merger and acquitions
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Mergers and Acquisitions
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MEMBERS
KHALID JASNAIKFAIZ KAZI
RAMEEZ KADRISAIMA KHAN
MEHNAAZ ANSARIFAIZAN KHAN
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MEANING
Merger
•A transaction where two firms agree to integrate their operations on a relatively co-equal basis because they have resources and capabilities that together may create a stronger competitive advantage.
•The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock
•Example: Company A+ Company B= Company C.
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ACQUISITION
A transaction where one firms buys another firm with the intent of more effectively using a core competence by making the acquired firm a subsidiary within its portfolio of business
It also known as a takeover or a buyoutIt is the buying of one company by another. In acquisition two companies are combine together to form a new company altogether.
Example: Company A+ Company B= Company A.
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MERGER ACQUISITION
DIFFERENCE BETWEEN MERGER AND ACQUISITION:
i. Merging of two organization in to one.
ii. It is the mutual decision.
iii. Merger is expensive than acquisition(higher legal cost).
iv. Through merger shareholders can increase their net worth.
v. It is time consuming and the company has to maintain so much legal issues.
vi. Dilution of ownership occurs in merger.
i. Buying one organization by another.
ii. It can be friendly takeover or hostile takeover.
iii. Acquisition is less expensive than merger.
iv. Buyers cannot raise their enough capital.
v. It is faster and easier transaction.
vi. The acquirer does not experience the dilution of ownership.
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WHY IS IMPORTANT PROBLEM WITH MERGER
MERGER:WHY & WHY NOT
i. Increase Market Share.
ii. Economies of scale
iii. Profit for Research and development.
iv. Benefits on account of tax shields like carried forward losses or unclaimed depreciation.
v. Reduction of competition.
i. Clash of corporate cultures
ii. Increased business complexity
iii. Employees may be resistant to change
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WHY IS IMPORTANT PROBLEM WITH ACUIQISITION
ACQUISITION:WHY & WHY NOT
i. Increased market share.
ii. Increased speed to market
iii. Lower risk comparing to develop new products.
iv. Increased diversification
v. Avoid excessive competition
i. Inadequate valuation of target.
ii. Inability to achieve synergy.
iii. Finance by taking huge debt.
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REASONS /ADVANTAGES Size and Synergy
Increased revenue/Increased Market Share
Economies of Scale
Helps to face competition
Revival of sick units
Faster growth rate
Taxes Advantages
Finance related advantages
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Horizontal Merger
Conglomeration merger
Vertical Merger
Product-Extension Merger
Market-Extension Merger
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TOP 5
M&A DEALS…
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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.
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2. Vodafone-Hutchison Essar: $11.1 billion
TELECOM sector11th February 20072nd largest takeover deal
67 % stake holding in hutch
Image: The then CEO of Vodafone Arun Sarin visits Hutchison Telecommunications head office in Mumbai.
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3. Ranbaxy-Daiichi Sankyo: $4.5 b
Pharmaceuticals sectorJune 2008Acquisition deallargest-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 drugmakerImage: Malvinder Singh (left), ex-CEO of Ranbaxy, and Takashi Shoda, president and CEO of Daiichi Sankyo.
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4. Tata Motors-Jaguar Land Rover: $2.3 billion
March 2008 (just a year after acquiring Corus)
Automobile sectorAcquisition dealGave 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.
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5. RIL-RPL merger: $1.68 billion
March 2009Merger dealamalgamation of its subsidiary Reliance Petroleum with the parent company Reliance industries ltd.
Rs 8,500 croreRIL-RPL merger swap ratio was at 16:1Image: Reliance Industries'
chairman Mukesh Ambani.
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Why India?
Dynamic government policiesCorporate investments in industryEconomic stability“Ready to experiment” attitude of Indian industrialists
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Deals in India for first financial quarter 2010
Sector No. of DealsValue in USD
millionShare in per
cent
Telecom 3 22732.26 67.19
Pharmaceutical 4 3958.29 11.02
BFSI 6 2651.54 7.84
Metal and Mining 4 1483.15 4.38
Energy 4 1320 3.90
Other sectors 39 1919.00 5.67
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PROCESS OF MERGER & ACQUISITION IN INDIA:
The process of merger and acquisition has the following steps:
i.Approval of Board of Directors
ii.Information to the stock exchange
iii.Application in the High Court
iv.Shareholders and Creditors meetings
v.Sanction by the High Court
vi.Filing of the court order
vii.Transfer of assets or liabilities
viii.Payment by cash and securities
Maximum Waiting period:210 days from the filing of notice(or the order of the commission - whichever earlier).
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Impact of Mergers and Acquisitions
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Why Mergers and Acquisitions Fail?
Cultural Difference
Flawed Intention
No guiding principles
No ground rules
No detailed investigating
Poor stake holder outreach
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How to Prevent the Failure
Continuous communication – employees,
stakeholders, customers, suppliers and
government leaders.
Transparency in managers operations
Capacity to meet new culture higher
management professionals must be ready to
greet a new or modified culture.
Talent management by the management
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MERGER & ACQUISITION(2009-10) :
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