Mergers and Acquisitions

BIG IDEAS HR CONSULTING PVT. LTD.

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What is 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.

• Example: Company A+ Company B= Company C.

MERGERCase study- NTT DoCoMo and Tata

• It also known as a takeover or a buyout• It 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.

What is ACQUISITION?

ACQUISITION

Case study- Tata Steel and Corus

THE FIRST CLASSIFICATION

ACQUISITION

PUBLIC (IF ACQUIREE LISTED IN PUBLIC

MARKETS)

PRIVATE (IF ACQUIREE NOT LISTED IN PUBLIC

MARKETS

THE SECOND CLASSIFICATION

ACQUISITION

FRIENDLY HOSTILE

Why Mergers And Acquisition are done??

Mergers and Acquisitions are pursued for a variety of reasons:1.Economies of scale in operations2.Consolidation in saturated markets3.Improving competitive position through

larger asset base

                                   

ACQUISITIONi. 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.

DIFFERENCE BETWEEN MERGER AND ACQUISITION

MERGER

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.

• Cultural Difference

• Flawed Intention

• No guiding principles

• No ground rules

• No detailed investigating

• Poor stake holder outreach

Why Mergers and Acquisitions Fail?

PROBLEM WITH MERGER

i. Clash of corporate cultures

ii. Increased business complexity

iii. Employees may be resistant to change

MERGER:WHY & WHY NOT

WHY IS IT IMPORTANT

i. Increase Market Share.ii. Economies of scaleiii. Profit for Research and

development.iv. Benefits on account of

tax shields like carried forward losses or unclaimed depreciation.

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PROBLEM WITH ACUIQISITION

i. Inadequate valuation of target.

ii. Inability to achieve synergy.

iii. Finance by taking huge debt.

WHY IS IMPORTANT

i. Increased market share.

ii. Increased speed to market

iii. Lower risk comparing to develop new products.

iv. Increased diversification

v. Avoid excessive competition

ACQUISITION:WHY & WHY NOT

Impact of Mergers and Acquisitions

Impact

Employees

Competition

ManagementPublic

Shareholders

MOTIVES OF MERGERS AND ACQUISITIONS

Economy of scale:This refers to the fact that the combined company can often reduce its fixed costs by removing duplicate departments or operations, lowering the costs of the company relative to the same revenue stream, thus increasing profit margins.

Economy of scope: This refers to the efficiencies primarily associated with demand-side changes, such as increasing or decreasing the scope of marketing and distribution, of different types of products.

Synergy:For example, managerial economies such as the increased opportunity of managerial specialization. Another example are purchasing economies due to increased order size and associated bulk-buying discounts.

• 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

How to Prevent the Failure

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