LEADERSHIP THROUGH

WEALTH CREATION BY
MERGERS AND
ACQUISITIONS

Presented by: Group 7

Tisha Gugliani D05
Shraddha Tripathi D08
Pankaj Ishpujani D30
Rishabh Jain D48
Gaurav Goel D53
Karan Malhotra D59
 Mergers and Acquisitions
Merger - A Merger may be defined as the combination
of two or more independent business corporations into
a single enterprise, usually involving the absorption of
one or more firms by a dominant firm.

Mergers may be broadly classified as Horizontal,

Vertical or Conglomerate

Acquisition may be defined as an act of one enterprise

of acquiring, directly or indirectly of shares, voting
rights, assets or control over the management, of
another enterprise .
 Mergers
STRUCTURE 1
 A = Amalgamating Company: Ceases to Exist
 B = Amalgamated Company
 B receives all of A’s assets and liabilities
 Shareholders of A receive shares in B and maybe other benefits
like debentures, cash

A B

Transfer assets and liabilities

 Mergers
STRUCTURE 2
 A, B and C = Amalgamating Companies: Cease to exist
 D = Amalgamated Company: may or may not have existed
before Merger
 All assets and liabilities of A, B and C transferred to D
 Shareholders in A,B and C get shares in D.

B D

C
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 Why M&A?
Underlying Principle for
M&A Transactions
2+2≠4
Additional Value of “Synergy”

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 Mergers and Acquisitions
Reasons for mergers & acquisitions:
• Strategic: The combined FCFs (Free Cash Flows) of
the merged operation are greater than the sum of
the individual cash flows.
• Financial: The cash flows and also the market
value of the target are below their true value, due
to perhaps inefficient management. Such firms
are typically restructured after the acquisition.

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 Types of Takeovers
How the Deal is Financed
Cash Transaction
– The receipt of cash for shares by shareholders in
the target company.
Share Transaction
– The offer by an acquiring company of shares or a
combination of cash and shares to the target
company’s shareholders.
Going Private Transaction (Issuer bid)
– A special form of acquisition where the
purchaser already owns a majority stake in the
target company.
 ESSAR COMMUNICATIONS
• Essar Communications operates in four business
segments: Telecom, telecom retail, telecom infrastructure
and Aegis Services.
• It has a joint venture with Vodafone, a chain of telecom
retail outlets, a nationwide telecom tower network and a
presence in IT enabled services.
• Essar Telecom Infrastructure Private Limited (ETIPL) is one
of the largest independent telecom infrastructure service
provisioning companies in the country.
• It builds telecom site infrastructure and shares it with
multiple telecom operators in India.
• It has already set up over 3,500 towers in India, with plans
to build 20,000 towers.
 Vodafone Group Plc
• Vodafone Group Plc is the world's leading mobile
telecommunications company
• Significant presence in Europe, the Middle East, Africa,
Asia Pacific and the United States
• Group had 289 million customers till Dec, 2008
• The Company's ordinary shares are listed on the London
Stock Exchange and NYSE
• The Company had a total market capitalization of
approximately £74 billion at 31 December 2008.
 Key Highlights of Acquisition
• Acquisition of companies (Hutchison Telecom) that control
Hutch Essar
• Transaction consideration: US$11.1bn (£5.7bn)

• Implied enterprise value: US$18.8bn (£9.6bn)

• Partnership agreement with Essar

• Vodafone has full operational control

• Avoidance of paying a control premium; liquidity rights granted

in years 3-4
 Why Hutch was willing to sell its stake in
Hutchison Essar?

