Global Mergers & Acquisitions: JM Morgan Stanley

Global Mergers & Acquisitions
8th October, 2005
JM MORGAN STANLEY
K:\Utkarsh\GLOBAL M&A\GLOBAL M&A.ppt\A2XP\03 OCT 2005\6:52 PM\2
Why Global M&A….

What Motivates Companies ?
 The need for faster growth which arises out of increasing competition.
 Access to large capital funds and brand equity.
 Gaining complementary strengths.
 Expanding Customer Base.
 The need to enhance technological skill sets.
 Expand into new areas to foster growth.
 Widen the portfolio of addressable markets.
 Meet end to end solution needs.
 Opportunity for Growth: Given domestic limitations and challenges companies
worldwide have undertaken global M&A activities to grow in size by adding manpower,
access resources unavailable in domestic regions and facilitate overall expansion.
JM MORGAN STANLEY 1
Reasons for Increasing Global M&A Activity
Global M&A And World The reasons for these cross-border takeovers vary, but their increasing numbers suggest
Economy
that conditions are ripe for a wave of such deals as global competitive pressures intensify.
– In the past 25 years, there
have been two major • Much of the increased cross-border M&A activity this year has involved companies from the US
waves of surging cross- and Europe who are in a major consolidation process.
border M&A transactions.
The first wave was in the • Such deals are also becoming more common in developing countries, which are beginning to
late 1980s, and the second liberalize their trade and investment markets.
big cross-border buying
• A pick-up in the global economy is the main reason for this year's rebound in cross-border M&A.
spree was in the latter half
of the 1990s. During both • One factor that is contributing to increased M&A activity is the increasing importance of private
of these periods, the global
equity deals.
economy experienced
relatively high economic • The current wave of cross-border M&A deals is not only being driven predominantly by
growth and there was transatlantic activity, as were the two previous periods of frenzied buying in the late 1980s and
widespread industrial
1990s. This increase is more geographically distributed and includes China, India and Latin
restructuring, according to
the United Nations America
Conference on Trade and • The growing proportion of M&A deals that are settled in cash makes it easier to buy outside of a
Development. region.
• Companies around the world have fixed their balance sheets and are generating excess cash. Flush
with cash, they are more eager to consider acquisitions.
• As globalization continues, and multinational companies seek to increase market share, eliminate
competitors, or gain control of suppliers the stage is set for a third wave of rising cross-border
M&A.
JM MORGAN STANLEY 21
Phases of a Global M&A Process
3 Distinct Phases of the M&A • Formulation of the Vision

Process:
– Formulation of the Vision
– GROWTH - The vision for an organization defines its purpose, where it is heading, and
what it intends to do once it gets there. The vision includes a well-defined set of core
– Pre-Merger planning
values and beliefs that define a company’s culture and purpose.
– Post-Merger Process
– COMPETITION - The vision should identify the distinct set of competencies that will
Successful execution of all
phases relies upon clearly enable the organization to deliver the unique value required to remain competitive as it
defined roles and moves forward. It should describe clearly the expectations for what the company will look
responsibilities and like and how it will operate over time. Targets should be identified and evaluated in a
effective channels of manner consistent with the company’s vision.
communication
• Pre-Merger planning
– A coherent pre-merger planning process should target companies with the desired
capabilities, get the deal done, and lay the groundwork for a successful integration through
rigorous planning and building of trust among the players.
• Post-Merger Process
– The post-merger process should be focused on cultural integration, retention of key people,
and capturing well defined sources of value as quickly and efficiently as possible.
JM MORGAN STANLEY 2
The Strategic Rationale
Given domestic challenges to achieving growth, many companies worldwide will now need
to look outside their local boundaries for continued growth opportunities
– International operations can provide companies with new and diversified revenue sources and
opportunities to leverage economies of scale
– Can also reduce operating costs by tapping into lower cost off-shore manufacturing and service
operations in Eastern Europe and Asia
– Investors are expecting growth in developing economies such as India and China
Europe is a particularly attractive region:
– Many industry sectors are more fragmented and less efficient than their U.S. counterparts
Time may be appropriate for select companies to pursue growth strategies in Europe:
– Well-positioned U.S. companies enjoy a price to cash-earnings premium relative to their
European peers—particularly in the materials, healthcare and industrials industries
– however, this window of opportunity is closing as U.S. multiples have contracted while
European multiple have expanded YTD
– The U.S. dollar is currently strong relative to the Euro, however it is declining and thus the
price of foreign assets will increase.
Companies should act early as historical evidence suggests that participating later in the
M&A cycle, significantly decreases the value created by the merger or acquisitions
JM MORGAN STANLEY 3
Global M&A Environment

