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Submitted By: GROUP-Numero Uno, SECTION-B



It gives us immense pleasure to take this opportunity to acknowledge all the group members who are involved in making this project a successful one. And I would also like to give a deep sense of gratitude to thanks our faculty guide Mr. Surojit Saha for motivating us and providing us the fundamental knowledge regarding the project matter.





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TOPIC Merger & Acquisition Introduction: TATA, JAGUER, LANDROVER TATA-JLR Deal Why Did TATA go for JLR Problems during Acquisition Strategy Bidding Process Financial Ascertainment Is Deal Really Worth It? Evaluation of the Acquisition TOWS Matrix Critical Self Assessment

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Merger and Acquisition

Mergers and acquisitions (abbreviated M&A) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity. M&A Activities in India: In 2007, there were a total of 676 M&A deals and 405 private equity deals, in 2007, the total value of M&A and PE deals was USD 70 billion, Total M&A deal value was close to USD 51 billion, Private equity deals value increased to USD 19 billion Growth Drivers: Globalisation and increased competition Concentration of companies to achieve economies of scale Cash Reserves with corporate Trends: Cross-border deals are growing faster than domestic deals Private Equity (PE) houses have funded projects as well as made a few acquisitions in India Major M&A Deals Undertaken Abroad by India Inc.

afone buys hutch : 11$ billion

In year 2008.. M&A deals in India in 2008 totaled worth USD 19.8 bn Less compared to last year which stood at 33.1 bn $. Decline of M&A activity was in line with the global activity. Cross border M&A totaled 8.2 bn $ compared to 18.7 bn $.



Tata Motors Limited is an automobile company. Through its subsidiaries, the Company is engaged in engineering and automotive solutions, construction equipment manufacturing, automotive vehicle components manufacturing and supply chain activities, machine tools and factory automation solutions, high-precision tooling and plastic and electronic components for automotive and computer applications, and automotive retailing and service operations. The Company operates in two segments: automotive operations and all other operations. Its automotive operations include all activities relating to development, design, manufacture, assembly and sale of vehicles including financing thereof, as well as sale of related parts and accessories. The Companys other operations business segment includes information technology (IT) services, machine tools and factory automation solutions and investment business.

Jaguar Cars Ltd. ( better known simply as Jaguar) is an automaker from England, United Kingdom that manufactures luxury and executive motor car. Jaguar was founded as the Swallow Sidecar Company by Sir William Lyons in 1922, originally making motorcycle sidecars before switching to passenger cars. The name was changed to Jaguar after the Second World War due to the unfavorable connotations of the SS initials. Jaguar cars are designed in an engineering centre at their headquarters in Coventry, England and are manufactured in one of three English Jaguar plants; Castle Bromwich in Birmingham, Halewood near Liverpool and Gaydon in Oxford shire. Following several subsequent changes of ownership since the 1960s, Jaguar was listed on the London Stock Exchange and became a constituent of the FTSE 100 Index, which ended when Ford acquired Jaguar in 1989. The Ford Motor Company made offers to the US and UK Jaguar shareholders to buy their shares in November 1989; Jaguar's listing on the London Stock Exchange was removed on 28 February 1990. In 1999 it became part of Ford's new Premier Automotive Group along with Aston Martin, Volvo Cars and, from 2000, Land Rover; Aston Martin was subsequently sold off in 2007. Between Ford purchasing Jaguar in 1989 and selling it in 2008 it did not earn any profit for the Dearborn-based auto manufacturer. On 11 June 2007, Ford announced that it planned to sell Jaguar, along with Land Rover and retained the services of Goldman Sachs, Morgan Stanley and HSBC to advise it on the deal. The sale was initially expected to be announced by September 2007, but was delayed until March 2008. On 26 March 2008, Ford announced that it had agreed to sell its Jaguar and Land Rover operations to Tata Motors of India, and that the sale was expected to be completed by the end of the second quarter of 2008. Included in the deal were the rights to three other British brands, Jaguar's own Daimler, as well as two dormant brands Lanchester and Rover. On 2 June 2008, the sale to Tata was completed at a cost of 1.7 billion.


