MERGERS AND ACQUISITIONS

CHANGING FACE OF INDIAN BUSINESS

 MERGERS & ACQUISITIONS?

 Merger:When two or more companies or firms join

to become one entity. It involves absorption of one
company by another or amalgamation of two
companies to form a new company .

 Acquisition: Acquiring control of a corporation,

called a target, by stock purchase or exchange, either
hostile or friendly. Also called Takeover.
 WHY M&A?
• Cost Efficiency through economies of scale.
• Increased value generation.
• Increase in market share.
• Tax gains and revenue enhancement through market
share gain.
• Beneficial to the companies weathering through the
tough times.
 M& A: BENEFITS

 When a firm :
 Wants to enter a new market.
 Wants to introduce new products through research
and development.
 Wants achieve administrative benefits.
 To increased market share.
 M& A: BENEFITS

To lower cost of operation and/or production.

To gain higher competitiveness.
For industry know how and positioning.
For Financial leveraging.
 DEAL CYCLE
Growth
Strategy

Develop & Potential

Sustain Targets

Creating
Due
Single
Diligence
entity

Cultural
Integration
 DUE DILIGENCE
 Complicated process should be given major emphasis.
Helps in understanding the inner working of the seller’s
company.
Due diligence is divided into 4 sub sections.
 Financial
 Business
 Legal
 Tax

A through examination of the firm.

 M&A SNAPSHOT
Volume Value Avg. Deal Size

’06 ‘07 ‘08 ’06 ‘07 ‘08 ’06 ’07 ’08

Inbound 76 112 86 5.4 15.5 12.5 71.05 138.40 145.89

Outbound 190 243 196 9.9 32.7 13.2 52.18 134.81 67.31

Total Cross border 266 355 282 15.3 48.2 25.7 57.57 135.94 91.27

Domestic 214 321 172 4.9 2.8 5.2 23.32 8.89 30.30

Total M&A 480 676 454 20.2 51 30.9 42.30 75.61 68.17

PE 302 405 312 7.8 19.3 10.5 26.02 46.99 33.93

Total 782 1081 766 28 70.3 41.4 36.02 64.89 54.23

 M&A SNAPSHOT
• Total value of M&A and PE investment declined by
49% in 2009.
• M&A deals declined by 41% in 2009.
• 63% decrease in volume of Q1in 2009 as compared to
2008.
• 30% decrease in terms of value.
• Domestic deals were greater than cross border
counterparts.
 KEY M&A DEALS(2008)
Acquirer Target Sector Price (US$ % Stake
Mns)
Daiichi Sankyo Ranbaxy Pharma 4506.31 60.63%
Co. Laboratories
Ltd.
Oil & Natural Imperial Oil & Gas 800.00 100.00%
Gas Corp Energy PLC
Videsh Ltd
NTT Tata Telecom 2700.00 26%
DOCOMO. Teleservices
INC. Ltd
HDFC Bank Centurion BFSI 2377.50 100%
Ltd. Bank of
Punjab
GMR InterGen NV Power and 1100.00 50%
Infrastructure Energy
Ltd
HCL Axon Group IT & ITES 749.70 100%
Technologies plc
 KEY M&A DEALS(2009)
Acquirer Target Sector Price (US$ % Stake
Mns)
Reliance Reliance Oil and Gas 1888.89 NA
Industries Petroleum
Quippo Wireless Tata Telecom 533.33 49.00%
Telecom Telecom
Infrastructure Infrastructure
Ltd. Ltd.
Sesa Goa Ltd. VS Dempo & Metals and 388.89 100%
Co. Private Ores
Ltd.
Tech Satyam IT & ITES 351.00 31%
Mahindra Ltd. Computer
Services Ltd.
Fire Capital Fire Arcor Real Estate & 250.00 75%
Fund Infrastructure Infrastructure
Pvt. Ltd. Management
 KEY M&A DEALS (2010)
Acquirer Target Sector Price (US$ Bns)

Bharti Airtel Zain African Telecom 10.7

operation

GTL Infrastructure AIRCEL Telecom 1.8

Infrastructure

Fortis Healthcare Parkway Holdings Healthcare .685

Essar Group Trinity Coal Mining .600

Corporation

Telenor ASA Unitech wireless telecom .433

 FINANCIAL BUYERS

• Private equity firms ( financial sponsors)

• Venture capital firms
• Hedge funds
• Family investment offices
• Ultra high net worth individuals (UHNWs)
 PRIVATE EQUITY FUND MANAGEMENT CYCLE:

Dispers
Fund Portfoli
al of
raising o
Investm Divest funds
for acquisit Growth
ent ment to
limited ion
limited
partners search
partners
 STRATEGIC VS. FINANCIAL
BUYERS
Strategic buyers Financial buyers
Evaluation of business Focus heavily on Standalone cash
synergies and integration generating capabilities
capabilities and capacity for earnings
growth

Determining investment Less time on macro view More time on macro view
merits of industry of industry and more time of industry and less time
on micro view of on micro view of
company company

Strength of back office Focus less Focus more

infrastructure
Impact of investment Less sensitive to business More sensitive to
horizon cycle risk business cycle risk

Transaction efficiency Process takes longer time Execute deals in a timely

fashion
 KEY PE DEALS (2008)
Investor Investee Sector Stake % Price (US$
Mns)
Providence Aditya Birla Telecom 20 640.00
Equity Telecom
Partners
Symphony DLF Assets Real Estate & N.A. 450.00
Capital Infrastructure
Management
MPC Synergy Phoenix Mills Real Estate & N.A. 325.00
Ltd. Infrastructure
Management
Orient Global Cairn India Power & 3 278.69
Tamarind Ltd. Energy
Fund Pvt. Ltd.
DE Shaw Mack Star Real Estate & N.A. 250.00
Marketing Infrastructure
Management
 REFERENCES
PwC study on Strategic deals and mergers of
productivity to drive M&A in 2010.
http://equityez.com/portfolio/stages-of-the-private-e

quity-fund-management-cycle/
Study by KPMG Indian-M&A-Landscape-2009.
Study by Evalueserve - Greenfield Business
Sentiments Survey on Indian M&A - post editorial.
Deal Tracker Annual Issue 2008.
 REFERENCES
 Assocham Financial Pulse study “M&A in India:
Retrospect & Prospects” April 2009.
 Study by Grant Thornton “Marketing Services
Merger and Acquisitions” Summer 2010.
 “Global Private Equity Report 2010” by Bain &
Company.