Announced Transactions Involving Global Targets
Dollar Volume Average Transaction Size

$Bn $MM
4,000 1,200
3,500 1,050
3,000 900
2,500 750
2,000 600
1,500 450
1,000 300
500 150
0 1617 2234 2412 2802 3041 1987 1994 2341 2586

0
1814
Numbers below the columns represent number of announced deals (aggregate value of over US$100MM) for that year
Actual Annualized Avg. Transaction Size
Notes
JM MORGAN STANLEY 1. Includes announced transactions, each with an aggregate value of $100MM or more. Includes transactions with estimated values
Excludes terminated transactions. Future terminations of pending transactions will reduce totals shown 6
2. Includes transactions announced as of 30 June 2005. 2005 Annualized

Correlation With Broader Economy
Number of Global M&A Transactions vs. Global Equities Performance and Economic Growth
900 6
841
800 760 763

755
737
5
695 700 707
684 693
700
655
601 609
593 594 592 582 586
600 579 4
531 544
536 530
511 514
485 495
500 470 439 473 468
438 428 3
414 390 406 403
400
343
300 2
200
1
100
0 0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Quarter Announced Transactions (1) MSCI World Index (2) Global GDP Growth (3)
Notes
JM MORGAN STANLEY 1. Includes announced transactions, each with an aggregate value of $100MM or more. Includes transactions with estimated values. Excludes terminated transactions
2. MSCI World Index indexed to 2.5 on start of period, 1st quarter 1996 7
3. Percentage change on the same quarter of the previous year based on constant OECD GDP data; 2Q 2005 Illustrative GDP growth based on Morgan Stanley
estimates

Growth in the Worldwide M&A Markets
Dollar Volume Average Transaction Size

$Bn $MM
4,000 1,200
3,500 1,050
3 ,18 7
3 ,0 53
3,000 900
2,500 2 ,3 9 2 750
2 ,2 9 6 1,54 9
1,58 9
2,000 600
770 1,751
1,2 4 3
1,52 9
1,4 51
1,500 450
1,2 17
96 2
630 8 17 1,0 54
9 56
1,000 300
806 699
1,6 3 8
402 1,52 6 1,4 6 4 665
347
4 31 1,14 9
500 347 34 4 821
150
24 9 266 14 3 712 78 9
206 150 4 59 554 518
151 152 389
288
14 1 98 114 19 4
0 0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005A
U.S. Targets Non-U.S. Targets Avg. Transaction Size
Notes
1. Includes announced transactions, each with an aggregate value of $100MM or more. Includes transactions with estimated values
Excludes terminated transactions. Future terminations of pending transactions will reduce totals shown
JM MORGAN STANLEY 2. Includes transactions announced as of 30 June 2005. 2005 Annualized
8
3. Percentage increase/decrease year over year

Announced Transactions By Value Range
Dollar Value
%
100
28 21 29
80 38 35
50 53 49 45
60 35
32 31
29 30
40 24 27 28
16 23 16 13
13 13
20 10 10 10 10
24 20 28 27 22
16 14 14 17
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 YTD
Number of Deals
%
100 2 3 4 3 3 1 2 2 3
11 11 12 13 11 11 10 12 13
80 14 13 14 13 12 13
15 15 14
60
40 73 73 72 75 76 73
69 69 70
20
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 YTD
$100MM–500MM $500MM–1Bn $1Bn–$5Bn $5+Bn
Notes
1. Includes announced transactions, each with an aggregate value of $100MM or more. Includes transactions with estimated values. Future terminations of
JM MORGAN STANLEY pending transactions will reduce totals
9
2. Includes transactions announced as of 30 June 2005

