International Business Assignment

on

Mergers &Acquisition

Submitted to:-

Mahek Goreja

Submitted by:- Vipul Pirodia

Mergers•  Merger is defined as combination of two or

more companies into a single company where one survives and the others lose their corporate existence.

• Merger is also defined as amalgamation i.e. it is the fusion of two or more existing companies.

• The amalgamating companies loose their identity and the shareholders of the amalgamating companies become shareholders of the amalgamated company.

Acquisitions

• Acquisition in general sense is acquiring the ownership in the property. In the context of business combinations, an acquisition is the purchase by one company of a controlling interest in the share capital of another existing company.

 What do you mean

by Mergers &

Acquisitions ?

In simple words..

Ways to takeoverFriendly Takeover:-

The acquiring firm makes a financial proposal to the target firm’s management and board. This proposal might involve the merger of the two firms, the consolidation of two firms, or the creation of parent/subsidiary relationship.

Hostile Takeover:-A hostile takeover may not follow a preliminary attempt at a friendly takeover. For example, it is not uncommon for an acquiring firm to embrace the target firm’s management in what is colloquially called a bear hug

Leveraged Buyouts.

These are a form of takeovers where the acquisition is funded by borrowed money. Often the assets of the target company are used as collateral for the loan. This is a common structure when acquirers wish to make large acquisitions without having to commit too much capital, and hope to make the acquired business service the debt so raised.

Bailout Takeovers.

Another form of takeover is a ‘bail out takeover’ in which a profit making company acquires a sick company. This kind of takeover is usually pursuant to a scheme of reconstruction/rehabilitation with the approval of lender banks/financial institutions. One of the primary motives for a profit making company to acquire a sick/loss making company would be to set off of the losses of the sick company against the profits of the acquirer, thereby reducing the tax payable by the acquirer. This would be true in the case of a merger between such companies as well.

Types of mergers…

Horizontal Merger 

Vertical Merger 

Co-Generic Merger

Conglomerate Merger

Cash Merger.

Its USP…Gaining Cost Efficiency

When two companies come together by merger or acquisition, the joint company benefits in terms of

cost efficiency. A merger or acquisition is able to create economies of scale which in turn generates

cost efficiency.

When a firm wants to enter a new market

When a firm wants to introduce new products through research and development

When a forms wants achieve administrative benefits

To increased market share

To lower cost of operation and/or production

To gain higher competitiveness

For Financial leveraging

To improve profitability and EPS

Cont..

Its faliures…• There are several reasons merger or

an acquisition failures. Some of the prominent causes are summarized below:If a merger or acquisition is planned depending on the (bullish) conditions prevailing in the stock

market, it may be risky.• There are times when a merger or an

acquisition may be effected for the purpose of "seeking glory," rather

than viewing it as a corporate strategy to fulfill the needs of the

company. Regardless of the organizational goal, these top level executives are more interested in satisfying their "executive ego.“

• Cont..

In addition to the above, failure may also occur if a merger takes place as a

defensive measure to neutralize the adverse effects of globalization and a

dynamic corporate environment.

Failures may result if the two unifying companies embrace different "corporate

cultures.“

It cuts the job s of employee for example when P&G merge with GILLETTE 6000 jobs were cut .

Tata Steel’s mega takeover of European steel major Corus for $12.2 billion. The biggest ever for an Indian company. This is the first big thing which marked the arrival of India Inc on the global stage.

Vodafone’s purchase of 52% stake in Hutch Essar for about $10 billion. Essar group still holds 32% in the Joint venture.

Hindalco of Aditya Birla group’s acquisition of  Novellis for $6 billion.

Ranbaxy’s sale to Japan’s Daiichi for $4.5 billion. Sing brothers sold the company to Daiichi and since then there is no real good news coming out of Ranbaxy.

ONGC acquisition of Russia based Imperial Energy for $2.8 billion. This marked the turn around of India’s hunt for natural reserves to compete with China.

P&G to acquire Gillette for $57bn Procter & Gamble is to buy Gillette for $57bn (£30.2bn) and create the world's largest stable of consumer brands.

Tata Motors acquisition of luxury car maker Jaguar Land Rover for $2.3 billion. This could probably the most ambitious deal after the Ranbaxy one. It certainly landed Tata Motors into lot of trouble.

Reliance Industries taking over Reliance Petroleum Limited (RPL) for 8500 crores or $1.6 billion.

HDFC Bank acquisition of Centurion Bank of Punjab for $2.4 billion.