mergers and acquisitions
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Mergers & Acquisitions
Presented by: Group - 4
SuhaibPrathibaPooja SinghNirajRaghuram BhandhariNitin G. Mahendrakar
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M & A –An Overview
* Mergers and Acquisitions M&A have become very popular all over the world in last 3 decades.
* India born Laxmi Nivas Mittal has taken over Arcelor in Europe, to form a largest Steel making Company in Europe-”Arcelor-Mittal.”(130 Mtons/Year-Global) .
* Tata Steel-Corus(UK) Acquisition by Tata Steel for $12 Billion is very significant and a landmark for the Indian Corporate World. (28 Mtons/Annum-2006)
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Types of Mergers
1. Horizontal
2. vertical
3. Conglomerate
4. concentric
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M & A Process
Pre acquisition review
Search and screen targets
Investigate and value the target
Acquire through negotiation
Post merger integration
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Reasons for M & A
• Increased Market Power• Overcome Barriers to Entry• Lower Cost and Risk of New Product
Development• Increased Speed to Market• Reshaping Competitive Scope
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Advantages of M & A
• Drives growth• Enhance profitability• Mitigates risk• Cut down competiton• Reduces tax liability
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Example of Merger
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EXAMPLE OF MERGER
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ABOUT BOR AND MERGER
• ICICI OFFERED TO BOR
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WHY MERGER OF BOR WITH ICICI ???
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ICICI AFTER MERGER
• PE RATIO 22.97 10/06/10• EPS(RS)36.10 MAR 2010• SALES(RS crore)5826.98 MAR 2010• FACE VALUE RS 10• NET PROFITMARGIN(%)9074 MAR 2009• ROAE (%)7.58 MAR2009
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Acquisition
An acquisition may be defined as an act of acquiring effective control by one company over the assets or management of another company without any combination of companies
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Legal procedure
*Sec 391 – 394 of Indian companies act covers M & A.*Examination of object clause*Approval from the board*Intimation to share holders and creditors. *Approval from share holders and creditors.- 75% of SH and
creditors to approval*Application to National Company Law Tribunal (NCLT)• Petition to NCLT for approval• Transfer of assets and Liabilities• Issuance of shares
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Example of Acquisition
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TATA acquiring CORUS
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Former Name : Tata Iron and Steel Company
Type : Public BSE (500470)
Founded : 1907
Chairman : Ratan Tata
Industry : Steel
Overview of the Acquirer
Founder : Jamshedji Tata
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Headquarter : Jamshedpur, Jharkhand, India
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Name : Corus
Parent : Tata Steel, member of Tata Group
Type : Subsidiary
Founded : 1999
CEO : Kirby Adams
Industry : Steel
Course : SML730Organisation Management
DMS. IIT Delhi
Overview of the Acquired
Formation : Merger of British Steel Corporation & Koninklijke Hoogovens N.V.
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Headquarter : London, England, UK
Reasons for bid from TATA Group To tap European mature market
Cost of acquisition is lower than setting up green field
plant and marketing and distribution channel
Acquisition would help Tata to feature in top 10 players
in the world of steel industry
Technology benefit
Economies of scale
Corus held a number of patents and R&D facilities
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Reasons for CORUS to accept bid
Saturated market of Europe
Decline in market share and profit
Total debt of Corus was 1.6 Bn GBP
High cost of production, as there was a scarcity of
raw materials
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Counter Bid• Nov 18, 06 : The Brazilian Steel Group CSN
approaches Corus With an offer of 475 pence/share• Nov 27, 06 : Board of Corus decides to give more
time for shareholders to decide whether it issue forward a formal offer
• Dec 18,06 : Tata increases its original bid for Corus 500 pence/share, then CSN made its counter bid at 515 pence/share in cash
• Jan 29, 07 : CSN raised its bid to 603 pence/share• Jan 31, 07 : Tata had agreed to offer Corus investors
608 pence per share in cash• Apr 02, 07 : Tata won over CSN, to acquire Corus
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How the deal was funded.???
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Effect on stock price of CORUS
Corus Stock Price moved upwards as the bids moved upward
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Effect on stock price of TATA
Tata steel stock moved downwards showing some volatility
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Effect on stock price of both TATA and CORUS
From the announcement date till the deal completion, Corus
stock gained 67% and Tata Steel stock lost around 12%
Result of the deal On July 23, 2007, Tata Steel stock reached 721.00
on the Bombay Stock Exchange’s (BSE) stock Sensex after hitting a lowest of 399.00 on March 8, 2007. Tata Steel was one of the market leaders for the BSE Sensex up 27% in 2007.
Currently TATA’s are the 7th largest producer of steel in the world. TATA’s credit ratting moved up from BBB to BB.
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