•Aid in creating value in emerging mobile markets and

realizing the same for the benefit of shareholders at the
right time
•HTIL Suffers loss of HK$768 million in 2005
•Will be able to generate huge cash for launch of
operations in Vietnam and Indonesia
•The Company did not declare any dividends for the
year ended 31 December 2006.
 Why Vodafone interested to
acquire control in Hutch Essar??
Hutch Essar and Vodafone
Controlling interest in a major, fast growing market

Meets twin financial investment criteria

Strong management team with good cultural fit

Vodafone and Essar will derive greater value together

India: A very large market
Indian Mobile Market
One of only 4 major mobile
operators in India
September 21, 2007
 THE DEAL
• In the year 2007, the world’s largest telecom company in
terms of revenue, Vodafone Plc (Vodafone) made a major
foray into the Indian telecom market by acquiring a 52% stake
in the Indian telecom company Hutchinson Essar Ltd., through
a deal with the Hong Kong based Hutchinson
Telecommunication International Ltd. It was the biggest deal
in the Indian telecom market. Vodafone’s main motive going
in for the deal was its strategy of expanding into emerging
and high growth markets like India. In 2007, India has
emerged as the fastest growing telecom market in the world
outpacing China. But it still had low penetration rates, making
it the most lucrative market for global telecom companies.

• British telecom giant vodafone has bagged the 67% HTIL at an

enterprise value of $19.3 billion (approx. Rs. 86000 crore)
which comes to $794 per share.
 PRINCIPLE BENEFITS
Accelerates Vodafone’s move to a controlling
position in a leading operator in the attractive
and fast growing Indian mobile market
• India is the world’s 2nd most populated country
with over 1.1 billion inhabitants
• India is the fastest growing major mobile market
in the world, with around 6.5 million monthly net
adds in the last quarter
• India benefits from strong economic
fundamentals with expected real GDP growth in
high single digits
Contd.
Increases Vodafone’s presence in higher growth
emerging markets
• proportion of Group statutory EBITDA from the
EMAPA region expected to increase from below
• 20% in the financial year ending 31 March 2007
(FY2007) to over a third by FY2012
• As of 31st July 2010, Vodafone has 111,465,260
numbering strong customer base.
 What is Wealth ?
Net Worth that is the accumulation of your residual
income over time. Therefore, to create constant and
lasting wealth, you need to add value to all your
financial resources. These financial resources are simply
utilized to create added residual value over time.

Steps in wealth creation:

-Create wealth
-Accumulate wealth
-Monitor and grow the wealth
 Leadership through wealth creation
The purpose of business leadership is to create
wealth – financial and material, human and
social – in the face of external developments
that are never entirely foreseeable. 
•  Vodafone India reported revenues of Rs 69
billion, a growth of 13.2 per cent QoQ and
26.4 per cent YoY, one of the strongest
growth in last 5 quarters.
 Attaining leadership
•  India’s second largest telco by sales, Vodafone Essar, posted its strongest
growth in the last six quarters with a better-than-anticipated 26.4% revenue
jump in the three months ended June 30, 2010. 
• Vodafone Essar had turned cash-positive.
• Posted revenues of £954 million for the June quarter, up 26.4% from the
same period last year.
• It showed an impressive rise of 13.2%. 
• The improvement was driven by continued strong customer growth and
better usage trends in India where there have been no recent significant
price reductions by market leaders.
• Significant price declines have been successful and seeing minutes return to
operators with strong brands and performing networks.
• Vodafone added 8.2 million new users in India during this period taking its
customer base to over 109 million. India accounted for over 75% of
customer additions globally during this quarter.
 Conclusion
Vodafone creating value in India

Controlling position in a leading operator with nationwide

presence
Strong existing platform for growth

Additional value under Vodafone ownership

Increased Vodafone’s presence in high growth markets

Increased presence of big Global Players in India

References
http://www.trai.gov.in

http://www.vodafone.com

http://www.afaqs.com/perl/news/case_studies/index.html?mid=13

http://www.indiaprwire.com/pdf/news/20188.pdf

http://www.vodafone.com/start/media_relations/news/local_press_releases/india/vod

afone_essar_press/vodafone_is_here_.html

http://www.tonsetelecom.com/pdf%20files/B_E_Feb07.pdf

http://www.rediff.com/money/2007/mar/08hutch.htm

http://www.domain-b.com/companies/companies_v/vodafone/20070212_control.htm