Worldwide Target Transactions of $10 Billion or More
Dollar Volume
$Bn
2,500
Target/Acquiror Target/Acquiror Target/Acquiror Target/Acquiror
Target/Acquiror $Bn
Historic TW Inc/Time Warner 186
$Bn $Bn $Bn $Bn
Smithkline Beecham/Glaxosmithkline 72
VodafoneGMBH/Vodafone Group PLC
SeagramCo/Vivendi Universal SA 43 FleetBoston/Bank of America • Gillette/Procter & Gamble
Texaco Inc/Chevron 42
185 49 57
2,000 Orange PLC/France Telecom 41
Piezer/Warner Lambert Co Telecom Italia/Olivetti • UFJ/Mitsubishi Tokyo Fin. Grp.
110 28 41
Vodafone America Asia/Vodafone Group Resona Bank/Dep. Ins Corp of Japan • MBNA/Bank of America
57 17 36
1,500 Mediaone Group/AT&A Corp Sibneft/Yukos • AT&T/SBC Communications
55 Target/Acquiror $Bn
1,285 17 22
Shell Transport + Trading/Royal Dutch Shell 80
ELF Aquitaine/Total SA
1,180
Wellpoint Health/Anthem •
Unocal/China Nat’l Offshore Oil
Aventis/Sanofi-Synthélabo 66
52 Bank One/JP Morgan 59
16 20
AT&T Wireless/Cingular 47
Travelers Ppty Casualty/St. Paul •
Unocal/ChevronTexaco
Nextel Communications/Sprint 47
1,000 TIM SpA/Telecom Italia 29
850 16 19
PSEG/Exelon 27
GM Hughes/General Motors •
HVB/Unicredito Italiano
15 18
499
500
354 369
249
194
144
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 YTD
American (North/South) Target European Target Rest of World
Notes
JM MORGAN STANLEY 1. Includes announced transactions, each with an aggregate value of $10Bn or more. Includes transactions with estimated values. Excludes terminated transactions. Future
terminations of pending transactions will reduce totals. Seven largest transactions are detailed for each of 2002, 2003, 2004, and 2005 10
2. Includes transactions announced as of 30 June 2005

Announced Transactions by Region of Target
World
World Region of Target
Region of Target
$$Bn
Billion
1997 1998 1999 2000 2001 2002 2003 2004 2005A
3,500 # of Transactions
3 ,18 7 Americas 1,376 1,461 1,483 1,585 937 796 905 1,089 1,133
3 ,0 53 20
10 3
23 Europe 583 652 888 973 671 694 674 847 948
3,000 19 1 204
Asia Pacific 208 197 277 322 266 207 272 267 327
10 9
Japan 20 33 93 109 83 93 102 103 155
2,500 2 ,3 9 2 ROW 47 78 61 52 30 24 41 35 44
2 ,2 9 6 31 931 16
206 Total 2,234 2,421 2,802 3,041 1,987 1,814 1,994 2,341 2,607
70 16
1,13 5
16 0 % of Total ($Volume)
2,000
52 5 Americas 65 72 52 61 54 44 47 50 52
1,751
20 Europe 28 23 37 29 32 41 38 38 32
65
1,52 9 12 6 772
1,4 51 15 20 Growth Rate (%)
1,500
78 10 13 1 59
1,2 17 Americas – 75 (4) 21 (57) (44) 23 54 40
18 6 58
401 1,0 54 68 Europe – 31 116 (18) (47) (11) 5 43 17
490 9 99
1,000 1,9 2 9 10 3
39
1,6 54 1,59 5 461
437
1,2 3 8
500 947
829 882
571
466
0
1997 1998 1999 2000 2001 2002 2003 2004 2005A
Americas Euro p e As ia Pacific J ap an ROW
Notes
1. Includes announced transactions, each with an aggregate value of $100MM or more. Includes transactions with estimated values. Future terminations of
JM MORGAN STANLEY pending transactions will reduce totals
11

