companies technology Tata will also use its facilities of
production to make desirable improvements in its trucks and cars. Though the acquisition will cost

7
Tata Company an approximate of $1 Billion it would actualize Tata’s dream to go international band
hence become one of the first brand in India to make global products hence its business will achieve
diversity overseas.

SWOT ANALYSIS OF THE COMPANY

A. Strengths

1. Tata’s strong management capability

2. Strong monetary base to invest

3. Synergy due to Corus, TACO and TCS

4. Experience in growing market like India

5. New product development and brand building experience

B. Weaknesses

1. Inexperience in Handling luxury automobile brand

C. Opportunities:
1. Demand of luxury automobiles in growing markets like India and China

2. Support from Jaguar in Technology

3. Complete product line with addition of luxury brands

4. Access to European and American Market

D. Threats

1. Volatility in market driven by new products

2. Strong presence of competitors like Mercedes, BMW, Lexus and Infinity

3. Receding sales and brand image

4. High interest rate Investment riskier and costlier

8
 MAJOR CHALLENGES OF ACQUISITION

Despite the benefits that have been identified above Tata also underwent some major challenges as a
result of the acquisition of the Jaguar and the Land Rover. One of the major challenges that the Tata
Company would face was nurturing these two brands and making them thrive in their own books in
the market. The jaguar and the Land Rover are luxurious and expensive cars and therefore Tata has
the uphill task of maintaining it standards and also up grading them so that they will be able to
compete with other luxurious brands who are upgrading day in day out in a bid to try and fetch good
market by attracting more customers.

On the other hand the acquisition also goes to the negative for Tata since it increased Tata volatility in
earnings since this happened at a very difficult economic crisis in the JRL’s chief markets including
the United States and also Europe. Tata motors were liable to incurring huge capital expenditures in
its plan to make investments in another U.S $2.3 billion it would spend on the acquisition. Tata
motors had also at the same period incurred huge capital expenditures in regard to making
developments on one of its cheapest cars the Nano in addition to a joint venture with fiat in order for
them to make their manufacturing of some of their vehicles in India.

The other problems will be that Tata will encounter difficulties in leveraging Jaguar and Land Rover
dealers to sell Tata’s products. This is because Tata has no obvious synergies between them and JLR
and in addition to this Tata has no expertise in kits marketing segments especially at such at a time
when some of the markets like the United States and Europe are at a low tide. Tata Motors will also
have to contend with stiff competition from other companies that have a good command in selling
luxurious car in market segments that have been highly profitable but have been facing intense global
competition. These segments have other dominant brands which receive a lot of support from big
automobile companies. For instanced the Volkswagen which is a car manufacturer of the American
decent had been very aggressively backing up their brands like Audi as well as other models like the
Mercedes from Daimler and Toyota with it Lexus were putting a lot of pressure on Tata.

The other major challenge that Tata will have in regard to making sales in the Jaguar and the Land
Rover will be to sell them in a market that is so competitive and one which is not also growing. If
stricter impositions on emission norms are made it would also be a very big challenge for Tata Motors
Limited. Apart from these emission and competition norms Tata Motors Limited also face a major
challenge in the funding as well as management.

To go back to the governments tendency to make increments in markets that are developing to impose
emission norms that are stricter the future of Tata Motors would be facing an uphill task. Though ford
continues to support Tata Motors with engine supplies and technological support, Tata will eventually
have to come up with their own capabilities in regard to building engines that are more advanced,

9
safer and transmission systems in order to be at par with other luxury vehicles manufactures. Failure
to establish such kinds of capabilities difficulties will arise in distinguishing Tata’s brands from those
of its competitors.

CONCLUSION

Tata motors decision of acquisition criticise on the ground of time of deal that is changing economic
situation of the world. Post acquisition due to slowdown in domestic and world economy demand of
commercial as well as passenger vehicle decreased. Tata motors major revenue is coming from
commercial vehicle before acquisition. This acquisition will help the company to develop its brand in
luxury passenger vehicle. The opportunity came to Tata motors for the acquisition is also the result of
economic downtrend. Ford was ready to sale these two iconic brand at half of its price which is at the
time of acquisition paid by Ford in 2005. Such distress sale by Ford is an opportunity for Tata motors
to become globalise and enter into premium class passenger vehicle which may not possible as early
in other case. Tata motors strength, that is their managerial competencies along with experience of
large market like India, great brand and financial base help them to take such strategic decision. Fall
in domestic market demand may change their strategy to move to growing countries like china is also
the strategic decision taken towards the fulfilment of strategic intent of company. Tata motors now
develop its brand value in world because of this successful acquisition and growth of these two
companies.

10
 BIBLIOGRAPHY

Websites
 http://www.ijmbs.com/Vol6/1/3-dr-seema-laddha.pdf
 https://www.coursehero.com/file/30547442/PPT8ppt/
 https://www.mbaknol.com/management-case-studies/case-study-of-tata-motor-acquisition-
ofjaguar-and-land-rover/

11