Professional Documents
Culture Documents
Corporate Restructuring
By Prof. Samie
M&A basics
Global M&A Overview
Case Study
Lets begin.
M&A is a tool used by companies to perform
corporate restructuring.
Is there a difference in merger and
acquisition or are they a part of the same
activity?
Merger is defined as a process where in two or
more companies combine in such a way that the
target company loses its identity (absorption) or
a completely new company is formed with both
companies losing their identity (consolidation).
IPCLs merger with Reliance Industries is a
merger by absorption. HCL was formed by
consolidation of three companies Hindustan
Computers Ltd, Hindustan Instruments and
Software Company and Indian Reprographics
Ltd.
Arrange for Bridge loan financing towards the deal for the next 12 months or
so
M&A
Origination
M&A
Execution
Spin Off
Spin-Off : The creation of an independent company
through the sale or distribution ofnew sharesof an
existingbusiness OR division ofa parentcompany.
In a "spin-off," a parent company distributes
shares of a subsidiary to the parent company's
shareholders. The shares are usually distributed on
a pro rata basis and the subsidiary becomes a
separate company.
Packaged consumer goods firm Marico spun off its
services business Kaya into a separate listed firm
to improve valuations of the parent company.
Marico Kaya will be listed separately on the
Bombay Stock Exchange and the National Stock
Exchange and will have its own board of directors
"Kaya is a feminine business; 85% of Marico's employees are male, which created a
distinct
from
Marico's
board.
macho
system that
did not
understand
the requirements of Kaya where 85% of
employees are women," Milind Sarwate, CFO at Marico,
Demerger
Demerger can be defined as split or division of a
company into more number of companies A demerger is a
form of restructure in which owners of interests in the head
entity (for example, shareholders or unit-holders) gain
direct ownership in an entity that they formerly owned
indirectly (the demerged entity).
Bajaj Auto did a demerger in 2008 thereby creating three
separate entities with management focus on:
auto company would focus on auto business; (Bajaj Auto
Ltd)
the wind power and financial services company will
focus on wind-energy generation, insurance, consumer
finance and new initiatives in financial services space;
and (Bajaj Finserv Ltd)
the primary investment company will focus on new
business opportunities (Bajaj Holdings & Investment
Limited)
Buybacks
In a share buyback, a company purchases shares it
has issued to shareholders.
Companies prefer to do buyback for the following
reasons:
Increase promoter holding, increase EPS, to pay
surplus cash not required currently by business.
Share buyback was not allowed in India till 1998.
The slowdown in the Indian economy between
1998-2002 was one of the prime reasons for the
Government accepting the industry proposal for
allowing a share buyback.
India PSU and private companies were sitting on
idle cash as there was a lack of investment
opportunities on account of the slowdown during
Delisting
Delisting involves removing a listed security from an
exchange.
Multinationals which set up subsidiaries in India
initially were forced to dilute the parent holdings
under the erstwhile FERA (Foreign Exchange
Regulation Act, 1973) by listing at very low prices in
Indian stock exchanges.
Cadbury which listed in India in June 1977 decided to
get delisted from Indian stock exchanges in 2003.
However, till 2011 Cadbury was unable to fully buy
its delisted shares from the market on account of
valuation issues with minority shareholders.
3.5
2.8
2.7
2.5
1.9
2
1.2
1.6
1.4
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
Value in USD T N
Global M&A in 2012 (US$ 2.1745tn) was down 2.7% on the same
period in 2011 (US$ 2.2342tn).
In 2013, Global M&A was USD2.91tn up by 9% over 2012.
Source : Bloomberg, Wall Street Journal , Thomson Reuters
Buyer
Target
Deal Value
(USD)
Jan 2013
Existing
Shareholders
AbbVie (USA)
64BN
Feb 2013
Berkshire
Hathway
3G Capital
HJ Heinz (USA)
27.5BN
Feb 2013
Liberty Global
Virgin Media
(UK)
25BN
Feb 2013
Silverlake
Management
LLC (MB)
Dell (USA)
21BN
Feb 2013
Creditors
US Airways
AMR Group
(USA)
19BN
Jul 2013
Omnicom
Publicis
(France)
18BN
Buyer
Target
Deal Value
(USD)
Apr -2014
Sun Pharma
Ranbaxy
4BN
Apr 2013
Unilever NV
Unilever India
3.5BN
Aug 2013
ONGC Videsh
Andarko
Petroleum
2.6BN
Jul -2013
Ambuja
Cements
ACC
2.4BN
Jun -2013
Apollo Tyres
(called off)
2.3BN
May -2014
Adani Ports
Dharma Port
Company
0.9BN
May -2014
Reliance
Industries
Network 18
0.8BN