Announced Transactions by Region of Acquirer
World Region of Acquiror

$Billion
1997 1998 1999 2000 2001 2002 2003 2004 2005A

3,500
# of Transactions
3 ,18 7 Americas 1,368 1,455 1,441 1,485 915 798 943 1,115 1,155
3 ,0 53 27
12 1
27 Europe 591 708 989 1,139 730 676 631 806 875
3,000 18 2 18 7
Asia Pacific 190 133 205 247 219 192 250 248 321
89
Japan 27 36 95 113 78 96 100 109 181
2,500 2 ,3 9 2 ROW 58 89 72 57 45 52 70 63 75
2 ,2 9 6 39
73
15 1,2 0 8 Total 2,234 2,421 2,802 3,041 1,987 1,814 1,994 2,341 2,607
58 2 12
1,3 3 8 % of Total ($ Volume)
2,000 19 8
669 1,751 Americas 64 66 46 52 52 42 50 52 51

21
61 Europe 29 29 44 38 35 42 33 36 29
1,52 9 12 5
1,4 51 18 688
1,500 16
Growth Rate (%)
69 12 13 2 48
1,2 17 47 Americas – 63 (6) 16 (52) (44) 38 48 35
638
423 1,0 54 27 61
53 9 97 Europe – 58 100 (10) (55) (18) (10) 60 8
1,000 98 42
1,6 4 4 398
1,515
1,4 17
443
1,2 2 1
500 929 906
79 4
6 14
444
0
1997 1998 1999 2000 2001 2002 2003 2004 2005A
Americas Euro p e As ia Pacific J ap an ROW
Notes
JM MORGAN STANLEY 1. Includes announced transactions, each with an aggregate value of $100MM or more. Includes transactions with estimated values. Future terminations of
pending transactions will reduce totals 12

