mergers and acquisitions in various industries
TRANSCRIPT
MERGERS AND
ACQUISITIONS
IN
VARIOUS INDUSTRIES
MERGERS
A merger occurs when two or more companies combines and the resulting firm maintains
the identity of one of the firms. One or more companies may merger with an existing
company or they may merge to form a new company. Usually the assets and liabilities of the
smaller firms are merged into those of larger firms. Merger may take two forms
Merger through absorption
Merger through consolidation.
Absorption
Absorption is a combination of two or more companies into an existing company. All
companies except one lose their identify in a merger through absorption.
Consolidation
A consolidation is a combination if two or more combines into a new company. In this
form of merger all companies are legally dissolved and a new entity is created. In
consolidation the acquired company transfers its assets, liabilities and share of the
acquiring company for cash or exchange of assets.
Types Of Mergers
Mergers are of many types. Mergers may be differentiated on the basis of activities, which are
added in the process of the existing product or service lines. Mergers can be a distinguished into
the following four types:
Horizontal Merger
vertical Merger
Conglomerate Merger
Concentric Merger
Horizontal merger
Horizontal merger is a combination of two or more corporate firms dealing in same lines of
business activity. Horizontal merger is a co centric merger, which involves combination of two
or more business units related to technology, production process, marketing research and
development and management.
Vertical Merger
Vertical merger is the joining of two or more firms in different stages of production or
distribution that are usually separate. The vertical Mergers chief gains are identified as the lower
buying cost of material. Minimization of distribution costs, assured supplies and market
increasing or creating barriers to entry for potential competition or placing, them at a cost
disadvantage.
Conglomerate Merger
Conglomerate merger is the combination of two or more unrelated business units in respect of
technology, production process or market and management. In other words, firms engaged in the
different or unrelated activities are combined together. Diversification of risk constitutes the
rational for such merger moves.
Concentric Merger
Concentric merger are based on specific management functions where as the conglomerate
mergers are based on general management functions. If the activities of the segments brought
together are so related that there is carry over on specific management functions. Such as
marketing research, marketing, financing, manufacturing and personnel.
ACQUISITION
A fundamental characteristic of merger is that the acquiring company takes over the ownership
of other companies and combines their operations with its own operations. 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.
TAKEOVER
A takeover may also be defined as obtaining control over management of a company by
another company
Distinction between Mergers and Acquisitions
Although they are often uttered in the same breath and used as though they were synonymous,
the terms merger and acquisition mean slightly different things. When one company takes over
another and clearly established itself as the new owner, the purchase is called an acquisition.
From a legal point of view, the target company ceases to exist, the buyer "swallows" the business
and the buyer's stock continues to be traded. In the pure sense of the term, a merger happens
when two firms, often of about the same size, agree to go forward as a single new company
rather than remain separately owned and operated. This kind of action is more precisely referred
to as a "merger of equals." Both companies' stocks are surrendered and new company stock is
issued in its place.
For example
Both Daimler-Benz and Chrysler ceased to exist when the two firms merged, and a new
company, DaimlerChrysler, was created. In practice, however, actual mergers of equals don't
happen very often. Usually, one company will buy another and, as part of the deal's terms,
simply allow the acquired firm to proclaim that the action is a merger of equals, even if it's
technically an acquisition. Being bought out often carries negative connotations, therefore, by
describing the deal as a merger, deal makers and top managers try to make the takeover more
palatable.
A purchase deal will also be called a merger when both CEOs agree that joining together is in the
best interest of both of their companies. But when the deal is unfriendly - that is, when the target
company does not want to be purchased – it is always regarded as an acquisition. Whether a
purchase is considered a merger or an acquisition really depends on whether the purchase is
friendly or hostile and how it is announced.
MERGERS AND ACQUISITIONS IN TELECOM INDUSTRY
Etisalat-Allianz merger in May 2009
The Department of Telecom has given its nod to a proposed merger between Etisalat-Swan and
Allianz Infratech. Allianz has licenses to launch mobile services in Madhya Pradesh and Bihar.
UAE’s Etisalat had earlier picked up a 45 per cent stake in Swan, which has bagged licenses to
operate in 13 of the 22 telecom zones in India.
Tata- Docomo Merger in August 2009
NTT DOCOMO is a Japanese Telecom famous for its most high-end telecom VAS, value added
services, is Japan’s premier provider of leading-edge mobile voice, data and multimedia services.
With more than 54 million customers in Japan, the company is one of the world’s largest mobile
communications operators.
The Deal goes in partnership with Indian Communications and Steel Giant TATA Group. Tata
DOCOMO is Tata Teleservices Limited’s telecom service on the GSM platform.
Tata DOCOMO marks a significant milestone in the Indian telecom landscape, as it stands to
redefine the very face of telecoms in India.
MERGERS AND ACQUISITIONS IN BANKING INDUSTRY
HDFC-CBoP MERGER IN FEB 2008
The board of HDFC Bank approved issuance of one equity share for every 29 held in Centurion
Bank of Punjab for merger of the two financial institutions. The board has approved the share
swap ratio of one share of Rs 10 each of HDFC Bank for every 29 shares of Re 1 each held in
Centurion Bank of Punjab.
MERGERS AND ACQUISITIONS IN PHARMACEUTICAL INDUSTRY
ORACLE-SUN
Oracle and Sun announced in April 2009 a deal in which Oracle acquire Sun common stock for
$9.50 per share in cash, putting the value of the transaction at about $7.4 billion.
Zandu’s FMCG business merged into Emami IN JUNE 2009
Emami Ltd and its listed subsidiary, Zandu Pharmaceutical Works, have proposed to merge
Zandu’s FMCG business into Emami, demerge Zandu’s other (non-FMCG) assets and liabilities,
including real estate and investments, into a new entity.
MERGERS AND ACQUISITIONS IN HOSPITALITY INDUSTRY
Sodexo Takeover Rkhs
French global food and facilities management company Sodexo has taken over India's largest
food and support services company, Radhakrishna Hospitality Services (RKHS), in an all-cash
deal worth more than Rs 400 crore.
MERGERS AND ACQUISITIONS IN INSURANCE AND FINANCIAL SERVICES
Nomura Acquire 35% In LIC Mutual Fund In June 2009
Japan's Nomura Group acquire 35 per cent in LIC Mutual Fund, India's seventh largest mutual
fund
MERGERS AND ACQUISITIONS IN AUTOMOBILE INDUSTRY
Chrysler, Fiat merger IN 2009
US carmaker Chrysler and Italian carmaker Fiat merged to create world's sixth largest global
auto giant