Land Rover is an all-terrain vehicle and Multi Purpose Vehicle (MPV) manufacturer, based in Solihull, West Midlands, England. Originally the term Land Rover referred to one specific vehicle, a pioneering civilian all-terrain utility vehicle launched on 30 April 1948, at the Amsterdam Motor Show, but was later used as a brand for several distinct models, all capable of four-wheel drive. Starting out as a model in the Rover 5|Page

Company's product range, the Land Rover brand developed, first as a marquee, then as a separate company, developing a range of four-wheel drive capable vehicles under a succession of owners, including British Leyland, British Aerospace and BMW. In 2000, the company was sold by BMW to the Ford Motor Company, becoming part of their Premier Automotive Group. In June 2008, Ford sold its Jaguar and Land Rover operations to Tata Motors

Jaguar: The ups and downs:

1922 - Founded in Blackpool as Swallow Sidecar Company 1960 - Jaguar name first appeared in 1935 1975 - Nationalized in due to financial difficulties 1984 - Floated off as a separate co in the stock market 1990 - Taken over by Ford A statement of ultra luxury, Holds Royal warrants, rarely advertised, Fords formula one entry since 1990s 1948: Land Rover is designed by the Rover Car co 1976: One millionth Land Rover leaves the production line 1994: Rover Group is taken over by BMW 2000: Sold to Ford for 1.8 billion

The case of Land Rover:

Known for superior off-road performance, Used by military for projects and expeditions, Safe but less reliable, Makeover in recent times Key issues: Ford acquired Jaguar for $2.5 billion in 1989. Ford acquired Land Rover for $2.75 billion in 2000. But the US auto major put the two marquees on the market in 2007 after posting losses of $12.6 billion in 2006 - the heaviest in its 103-year history.


Tata had completed this biggest buy-out in the automobile space by an Indian company on June 2, 2008 as it bought the ownership of luxury brands - Jaguar and Land Rover. The deal included the purchase of JLR's manufacturing plants, two advanced design centers in the UK, national sales companies spanning across the world and also licenses of all necessary intellectual property rights. Tata Motors was interested in acquiring JLR as it will reduce the companys dependence on the Indian market, which accounted for 90% of its sales. Morgan Stanley reported that JLRs acquisition appeared negative for Tata Motors, as it had increased the earnings volatility, given the difficult economic conditions in the key markets of JLR including the US and Europe. Tata Motors raised $3 billion (about Rs 12,000 crore) through bridge loans for 15 months from a clutch of banks, including JP Morgan, Citigroup, and State Bank of India. Tata came under cash crisis because of the Corus deal and the huge investments in the TATA Nano project which itself was surrounded in a lot of uncertainties. The credit rating companies also took a negative outlook toward this deal because of the huge debt requirement to complete the deal. Ford Motors Company (Ford) is a leading automaker and the third largest multinational corporation in the automobile industry. The company acquired Jaguar from British Leyland Limited in 1989 for US$ 2.5 billion. After Ford acquired Jaguar, adverse economic conditions worldwide in the 1990s led to tough market conditions and a decrease in the demand for luxury cars. The sales of Jaguar in many markets declined, but in some markets like Japan, Germany, and Italy, it still recorded high sales. In March 1999, Ford established the PAG with Aston Martin, Jaguar, and Lincoln. During the year, Volvo was acquired for US$ 6.45 billion, and it also became a part of the PAG. In September 2006, Allan Mulally (Mulally), President and CEO of Ford, as part of the restructuring exercise called the Way Forward' plan decided to dismantle the PAG. In March 2007, Ford sold the Aston Martin sports car unit for US$ 931 million. In June 2007, Ford announced that it was considering selling JLR. After failing to re-brand and integrate these luxury brands with its product portfolio, Ford Motors felt that acquisition was not the right way of penetrating into the upscale segment.


Why did TATA go for JLR

Tata Motors had several major international acquisitions to its credit. It had acquired Tetley, South Koreabased Daewoo's commercial vehicle unit, and Anglo-Dutch Steel maker Corus (Refer to Exhibit I for the details of the group's international acquisitions). Tata Motors' long-term strategy included consolidating its position in the domestic Indian market and expanding its international footprint by leveraging on in-house capabilities and products and also through acquisitions and strategic collaborations. On acquiring JLR, Ratan Tata, Chairman, Tata Group, said, "We are very pleased at the prospect of Jaguar and Land Rover being a significant part of our automotive business. We have enormous respect for the two brands and will endeavor to preserve and build on their heritage and competitiveness, keeping their identities intact. We aim to support their growth, while holding true to our principles of allowing the management and employees to bring their experience and expertise to bear on the growth of the business." Tata Motors stood to gain on several fronts from the deal. One, the acquisition would help the company acquire a global footprint and enter the high-end premier segment of the global automobile market. After the acquisition, Tata Motors would own the world's cheapest car - the US$ 2,500 Nano, and luxury marquees like the Jaguar and Land Rover. Two, Tata also got two advance design studios and technology as part of the deal. This would provide Tata Motors access to latest technology which would also allow Tata to improve their core products in India, for eg, Indica and Safari suffered from internal noise and vibration problems. Three, this deal provided Tata an instant recognition and credibility across globe which would otherwise would have taken years. Four, the cost competitive advantage as Corus was the main supplier of automotive high grade steel to JLR and other automobile industry in US and Europe. This would have provided a synergy for TATA Group on a whole. The whole cost synergy that can be created can be seen in the following diagram.
TAMO's flagship ancillary biz. Customers inc. Ford, Daimler, FIAT etc. Leader in the automative grade steel. 16% of revenue fron auto steel division.