Announced Transactions by Target Industry
Key Points Title

Worldwide Targets ($Bn)
• First
% key point
– Sub point 2 .1% 1.3 % 1.9 %
2 .3 % 1.6 % 2 .0 % 2 .1% 3 .1% 3 .8 %
$3 1 $52 $4 0 $51 $3 0 $2 2 $2 2
$3 8 $6 7
10 0
2 .7% 3 .3 %
8 .2 % 5.0 % 5.8 % 8 .6 %
$8 1 $10 4 8 .7%
$115 $8 8 9 .0 %
$119 11.4 % 9 .6 % $9 2 11.3 % $10 2
$110
$3 4 7 $3 0 6 $19 7
10 .5% 15.2 %
4 .5% 16 .5%
$3 50 11.0 % 13 .3 %
$153 5.5% $14 4 $2 52 14 .9 %
$13 4 $158
80 $16 9 $157
4 .8 % 15.4 %
5.1% $2 6 9
$70 5.8 % 8 .0 % 5.0 %
$118 19 .5%
$8 8 9 .3 % $9 7 $59
2 3 .5% $6 2 2
$9 8
$716 10 .3 %
2 2 .3 % $18 0
2 8 .6 %
60 $513
$4 15 2 6 .4 %
2 8 .4 % 3 2 .3 %
16 .1% $4 0 3
$3 4 6 $3 8 3
$512
3 1.8 %
16 .9 % 2 3 .4 %
$3 3 5
$517 $4 0 9
40 2 4 .4 %
$56 0 2 0 .5%
2 5.4 %
$3 6 8 $3 14 2 1.1% 18 .6 %
3 2 .4 % 15.5%
$1,0 3 1 14 .3 % $2 57 $2 2 1
$2 71
3 1.3 % $151
$9 57
20
2 0 .9 % 16 .7%
15.5% $4 79 $2 56 14 .5% 15.2 % 16 .8 % 16 .4 %
$2 2 5 $153 $18 5 $2 9 4 $19 4
13 .1%
7.4 % 4 .4 %
4 .8 % 4 .7% $4 17 6 .4 % 4 .1% 3 .7% 4 .0 %
$2 2 6 $4 6
$70 $10 9 $9 8 $50 $6 4 $4 7
0
19 9 7 19 9 8 19 9 9 2000 2001 2002 2003 2004 200 5
Tech M ed ia/Co mm FIG Ind us trial Healthcare Energ y/Ut ilities Real Es t ate Other
Notes
1. Includes announced transactions, each with an aggregate value of $100MM or more. Includes transactions with estimated values. Excludes terminated
JM MORGAN STANLEY transactions. Future terminations of pending transactions will reduce totals shown
2. Includes transactions announced as of 30 June 2005 13
Americas – M&A
WORLD REVIEW – M&A In the first half of 2005, the three most active industries were Energy and Power,
– The urge to merge Financials, and Media and Entertainment.
remained strong in second
Several large deals were announced in the second quarter:
quarter. For the first six
months of 2005, worldwide US$35.8 billion planned acquisition of MBNA by Bank of America,
merger volume climbed to
over US$1.2 trillion, the US$18.9 billion and US$20.4 billion competing bids for Unocal Corp by Chevron Corp and
best showing since the China National Offshore Oil, respectively.
second half 2000 when
The planned acquisition of Adelphia Communications Corp for US$17.6 billion by Time Warner
volume reached US$1.49
trillion. Inc and Comcast Corp.
– US companies accounted The planned acquisition by the Dolan Family of the remaining 77% interest in Cablevision
for almost 43% of all M&A Systems Corp for US$17.2 billion.
targets. Europe comprised
36.3% of target activity The US$57.2 billion Procter & Gamble mega-merger continued to drive the Consumer Products
while Japan accounted for and Services industry volume and remains the highest value deal announced in 2005.
6% and ROW accounted
for 3%
US M&A Totals more than $550 billion for First Half 2005
The record-setting pace of 2005 continued through the second quarter. Since 2001, the first half of
2005 was the most active 6-month period for announced US target transactions of more than $550
billion in volume. The number of deals announced decreased from last year as the trend towards
mega deal structures continues.
European - M&A
Increasing Appetite for European Targets

NOTEABLE DEALS In the first six months of 2005, the number of announced deals with a European target decreased from 5,266
– Gas Naturals $51.7 billion to 4,951transactions, while the overall volume level in the first half increased by 35% from $301.6 billion to
unsolicited bid for rival $406.1billion.
Endesa in Spain.
– Italian Bank UniCredito’s Sector Wise Break Up
$18.6 billion acquisition of
German rival HVB – Financials, accounting for 19.2% of the market, was the most active sector in Europe.
– Pernod’s $17.7 billion deal – Transactions in the Energy and Power sector accounted for 9.6% which was the second most active sector
to buy Britain’s Allied of the market.
Domecq
– OAO Rosneft’s US$7.1 UK Companies Account for 24% of European Targets and Italy ranks second with 17% of the market
billion acquisition of OAO share
Gazprom The most active country at the half year stage was the UK. Compared to this time last year, the value of UK
– Russia witnessed the targets rose from US$75.5 billion to US$99.5 billion.
US$7.12 Billion Italy was the second most active country accounting for 17.1% of the market. The total rank value increase was
Gaprom/Rozneft largely due to Weather’s US$15.2 billion two-step acquisition of Wind and Electricite de France’s US$9.8
transaction
billion takeover offer for Edison.
These and other similar
deals have led the way in
Russia & Czech Republic Rise to the Occasion
Europe and have started to
create a knock-on effect as Russian target announced M&A transactions rose from US$2.7 billion to US$11.2 billion. Also of note was the
deals that have been volume of announced M&A transactions involving Czech Republic targets which was fueld by Telefonica’s
bubbling under the surface US$6.4 billion two-step acquisition of Cesky Telecom and Vodafone’s US$4.4 billion acquisition of Oskar
finally find their way onto Mobil.
the table
Asia Pacific – M&A
TOP DEALS Asia – Pacific climbs more than 82%

