Mergers and Acquisitions

MEMBERS
KAJAL SUDANI 112
MANSI SHAH 104
JUHI PATEL 87
USHA SADHU 99
SHIMALI MEHTA 75
SURBHI KEDIA 37
MERGER
• A merger is a combination of
two companies into one larger
company, which involves stock
swap or cash payment to the
target.

• Example: Company A+
Company B = Company C.
• Mittal Steel +Arcelor steel

=ArcelorMittal
Acquisition.
 When one company takes over
another and clearly established
itself as the new owner, the
purchase is called an
acquisition.

 It also known as a takeover or a

buyout

 Example: Company A+
Company B= Company A.
 Vodafone + Hutch =Vodafone
DIFFERENCE BETWEEN MERGER AND
ACQUISTION:
MERGER ACQUISITION

i. Merging of two organization in to i. Buying one organization by

one. another.
ii. Merger is expensive than ii. Acquisition is less expensive
acquisition(higher legal cost). than merger.
iii. Through merger shareholders can
increase their net worth. iii. Buyers cannot raise their
iv. It is time consuming and the enough capital.
company has to maintain so
much legal issues.
iv. It is faster and easier
transaction.
 MERGER:WHY & WHY NOT
WHY IS IMPORTANT PROBLEM WITH MERGER

i. Increase Market Share. i. Clash of corporate cultures

ii. Economies of scale ii. Increased business
complexity
iii. Profit for Research and iii. Employees may be
development. resistant to change
iv. Benefits on account of tax
shields like carried forward
losses or unclaimed
depreciation.
v. Reduction of competition.
vi. Managerial effectiveness
6
 ACQUISITION:WHY & WHY NOT

WHY IS IMPORTANT PROBLEM WITH ACUIQISITION

i. Increased market share. i. Inadequate valuation of

ii. Increased speed to target.
market ii. Inability to achieve synergy.
iii. Lower risk comparing to iii. Finance by taking huge
develop new products. debt.
iv. Increased diversification
v. Avoid excessive
competition

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 8
TYPES OF MERGERS.

 Horizontal merger
 Vertical merger
 Conglomeration
 Market-extension merger
 Product-extension merger
 Product extension merger
FINANCING TECHNIQUES IN MERGER 9

1. Ordinary Share financing

Use of common shares to finance a merger, the relative price earnings ratios of two
firms are an important consideration. Firms having a high P/E ratio, ordinary
shares represent an ideal method for financing mergers and acquisitions.

2. Debt & preference shares financing

Some firm may have a relatively lower P/E ratio was also the requirement of some
investors might be different, other types of securities may be used for the purpose.
To tailor a security to the requirements of investors who seek dividend/ interest
income, convertible debentures and preference shares might be used to finance
mergers
 10
3. Deferred payment plan

Here the acquiring firm, besides making an initial payment, also

undertakes to make additional payments in future years to the
target firm. Since the future payment is linked to the firms
earnings, this plan is also known as earn out plan.

4. Tender offer

In this approach purchaser approaches the shareholders of the

firm rather than the management to encourage them to sell their
shares generally at a premium over the current market price.
Since the tender offer is a direct appeal to the shareholders, prior
approval of the management of the target firm is not required. 
 PROCESS OF MERGER & ACQUISITION
11
IN INDIA:
The process of merger and acquisition has the following steps:

i. Examination of Object Clause

ii. Information to the stock exchange
iii. Approval of Board of Directors
iv. Application in the High Court
v. Dispatch of Notice to Shareholders and Creditors
vi. Holding of Shareholders and Creditors meetings
vii. Sanction by the High Court
viii. Filing of the court order
ix. Transfer of assets & liabilities
x. Payment by cash and securities

Maximum Waiting period:210 days from the filing of notice(or the order of the
commission - whichever earlier).
 12