Provides engineering design, manufacturing solutions and sourcing services. Major customer include Chrysler, Ford , GM etc.

Provides services like supplier programs, consulting services and global outsourcing. Customers include Chrysler, Ford, GM etc.


Five, in the long run TATA Motors will surely diversify its present dependence on Indian markets (which contributed to 90% of TATAs revenue). Along with it due to TATAs footprints in South East Asia will help JLR do diversify its geographic dependence from US (30% of volumes) and Western Europe (55% of volumes). Analysts were of the view that the acquisition of JLR, which had a global presence and a repertoire of well established brands, would help Tata Motors become one of the major players in the global automobile industry. To summarize, some of the reasons behind the merger are as follows: 1. Immediate entry to the luxury performance car and premium all-terrain vehicle segments 2. An improvement in the global market position through a combination of resources and strengths 3. Strengthening of technological and product development/ innovation capabilities to address changing market trends 4. Sharing of best practices in manufacturing and quality assurance systems and processes 5. Enhanced human capital and managerial talent 6. Potential operational synergies



Tata motors acquired JLR when the world automobile industry was rationalizing its products and deffering the research and development works; the impact of downturn was clearly visible in the automobile sector with a decrease in world revenue of around 10%, Tatas decision to acquire JLR at this point of time was not accepted positively, it was negated at many stages. Tata motors faced a lot of problems while acquiring JLR starting from funds to investors unacceptance, some of the major problems are discussed below PRE ACQUISITION PROBLEMS: Financing the deal:

Just before acquiring JLR, Tata had acquired Corus and moreover Tata motors had undergone huge capital expenditure to bring nano into the market and hence financing the acquisition was a major concern for Tata motors
Investor disagreement:

Investors were not in favor of the decision of acquiring jlr at that time , both jaguar and land rover were loss making units and automobile industry at that point of time was under pressure of downturn, infact Tata motors itself had gone in for rationalization and retrenchment strategies. Investors believed that the balance sheet of Tata motors was not strong enough to absorb more loans.
Unfavorable economic conditions especially in the target market:

During the acquisition the worldwide car sales were down by 5%, the automobile industries over the world were rationalizing to conserve funds, moreover difficult economic conditions prevailed in the key markets comprising USA and Europe, which were the major factors influencing the earnings volatility.
POST ACQUISITION PROBLEMS: Debt burden To finance the acquisition Tata motors raised a bridge loan of 3 billion through consortium of banks by the end of 2009. Tata motors had yet to pay 2 billion towards the bridge loan, moreover it required additional funds and that too quickly to keep the operations running. Fall in share price Tata motors share prices dropped in the market after acquisition of JLR because of the investor perception that it was not the right time to invest in that acquisition, when Tata had recently undergone huge capital expenditure for the nana project, especially in singur and the results were still unrevealed, moreover the investor thought that it was the time to be conservative and stabilize reserves rather than in sourcing more debt burden. Inexperience in handling luxury brands: Tata motors had never ventured into luxury car segment before acquiring JLR; hence the inefficiency in handling such segment hampered Tata motors operational efficiency for quite some time. Strong competition Tata motors strategy to penetrate global market through acquisition of JLR faced hurdles in the form of strong competition from global automobile giants like Mercedes, BMW, Lexus and Infinity. 10 | P a g e