– China National Offshore
Oil Corp's recently Overall announced Asian (excluding Japan) M&A Involvement activity surged 82.9%, amounting to
announced unsolicited US$98.2 billion in the first half of 2005 compared to US$53.7 billion during the same period last year.
challenging offer to
acquire Unocal Corp, for
South Korea Region's Top Haven for Investors (by dollar value)
US$20.4 billion, topped all
Asian ex-Japan South Korea continued to dominate the M&A target nation list for this quarter, garnering a total of
transactions for this US$12.6 billion worth of transactions, with 84 deals.
quarter
China moved up one place to become the second busiest nation, with a total of 804 transactions
– Hite Brewery Co Ltd’s amounting to US$11.8 billion.
announced acquisition of
Jinro Ltd for US$3.4 billion, Hong Kong has overtaken Indonesia as the third busiest nation with 386 transactions totaling US$8.1
was the second largest billion.
transaction
Energy and Power as the most Active Sector

The most sought after industry for dealmakers in Asia ex. Japan was the Energy & Power sector, with a
market share of 32.3% for the second quarter, representing a 125.9% increase, compared to 14.3%, same
period last year. The top industry had 192 transactions worth US$31.7 billion.
The Financials sector was the second most active sector, accounting for 19.9% of the market, valued at
US$19.6 billion with 597 deals.
Client Name or Project Name
Japanese – M&A
TOP DEALS With Record Deal Volume, Japan Outpaces UK

– Nomura topped the
announcement-based A record 1,196 Japanese target deals were announced in the first half, reaching an aggregate value
tables with US$72.21 of $US108.85 billion, despite a typically slower second quarter. The Japanese M&A market,
billion in deals. which falls roughly between Australasia and the UK in terms of dollar volume and deal count,
– Mitsubishi Tokyo Financial surpassed the UK for the first time on both counts in the first half.
Group ranked second at
US$ 51.2 billion in deals.
Defensive Maneuvers
A MITI study group (Ministry of International Trade & Industry) released official guidelines for
corporate defense measures coinciding with a rush of company announcements proposing the
adoption of poison pills, board reorganizations, and M&A transactions aimed at consolidating
control over listed subsidiaries. In May and June alone, nearly 100 companies announced
intentions to introduce some manner of defense against hostile takeovers.
Cross Border: Lost in Transactions

Cross-border M&A investment into Japan dropped nearly 90% in the first half to US$958.2
million from/to 47 deals. 87 deals, totaling $8.19 billion were announced in the comparable 2004
period.
M&A Trends in India
M&A Activity in India

A predominant theme in M&A activity is rapidly picking up in India in terms of both number of transactions and value of deals
today’s M&A market is the
emergence of large volume 15,000
transactions.
And the growing capital

markets will further help in
increasing M&A activities in
India 10,000
51
Value in $US MM
NOTEABLE DEALS IN 2005

(YTD)
– Hutchison Communication 44
32
acquired BPL
Communications forUS$ 5,000 26 20
1152.52 million
– Ambuja Cement India Ltd 21
acquired Associated
13
Cement Company for US$
840.66 million 27
30 30
17 27
12 32
106 226 200 268 249 152
0
The lowest deal in the 1999 2000 2001 2002 2003 2004 2005 YTD
current year was Beethoven
Ltd acquiring Simplex Deals < 20MM >20 MM and <50 MM >50 MM Total
Concrete Pile India for US$
DATA IN COLUMS REPRESENT NUMBER OF DEALS
21.43
Global Hostile Activity - Overview
• A predominant theme in Aggregate Hostile Activity (1)

today’s market is the $Bn
emergence of the 600
opportunistic/hostile suitor 574
5
– Comcast’s $67Bn offer for
Disney 500
– Sanofi-Synthelabo’s $66Bn
offer for Aventis
– Gas Natural’s $29Bn offer 400
for Iberdrola 438

