MERGERS AND ACQUISITIONS

INDIAN SCENARIO 2010

ONWARDS
BHUMI MORABIA
DPGD/JL13/1804
FINANCE
WELINGKER INSTITUTE OF MANAGEMENT
DEVELOPMENT AND RESEARCH

Flow of Presentation
Merger
Acquisition
Takeover
Distinction between Mergers and Acquisitions
History of Mergers and Acquisitions
Purpose of Mergers and Acquisition
Advantages of Mergers and Acquisitions
Disadvantages of Mergers and Acquisitions
Mergers and Acquisitions in India
Conclusions

Merger
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. Merger is the fusion of two or more
existing companies.
A merger can resemble a takeover but result in a new company.
In business or economics a merger is a combination of two companies into
one larger company.

Classifications of Mergers
Mergers are generally classified into 7 broad categories.
1. Horizontal Merger
2. Vertical Merger
3. Conglomerate Mergers
4. Concentric Mergers
5. Consolidation Mergers
6. Market-Extension Merger
7. Product-Extension Merger

Acquisition

Acquisition in general sense is acquiring the ownership in the property.

An Acquisition usually refers to a purchase of a smaller firm by a larger one.
Acquisition, also known as a takeover or a buyout, is the buying of one
company by another.
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.

Takeover
In business, a takeover is the purchase of one company (the target) by
another (the acquirer, or bidder).
In the UK, the term refers to the acquisition of a public company whose
shares are listed on a stock exchange, in contrast to the acquisition of a
private company.

Types of Acquisitions
Acquisitions are generally classified into 4 categories.
1.

Friendly takeover

2.

Hostile takeover

3.

Back flip takeover

4.

Reverse takeover

Distinction between Mergers and Acquisitions

Merger

Acquisition

The case when two companies (often The case when one company takes
of same size) decide to move forward over another and establishes itself as
as a single new company instead of
the new owner of the business
operating business separately.
The stocks of both the companies are
surrendered, while new stocks are
issued afresh.

The buyer company swallows the

business of the target company,
which ceases to exist.

Generally, mergers take place

between two companies of more or
less same size.

The relatively less powerful, smaller

firm loses its existence, and the firm
taking over, runs the whole business
with its own identity.

History of Mergers and Acquisitions

Merger and acquisitions have evolved in five stages.

1. First wave mergers

The first wave mergers commenced from l897 to l904.
During this phase merger occurred between companies, which enjoyed monopoly over their
lines of production like railroads, electricity etc.

2. Second wave mergers

The second wave mergers that took place from l9l6 to l929 focused on the mergers
between oligopolies, rather than monopolies as in the previous phase.
The economic boom that followed the past World War I gave rise to these mergers.
Technological developments like the development of railroads and transportation
by motor vehicles provided the necessary infrastructure for such mergers or
acquisitions to take place.

3. Third Wave Mergers

The mergers that took place during this period (l965-69) were mainly conglomerate
mergers.
Mergers were inspired by high stock prices, interest rates and strict enforcement of
antitrust laws.

4. Forth wave mergers

The 4th wave merger that started from l98l and ended by l989 was characterized by
acquisition targets that wren much larger in size as compared to the 3rd wave merger.
Mergers took place between the oil and gas industries, pharmaceutical industries, banking
and airline industries.

5. Fifth wave merger

The 5th Wave Merger (l992-2000) was inspired by globalization, stock market boom and
deregulation. The 5th Wave Merger took place mainly in the banking and
telecommunications industries.

Purpose of Mergers and Acquisition

The basic purpose of merger or business combination is to achieve faster
growth of the corporate business.
Faster growth may be had through product improvement and competitive
position.

Other purposes for acquisition are short listed below: Procurement of supplies
Revamping production facilities
Market expansion and strategy
Financial Strength
General gains
Own developmental plans
Strategic purpose
Corporate friendliness

Advantages of Mergers and Acquisitions

To acquire a larger share of an existing market

Enter new markets

Eliminate competitors

Acquire expertise or assets

Transfer skills

Save costs

Increase efficiencies or capitalize on synergies

The main reason for companies to enter into such arrangements is to consolidate their
power and control over governments and markets

Disadvantages of Mergers and Acquisitions

All liabilities assumed (including potential litigation)
Two thirds of shareholders (most states) of both firms must approve
Dissenting shareholders can sue to receive their fair value
Management cooperation needed
Individual transfer of assets may be costly in legal fees
Integration difficult without 100% of shares
Resistance can raise price
Minority holdouts
Technology costs - costs of modifying individual organizations systems etc.
Process and organizational change issues every organization has its own culture and
business processes
Human Issues Staff feeling insecure and uncertain.
A very high failure rate (close to 50%)

Mergers and Acquisitions in India

The process of mergers and acquisitions has gained substantial importance in today's
corporate world. In India, the concept of mergers and acquisitions was initiated by the
government bodies.
The Indian economic reform since l99l has opened up a whole lot of challenges both
in the domestic and international spheres. The trends of mergers and acquisitions in
India have changed over the years.
India has emerged as one of the top countries with respect to merger and acquisition
deals.

Mergers & Acquisitions in 2010

Tata Chemicals buys British salt

Tata Chemicals buys British salt ; a UK based white salt producing company for about US $ 13 billion.
The acquisition gives Tata access to very strong brine supplies and also access to British Salts facilities
as it produces about 800,000 tons of pure white salt every year.

 Reliance Power and Reliance Natural Resources merger

This deal was valued at US $11 billion and turned out to be one of the biggest deals of the year.
It eased out the path for Reliance power to get natural gas for its power projects.