CASE STUDY
 13

ACQUISITION

Case study- Tata Steel and

Corus
 14

 Tata acquired Corus on the 2nd of April 2007 for a

price of $12 billion.
 Tata paid 608 pence( Rs 484)per share to Corus
shareholders, which is 33.6% higher than the first offer
which was 455 pence.
 Tata acquired Corus, which is four times larger than its
size and the largest steel producer in the U.K.
 Contribution from Tata Steel – $3.88 Billion & $2bn
equity .
 Lead financer of Tata steel was Suisse, ABN AMRO
and Deutsche Bank- $ 8.12 billion(combinelly )
 PROFILE PRE MERGER
TATA STEEL
 102 years in steel bazaar
 World’s 56th largest
 Capacity of 30 Million
 Founder:J.N. Tata
 Presence in 26 nations
 On the date of
announcement –536.60
15
CORUS
 World’s 6th largest
 2nd in Europe,1st in UK
 371st rank in fortune list
 50,000 people worldwide.
 Presence in 50 nations
 On the date of
announcement – 360.5
Pence/share
 PROFILE POST MERGER 16

TATA STEEL CORUS

 On the date of Acquisition-  CORUS was named as

464.90 TATA STEEL U.K.
 Production capacity of tata steel Ltd.
increase from 5.3 thousand
tonnes to 23.3thousand tonnes
 Today tata steel is on 5th ranks in
world
 Tata Steel Background 17

• Tata Steel a part of the Tata group, one of the largest diversified business
conglomerates in India.
• Founded in 1907,by Jamshedji Nusserwanji Tata.
• Started with a production capacity of 1,00,000 tones, has transformed into a global
giant
• In the mid- 1990s, Tata steel emerged as Asia’s first and India’s largest integrated
steel producer in the private sector.
• Tata steel acquired the Singapore based steel manufacturer NatSteel, and Thailand
based Millennium Steel
• Tata Steel generated net sales of Rs.175 billion in the financial year 2006-07.
 CORUS BACKGROUND 18

• Corus Group was formed on 6th October 1999, through the

merger of two companies, British Steel (38.3%) and
Koninklijke Hoogovens, (61.7%)
• Corus has manufacturing operations in many countries with
major plants located in the UK, The Netherlands, Germany,
France, Norway and Belgium
• It has wide variety of products and services
• Largest steel producer in UK with £10,142 million annual
Reasons for Tata Steel to Bid 19 19

Tata want to tap European Mature Market because Cost of

acquisition is lower than setting up of Green field plant &
marketing and distribution channel.
TATA manufactures Low Value ,long and flat steel products ,while
Corus produce High Value Stripped products.
Helped TATA to feature in Top 10 players in world.
Technology Benefit.

Corus holds number of patents and R&D facilities.

 REASONS FOR CORUS FOR ACCEPTING
20

BIDS

 To get access to low cost materials.

 The total debt of Corus was 1.6bnGBP, due to that the
market share and profit had decline.
 Corus wanted to reduce its employees cost(15%) and
TATA (9%)is well known for handling its labours
efficiently.
 Though the Corus had a revenue of $ 18.06bn it’s profit was
just $ 626mn on against Tata revenue was $ 4.84bn & profit
$824 mn
MERGER 21

Case study- NTT DoCoMo and Tata

 TATA DOCOMO
22

• Tata and NTT Docomo had merged in Nov.2008 under Tata

Teleservice Ltd.(TTSL)
• NTT Docomo have 26%equity stake in TTSL for Rs.13,070($2.7 bn)
• Tata Docomo had launced GSM service on 24 June 2009 in South
India.
• First mobile service provider to have second pulse tariff

Reason for Merger:

• Docomo has a good promoting techniques and its is largest mobile
operator in Japan with 50% market share
• Docomo want enter in world's fastest growing mobile market

• Tata want to increase it’s market share.

TOP 11
M&A DEALS…
 1. TATA STEEL-CORUS: $12.2 BILLION

 January 30, 2007

 Largest Indian take-over
 After the deal TATA’S
became the 5th largest
STEEL co.
 100 % stake in CORUS
paying Rs 428/- per share

Image: B Mutharaman, Tata Steel MD; Ratan Tata,

Tata chairman; J Leng, Corus chair;
and P Varin, Corus CEO.
 2. VODAFONE-HUTCHISON ESSAR:
$11.1 BILLION
 11th February 2007
 TELECOM sector
 2nd largest takeover
deal
 67 % stake holding in
hutch