– Oracle’s $9Bn offer for
300
PeopleSoft
– Harmony’s $8Bn offer for 231
Gold Fields 186 55

200
8
– Alcan’s $7Bn offer for
44
Pechiney SA 120
93
95
– ArvinMeritor’s $5Bn offer 100 34
75
90
1 8 77
for Dana Corp. 51 15
3 40 62
131
20
134 4
38 3 6 34
1 11 86 56 83 24 5
– Zimmer’s $4Bn offer for 12 18
10 1
20
2 37
57 49 56 67 9 4 11
25 13 72 15 3 21 17 8
Centerpulse AG 0 5
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
YTD
No. of
Hostile Bids 43
21 22 14 13 31 47 47 46 19 53 25 18 26 29 13
American (North/South) Targets European Targets ROW
Hostile Activity Has Been Widespread Across Industries
Hostile Activity by Industry

1990–2005 YTD $Bn
Basic Materials 72 128.6
General Industrial 54 68.7
Financial Institutions 51 332.5
Healthcare 40 215.8
Real Estate 39 78.8
Consumer Products 33 67.0
Energy 31 99.5
Retail 28 61.5
Technology 26 43.7
Utilities 24 90.0
Telecommunications 14 259.5
Transportation 14 33.8
Media & Entertainment 12 154.0
Automotive 9 50.7
Aerospace/Defense 6 7.5
Other 14 13.2
Worldwide Totals for Announced Hostile Deals (in excess of $100MM) 467 1,704.8
Indian M&A Regulatory Environment

Summary Comments
• The Indian M&A environment

• The Indian M&A environment is a strongly regulated by the following major pieces of
is a highly regulated one
with several pieces of legislation/bodies:
legislation as well as
institutions exerting control The Companies Act, 1956
over the process
The Takeovers Code, 1997
The Monopolies and Restrictive Trade Practices Act, 1969
The Foreign Exchange Management Act, 1999
The Foreign Investment Promotion Board (FIPB)
The Reserve Bank of India
The Income Tax Act, 1961
• Mergers, amalgamations, de-mergers, acquisitions of business units or divisions, are all
governed by The Companies Act for all registered companies
• Acquisition of shares in listed Indian companies is governed by The Takeover Code,
1997.
Why Global M&A’s Fail !!!
Research has conclusively shown that most of the mergers fail to achieve
their stated goals.
Some of the reasons identified are:
 Corporate Culture Clash
 Lack of Communication
 Loss of Key people and talent
 HR issues
 Lack of proper training
 Clashes between management
 Loss of customers due to apprehensions
 Failure to adhere to plans
Why Global M&A’s Fail !!! (cont’d)
Unsuccessful Deals due to Communications strategy can make the difference between success and failure of a
lack of Effective Global M&A transaction.
Communication Strategy.
• Slick press releases and conference calls can't save a bad deal, but a poorly conceived communications strategy
– Hewlett-Packard Co.'s
can - and usually will - kill one that may make good strategic sense.
acquisition of Compaq
Corp. • Over the last several years, many of the biggest unsuccessful deals, as measured by post-announcement return to
– Conseco Inc.'s acquisition shareholders, have performed poorly in large part because the acquirers didn't tell their story adequately
of Green Tree Financial • If the deal is dilutive in the short term, but makes "strategic" sense long-term, there should be a compelling
Corp. economics for profitable growth.
– Newell Co.'s takeover of • For the transaction to be successful, Constituencies - particularly investors and employees - must be convinced
Rubbermaid Inc. In that the company is capable of delivering on its promises and that they will be better off if the deal is completed.
contrast
• In short, “An Effective Communication Strategy” helps in securing everything from shareholder approval to
meshing two organizational cultures.
Successful Deals
– PepsiCo Inc.'s acquisition
of The Quaker Oats Co. Lack of IT Integration Seen As One of the Key Reasons to M&A Failure
– Reed Elsevier Plc's • The lack of focus on IT integration during the "lifecycle" of a merger or acquisition inevitably can lead
acquisition of Harcourt to a host of problems. For example, while many companies look to IT to help bring about a successful
General Inc. merger, many do not involve IT in the decision process before the deal is done. Frequently, the result is
– These deals succeeded that companies are less able to recognize potential difficulties in uniting IT operations before the actual
largely because, in each integration has taken place
case, the acquirer
explained to investors the
rationale behind its
respective deal - carefully,
honestly and succinctly.
Why M&A’s Fail !!! (cont’d)