 Airtels acquisition of Zain in Africa

Airtel acquired Zain at about US $ 10.7 billion to become the third biggest telecom major in the
world.
Since Zain is one of the biggest players in Africa covering over 15 countries, Airtels acquisition
gave it the opportunity to establish its base in one of the most important markets in the coming
decade.

Mergers & Acquisitions in 2011

The Reliance BP deal
Reliance Industries signed a 7.2 billion dollar deal with UK energy giant BP, with 30 percent
stake in 21 oil and gas blocks operated in India in July 2011.
Although the Indian governments approval on two oil blocks still remains pending, this still
makes it one of the biggest FDI deals to come through in India Inc in 2011-12-31.

 Mahindra & Mahindra acquires Ssangyong

In March 2011, Mahindra acquired a 70 percent stake in ailing South Korean auto maker
Ssangyong Motor Company Limited (SYMC) at a total of 463 million dollars.
This acquisition will see the Korean companys flagship SUV models, the Rexton II and the
Korando C foray into the Indian market.

 Adani Enterprises takes over Abbot Point Coal

In June 2011, Adani acquired the Australian Abbot Point Port for 1.9 billion dollars.
With this deal, the revenues from port operations are expected to almost triple from 110 million
Australian dollars to 305 million Australian dollars in 2011.
According to Adani, this was amongst the largest port deals ever made.

Mergers & Acquisitions 2012

Microsoft acquire Yammer for $1.2 billion

In a bid to bring social networking features to its widely used suite of business
software applications, Microsoft has reportedly acquired internet startup Yammer for
$1.2 billion.

 Dell to buy Quest Software for $2.4 billion

Intending to branch out beyond its weakening personal computer business, the tech
giant Dell is planning to buy enterprise management software maker Quest Software.
The deal will close in US $2.4 billion that too in cash.
Dells attest $2.4 billion deal acquisition can turn out to be a golden opportunity for
Dell in India market as Quest Software possesses a strong customer-base in the
country.

Mergers & Acquisitions 2013

Airtel loop
This was one of the greatest Mergers and Acquisition in 2013 in telecom sector
Bharti Airtel is set to acquire Loop Mobile in a Rs 700-crore deal which includes
repayment of debt worth Rs 400 crore in what will be the first consolidation move in the
countrys telecom industry since 2008, taking Indias biggest operator to the top spot in
Mumbai.

 Dabur india ltd and northern aromatics ltd.

FMCG firm Dabur India Ltd has acquired its vendor Northern Aromatics Ltd. which is an
existing vendor for Dabur that manufactures glucose and shampoos for Dabur, Whos core
business of manufacturing and marketing fragrances, flavors and essential oils.
Dabur India Ltd by acquiring Northern Aromatics Ltd (NAL) has been in a very profitable
situation. It is always easy to acquire an already working manufacturing unit than to build a
separate one altogether.

So it was very profitable deal for Dabur India Ltd.

Mergers & Acquisitions 2014

Flipkart- Myntra
This is the huge and most talked takeover or acquisition of the year 2014.
The seven year old Bangalore based domestic e-retailer acquired the online fashion portal for an
undisclosed amount in May 2014.
Industry analysts and insiders believe it was a $300 million or Rs 2,000 crore deal.

 Ranbaxy- Sun Pharmaceuticals

Sun Pharmaceutical Industries Limited, a multinational pharmaceutical company
headquartered in Mumbai, Maharashtra which manufactures and sells pharmaceutical
formulations and active pharmaceutical ingredients (APIs) primarily in India and the
United States bought the Ranbaxy Laboratories. The deal is expected to be completed in
December, 2014.
Ranbaxy shareholders will get 4 shares of Sun Pharma for every 5 Ranbaxy shares held by
them. The deal, worth $4 billion, will lead to a 16.4 dilution in the equity capital of Sun
Pharma.

 Yahoo- Bookpad
The search engine giant, Yahoo, acquired the one year old Bangalore based startup Bookpad for a
little under $15 million.
While the deal value is relatively small, this was the first acquisition made by Yahoo, and was
much talked about.

Mergers & Acquisitions 2015

PVR To Acquire DLF's DT Cinemas

India's largest real estate developer - DLF Ltd is set to sell its multiplex chain - DT Cinemas to
PVR Cinemas. The deal size is expected to be around R500 Cr and the transaction could be close
within weeks.
As per report, PVR plans to add 60 new screens annually in the next three years.

 Snapdeal Acquires Mobile Commerce Startup Martmobi

Taking mobile commerce to the next level, Jasper Infotech operated ecommerce marketplace,
Snapdeal, has acquired Hyderabad based mobile commerce platform, MartMobi for an
undisclosed amount.
As 75% of the Snapdeal orders are coming from mobiles-based devices, Snapdeal is aiming to
strengthen its mobility platform for merchant partners, with this acquisition.

 Mahindra Holidays To Buy Additional Stake In Holiday Club

Chennai based, Mahindra Holidays and Resorts has announced to buy additional 64% stake for
about Rs. 200 Cr in Finland based Holiday Club Resorts, by exercising its Call Option and the
deal expected to be completed in 2-3 months.

Conclusions
The level of restructuring activity is increasing rapidly and the consolidations through
M&A have reached every corporate boardroom.
The M&A activity is undertaken with the objective of financial restructuring and to
avail of the benefits of financial restructuring.
Financial restructuring becomes easier because of M&A.
The small companies cannot approach international markets without becoming big i.e.
without merging or acquiring.

Thank you