Mergers and

Acquisitions
 Merger
• When two companies agree to combine their
operations into a single entity
• Legal consolidation of two entities into one
entity
• Placing one party's business under the indirect
ownership of the other party's shareholders
• In India it is called Amalgamation
• Merging Company is called
Amalgamating company
• New Company is called
Amalgamated Company
 Reason for Merger
• Industry Consolidation
Tactical move that enables a company to reposition itself
into a stronger operational and competitive industry
position.
• Improve Competitive Position
Reduces competition, and allows the combined firm to use
its resources more effectively.
• Defensive Move
Attractive tactical move in any economic environment -
particularly in a cyclical down-turn where a merger can be a
strong defensive move.
• Synergies
Allowing two companies to work more efficiently together
than either would separately.
• Market / Business / Product Line Issues
Whether the market is a new product, a business
line, or a geographical region, market entry or
expansion is a powerful reason for a merger.
• Acquire Resources and Skills
To obtain access to the resources of another
company or to combine the resources of the two
companies
 Ways of merger –
A merger can take place in following ways:
• By purchasing of assets
• By purchase of common shares
• By exchanging of shares for assets
• By exchanging of shares for shares
 Types of Merger

Types

Horizontal Vertical Conglome Mkt Pdt

Merger ration Extension Extension
Merger
 Horizontal Merger
• A merger occurring between companies
producing similar products, goods and
offerings similar services.
• This type of merger occurs frequently as a
result of larger companies attempting to
create more effective economies of scale.
 Vertical Merger
• A merger between two companies producing
different goods and services for one specific
finished products.
• The merger of the firm that have actual or
potential buyer-seller relationship.
 Conglomeration
• A merge between firms that are involved in
totally unrelated business activity. Two
types of conglomerate merger are:
• Pure conglomerate merger- It involve firms
with nothing common.
• Mixed conglomerate merger- It involves firms
that are looking for product extensions or
market extensions.
 Market Extension
• This Merger
involves the combination of two
companies that sell the same products in
different markets.
• A market-extension merger allows for the market
that can be reached to become larger and is the
basis for the name of the merger.
• Eg: Tata and Starbucks
 Product Extension Merger
• It takes place between two business
organizations that deal in products that are
related to each other and operate in the same
market.
• Companies which sell different products of a
related category.
• Eg: The merger of Pizza Hut and PepsiCo in 1977 was
a Product Extension Merger. Pizza & Soft Drink, like Pepsi,
are not the same products but cater to the same industry.
Thus to expand its soft drink reach, Pepsi merged itself
with Pizza Hut by making Pizza Hut it's subsidiary.
 ACQUISITION

•An acquisition is where one

company purchases another. It
is also called as Takeovers

•It involves the acquiring

company(the acquirer) making
an offer for the common stock
of the other company(the
acquiree) at a fixed price per
share.
 Type
•
s
Acquisition can be friendly when they are
supported by the board of the target
company. Also called as negotiated takeovers
• Or unfriendly when they are opposed by the
target company’s board . In this case it is
called hostile takeovers
 1+1=3
• Key principle for buying a company is to create
shareholder value over and above that of the
sum of the two companies.
• 2 companies are more valuable than two
separate ones.
 Facebook acquired Whatsapp
WhatsApp Messenger
• cross-platform instant messaging
client for smart phones
• founded in 2009 by Brian Acton and
Jan Koum, both former employees of
Yahoo!
• On February 19, 2014, months after a venture capital
financing round at a $1.5 billion valuation, Facebook
announced it was acquiring WhatsApp for US$19
billion, its largest acquisition to date

• Facebook CEO Mark Zuckerberg said that Facebook's

acquisition of WhatsApp was closely related to the
Internet.org vision.

• "The idea, he said, is to develop a group of basic

internet services that would be free of charge to use
– 'a 911 for the internet.'
• Days after the announcement, WhatsApp
experienced a loss of service, leading to anger
users
across social media.
• The acquisition caused a considerable number of users to
move, or try out other message services as well.
• Telegram claimed to have seen 8 million additional
downloads of its app.
• Line claimed to have seen 2 million new users for its
service
• Due to acquisition the government of Iran announced
that it had proposed to block the access to WhatsApp
service to Iranian residents.
• Just three days after announcing that WhatsApp had
been purchased by Facebook, Koum said they were
working to introduce voice calls in the coming
months.
• By early January 2015, WhatsApp had 700 million
monthly active users with over 30 billion messages
being sent every day.
• In April 2015, Forbes predicted that between 2012
and 2018, the telecommunications industry will lose
a combined total of $386 billion because of OTT
services like WhatsApp and Skype
 Problems with M & A
• Working in a Global Environment
» Offices in different countries
» Language barriers
• Strategic Planning
» professionals are not sufficiently involved with the
evaluation of target companies before deals are
signed
» employee retention, and training and other
components of integration
» Even the most talented business leaders are
generally not experts in the various stages of a
merger and/or acquisition.
» challenge is to ensure that ongoing business is not
adversely affected by M&A activity
• Communication and Training
» companies can forget to stop and check their progress
» Merger training is often overlooked and can
present obstacles if not implemented promptly
» Employee productivity often falls
where major staffing
decisions are being made
 Laws Regulating Mergers And
Acquisition In India
(I) The Companies Act , 1956
(II) The Competition Act ,2002
(III) Foreign Exchange Management Act,1999
(IV) SEBI Take over Code 1994
(V) The Indian Income Tax Act (ITA), 1961
5 Biggest Mergers and Acquisitions in India
1. Arcelor Mittal
The biggest merger valued at $38.3 billion was also one that was the most hostile. In 2006,
Mittal Steel announced its initial bid of $23 billion for Arcelor which was later increased to
$38.3 billion.
2. Vodafone Idea Merger
Reuters reported the Vodafone Idea merger to be valued at $23 billion. Although the deal
resulted in a telecom giant it is safe to say that the 2 companies were pushed to do so due to
the entry of Reliance Jio and the price war that followed.
3. Walmart Acquisition of Flipkart
Walmarts acquisition of Flipkart marked its entry into the Indian Markets. Walmart won the
bidding war against Amazon and went onto acquire a 77% stake in Flipkart for $16 billion.
Flipkart itself had earlier acquired several companies in the eCommerce space like Myntra,
Jabong, PhonePe, and eBay.  
4. Tata and Corus Steel
Tata’s takeover of Corus Steel in 2006 was valued at over $10 billion. The initial offers from
Tata were at £4.55 per share but following a bidding war with CSN, Tata raised its bid to 
£6.08 per share.
5. Vodafone Hutch-Essar
The world’s largest mobile operator by revenue – Vodafone acquired a 67% stake in Hutch
Essar for $11.1 billion. Later in 2011 Vodafone paid $5.46 billion to buy out Essar’s remaining
stake in the company. Vodafone’s purchase of Essar marked its entry into India and eventually
the creation of Vi.
 M&As

3600 M&As from 2015 to 2019 and an amount of $310

Billion