Mergers & Acquisitions

Presented by: Group - 4

Suhaib Prathiba Pooja Singh Niraj Raghuram Bhandhari Nitin G. Mahendrakar

M & A An Overview
* Mergers and Acquisitions M&A have become very popular all over the world in last 3 decades.
* India born Laxmi Nivas Mittal has taken over Arcelor in Europe, to form a largest Steel making Company in Europe-Arcelor-Mittal.(130 Mtons/Year-Global) . * Tata Steel-Corus(UK) Acquisition by Tata Steel for $12 Billion is very significant and a landmark for the Indian Corporate World. (28 Mtons/Annum-2006)
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Types of Mergers
1. Horizontal
2. vertical 3. Conglomerate 4. concentric

M & A Process
Pre acquisition review Search and screen targets

Investigate and value the target

Acquire through negotiation

Post merger integration

Reasons for M & A

Increased Market Power Overcome Barriers to Entry Lower Cost and Risk of New Product Development Increased Speed to Market Reshaping Competitive Scope

Advantages of M & A
Drives growth Enhance profitability Mitigates risk Cut down competiton Reduces tax liability

Example of Merger

EXAMPLE OF MERGER

ABOUT BOR AND MERGER

ICICI OFFERED TO BOR

WHY MERGER OF BOR WITH ICICI ???

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ICICI AFTER MERGER

PE RATIO 22.97 EPS(RS)36.10 SALES(RS crore)5826.98 FACE VALUE NET PROFITMARGIN(%)9074 ROAE (%)7.58 10/06/10 MAR 2010 MAR 2010 RS 10 MAR 2009 MAR2009

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Acquisition
An acquisition may be defined as an act of acquiring effective control by one company over the assets or management of another company without any combination of companies

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Legal procedure
*Sec 391 394 of Indian companies act covers M & A. *Examination of object clause *Approval from the board *Intimation to share holders and creditors. *Approval from share holders and creditors.- 75% of SH and creditors to approval *Application to National Company Law Tribunal (NCLT) Petition to NCLT for approval Transfer of assets and Liabilities Issuance of shares
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Example of Acquisition

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TATA acquiring CORUS

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Overview of the Acquirer

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Former Name : Tata Iron and Steel Company Founded : 1907 Founder : Jamshedji Tata Headquarter : Jamshedpur, Jharkhand, India Chairman : Ratan Tata Type : Public BSE (500470)

Industry : Steel

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Overview of the Acquired

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Name : Corus Founded : 1999 Formation : Merger of British Steel Corporation & Koninklijke Hoogovens N.V. Headquarter : London, England, UK CEO : Kirby Adams Type : Subsidiary

Industry : Steel Parent : Tata Steel, member of Tata Group

DMS. IIT Delhi 17

Course : SML730 Organisation Management

Reasons for bid from TATA Group

To tap European mature market Cost of acquisition is lower than setting up green field plant and marketing and distribution channel Acquisition would help Tata to feature in top 10

players in the world of steel industry

Technology benefit Economies of scale Corus held a number of patents and R&D facilities

Reasons for CORUS to accept bid

Saturated market of Europe

Decline in market share and profit

Total debt of Corus was 1.6 Bn GBP High cost of production, as there was a scarcity of raw materials
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Counter Bid
Nov 18, 06 : The Brazilian Steel Group CSN approaches Corus With an offer of 475 pence/share Nov 27, 06 : Board of Corus decides to give more time for shareholders to decide whether it issue forward a formal offer Dec 18,06 : Tata increases its original bid for Corus 500 pence/share, then CSN made its counter bid at 515 pence/share in cash Jan 29, 07 : CSN raised its bid to 603 pence/share Jan 31, 07 : Tata had agreed to offer Corus investors 608 pence per share in cash Apr 02, 07 : Tata won over CSN, to acquire Corus

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How the deal was funded.???

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Effect on stock price of CORUS

Corus Stock Price moved upwards as the bids moved upward

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Effect on stock price of TATA

Tata steel stock moved downwards showing some volatility

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Effect on stock price of both TATA and CORUS

From the announcement date till the deal completion, Corus stock gained 67% and Tata Steel stock lost around 12%

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Result of the deal

On July 23, 2007, Tata Steel stock reached 721.00 on the Bombay Stock Exchanges (BSE) stock Sensex after hitting a lowest of 399.00 on March 8, 2007. Tata Steel was one of the market leaders for the BSE Sensex up 27% in 2007.

Currently TATAs are the 7th largest producer of steel in the world. TATAs credit ratting moved up from BBB to BB.

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