Image: The then CEO of Vodafone

Arun Sarin visits Hutchison
Telecommunications head office in
Mumbai.
 3. HINDALCO-NOVELIS: $6 BILLION
 June 2008
 Aluminium and copper
sector
 Hindalco Acquired
Novelis
 Hindalco entered the
Fortune-500 listing of
world's largest
companies by sales
revenues
Image: Kumar Mangalam Birla
(center), chairman of Aditya Birla
Group.
4. RANBAXY-DAIICHI SANKYO: $4.5 B

 June 2008
 Pharmaceuticals sector

 Acquisition deal

 largest-ever deal in the

Indian pharma industry
 Daiichi Sankyo acquired
the majority stake of more
than 50 % in Ranbaxy for
Rs 15,000 crore
 15th biggest drugmaker
Image: Malvinder Singh (left), ex-CEO of
Ranbaxy, and Takashi Shoda, president
and CEO of Daiichi Sankyo.
 5. ONGC-IMPERIAL ENERGY:$2.8BILLION
 January 2009
 Power sector

 Acquisition deal

 Imperial energy is a
biggest chinese co.
 ONGC paid 880 per
share to the shareholders
of imperial energy
 ONGC wanted to tap the
siberian market
Image: Imperial Oil
CEO Bruce March.
 6. NTT DOCOMO-TATA TELE: $2.7 B
Tata -NTT Docomo –$ 2.7bn
 November 2008
 Telecom sector

 Acquisition deal

 Japanese telecom giant

NTT DoCoMo acquired
26 per cent equity stake
in Tata Teleservices for
about Rs 13,070 cr.

Image: A man walks past a signboard of

Japan's biggest mobile phone operator NTT
Docomo Inc. in Tokyo.
 7. HDFC BANK-CENTURION BANK OF
PUNJAB: $2.4 BILLION
 February, 2008

 Banking sector

 Acquisition deal

 CBoP shareholders got

one share of HDFC Bank
for every 29 shares held
by them.
 9,510 crore

Image: Rana Talwar (rear) Centurion

Bank of Punjab chairman, Deepak
Parekh, HDFC Bank chairman.
  March 2008 (just a year
after acquiring Corus)
 Automobile sector

 Acquisition deal

 Gave tuff competition to

M&M after signing the
deal with ford

Image: A Union flag flies behind a

Jaguar car emblem outside a
dealership in Manchester, England.
 9. STERLITE-ASARCO: $1.8 BILLION

 May 2008
 Acquisition deal

 Sector copper

Image: Vedanta Group chairman

Anil Agarwal.
 10. SUZLON-REPOWER: $1.7 BILLION

 May 2007
 Energy sector
 Acquisition deal
 Suzlon is now the
largest wind turbine
maker in Asia
 5th largest in the
world.

Image: Tulsi Tanti, chairman &

M.D of Suzlon Energy Ltd.
 11. RIL-RPL MERGER: $1.68 BILLION

 March 2009
 Merger deal

 amalgamation of its
subsidiary Reliance
Petroleum with the
parent company
Reliance industries ltd.
 Rs 8,500 crore

 RIL-RPL merger swap

ratio was at 16:1
Image: Reliance Industries'
chairman Mukesh Ambani.
 WHY INDIA?

 Dynamic government policies

 Corporate investments in industry
 Economic stability
 “Ready to experiment” attitude of Indian
industrialists
AMONGST BRIC NATIONS, INDIA SECOND MOST
TARGETED COUNTRY FOR MERGERS &
ACQUISITIONS(2010):
MERGER & ACQUISITION(2009-10) :

37
 RECENT M&A HAPPENINGS…

 Godrej acquires Argentine firm

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 RIL acquires Pioneer stake for $1.32 bn

 Hyderabad-based HBL Power Systems is set to take over

Igarashi Motors India Ltd, a Japanese-owned company
 GCPL (Godrej Consumer Products) has decided to buy two
domestic brands – Genteel (a liquid detergent) and Swastik
(soaps)
 CONTD…

 Dabur completes merger of Fem Care

 Ebay India ties up with Adidas for FIFA World Cup.

 Abbott buys Piramal unit

 Eurocopter signs two joint ventures with Pawan Hans 

 Mahindra to buy out Renault’s stake in India, revive Logan

sales.
 Pharma major Dr Reddy's Laboratories Ltd will buy oral
penicillin facility and product portfolio of GlaxoSmithKline
plc in the US