What is Cultural Integration ?
• It is well known that Research indicates that senior executives who have personal experience with a merger or
many M&A efforts lack a acquisition rate underestimating the importance and difficulty of integrating the two
critical success cultures as a major cause of M&A failures.
ingredient: sustained
attention to the Cultural
Organizational Culture & Cultural Integration
Integration of the two
sets of employees and "How we get things done around here" is a short yet evocative definition of Organizational culture. It
includes the emotional, cognitive and behavioral patterns among employees and how they interact with
their daily work
colleagues, customers, suppliers, and other stakeholders in their original firms.
processes.
Organizational culture includes the informal practices and the implicit norms and values that, as much as the
codified rules, silently guide the how of employees' daily work.
• Research indicates that Cultural Integration is the meshing of the two different Organizational Cultures. And when two firms
senior executives who combine, deal-makers and process managers always should be careful to integrate the formal rules and
have personal policies which previously governed each separate firm.
experience with a
merger or acquisition
Failure of Cultural Integration can have adverse impacts on the M&A transaction:
rate underestimating the
importance and difficulty • Clash between the two Managements and clash between Management & Employees.
of integrating the two • Creates differences among employees which can result in operational inefficiencies.
cultures as a major • Negatively affects the value creation process after the transaction is complete
cause of M&A failures. • Loss of Key employees
• Negatively affects the strategic communication process.

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Global Mergers & Acquisitions

8th October, 2005

Why Global M&A….

Reasons for Increasing Global M&A Activity

Phases of a Global M&A Process

3 Distinct Phases of the M&A • Formulation of the Vision

The Strategic Rationale

Global M&A Environment

Dollar Volume Average Transaction Size

0 1617 2234 2412 2802 3041 1987 1994 2341 2586

Actual Annualized Avg. Transaction Size

Global M&A Environment

800 760 763

Global M&A Environment

Dollar Volume Average Transaction Size

U.S. Targets Non-U.S. Targets Avg. Transaction Size

Global M&A Environment

$100MM–500MM $500MM–1Bn $1Bn–$5Bn $5+Bn

Global M&A Environment

American (North/South) Target European Target Rest of World

Global M&A Environment

1997 1998 1999 2000 2001 2002 2003 2004 2005A

Americas Euro p e As ia Pacific J ap an ROW

Global M&A Environment

World Region of Acquiror

1997 1998 1999 2000 2001 2002 2003 2004 2005A

669 1,751 Americas 64 66 46 52 52 42 50 52 51

Americas Euro p e As ia Pacific J ap an ROW

Global M&A Environment

Key Points Title

Increasing Appetite for European Targets

Asia Pacific – M&A

TOP DEALS Asia – Pacific climbs more than 82%

Energy and Power as the most Active Sector

Client Name or Project Name

TOP DEALS With Record Deal Volume, Japan Outpaces UK

Cross Border: Lost in Transactions

M&A Trends in India

M&A Activity in India

And the growing capital

NOTEABLE DEALS IN 2005

Global Hostile Activity - Overview

• A predominant theme in Aggregate Hostile Activity (1)

for Iberdrola 438

Gold Fields 186 55

American (North/South) Targets European Targets ROW

Hostile Activity Has Been Widespread Across Industries

Hostile Activity by Industry

Indian M&A Regulatory Environment

• The Indian M&A environment

Why Global M&A’s Fail !!!

Why Global M&A’s Fail !!! (cont’d)

Why M&A’s Fail !!! (cont’d)

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