Pre-Merger Strategy Tata Motors stood to gain on several fronts from the deal. 1. The acquisition would help the company acquire a global footprint and enter the high-end premier segment of the global automobile market 2. Tata also got two advance design studios and technology as part of the deal the company gets access to latest technology which would also allow Tata to improve their core products in India, for eg, Indica and Safari suffered from internal noise and vibration problems 3. This deal provided Tata an instant recognition and credibility across globe which would otherwise would have taken years. Post-Merger Strategy 1. Single shifts and down time at all three UK assembly plants. 2. Supplier payment terms extended from 45 to 60 days in line with industry standard. 3. Receivables reduced by 133 million from 38 to 27 days. 4. Inventory reduced by 217m between June 2008 and March 2009 from 70 to 50 days 5. Labor Actions a. Voluntary retirement to 600 employees b. Agency staff reduced by 800 c. Offered leaves to 300 workers of Bromwich and solihull plant d. Additional 450 job cuts including 300 managers 6. Agreement with Unions to implement pay freeze and longer working hours (equivalent to approximately 20% reduction in labor costs.) 7. Engineering and capital spending efficiencies 8. Fixed marketing and selling costs reduced in line with sales volume 9. Reduction in all other non-personnel related overhead costs.

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Bidding Process
12/06/2007- Announcement from Ford that it plans to sell Land Rover and Jaguar. August 2007 Major bidders are identified: Likely buyers: Tata Motors, M&M, Ceribrus capital Management, TPG Capital, Apollo Management Indias Tata Motors and M&M arrive as top bidders ($ 2.05b & $ 1.9b) 03/01/2008 Ford announces Tatas as the preferred bidders 26/03/2008 - Ford agreed to sell their Jaguar Land Rover operations to Tata Motors. 02/06/2008 The acquisition is complete.

Financial Ascertainment
On June 2, 2008, Tata Motors completed the acquisition of Jaguar Land Rover from Ford for a purchase consideration of US$ 2,300 million on cash free and debt free basis. Jaguar Land Rover Limited, Tata Motors indirect subsidiary, paid the purchase consideration. As part of the acquisition, the Company acquired the global businesses relating to Jaguar Land Rover including three vehicle manufacturing facilities, one veneer production facility, two advanced design centers, 26 national sales companies, intellectual property rights (including perpetual royalty free licenses), and brands and trademarks. The purchase consideration of US$ 2,300 million, on cash free and debt free basis, paid by Jaguar Land Rover Limited was financed through a capital contribution of US$ 400million and a portion of the proceeds from a US$ 3,000 million short term bridge loan facility extended to Jaguar Land Rover Limited. The purchase consideration was based on an agreed level of working capital as defined in the sale and purchase agreement entered into with Ford. In addition, US$ 100 million was paid by TML Holdings Pte Limited towards fees and other acquisition expenses consisting of legal and advisory fees, due-diligence and related expenses, structuring fees, underwriters fees and other expenses in relation to the short term bridge loan, and other acquisition related expenses. A net cash position of US$ 93 million was estimated for Jaguar Land Rover as at the date of acquisition. This amount represents additional net cash over the purchase consideration basis and was paid additionally by Jaguar Land Rover Limited. The same was financed out of the proceeds of the short term bridge loan. In addition, a final adjustment relating to the actual cash, debt and working capital position (as defined in the sale and purchase agreement) of Jaguar Land Rover on the date of the acquisition, based on a final completion statement of Jaguar Land Rover agreed between Jaguar Land Rover Limited and Ford, of US$ 131 million is payable by Jaguar Land Rover Limited to Ford. This represents additional net working capital/ cash available with Jaguar Land Rover over the agreed levels.

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Is deal really worth it?

Morgan Stanley reported that JLRs acquisition appeared negative for Tata Motors, as it had increased the earnings volatility, given the difficult economic conditions in the key markets of JLR including the US and Europe. Moreover, Tata Motors had to incur a huge capital expenditure as it planned to invest another US$ 1 billion in JLR. This was in addition to the US$ 2.3 billion it had spent on the acquisition. Tata Motors had also incurred huge capital expenditure on the development and launch of the small car Nano and on a joint venture with Fiat to manufacture some of the companys vehicles in India and Thailand. This, coupled with the downturn in the global automobile industry, was expected to impact the profitability of the company in the near future. Worldwide car sales are down 5% as compared to the previous year. The automobile industry the world over is rationalizing production facilities, reducing costs wherever possible, consolidating brands and dropping model lines and deferring R&D projects to conserve funds. The Chinese and Indian domestic markets for cars have been exceptions. While China has witnessed a significant reduction in its automotive-related exports and supplies to automobile companies, the Chinese domestic car market has grown by 7%. In India the passenger car market has remained more or less flat compared to the previous year. Since then, its fortunes have been unsure, as the slump in demand for automobiles has depressed its revenues at the same time Tata has invested nearly $400 million in the Nano launch and struggled to pay off the expensive $3 billion loans it racked up for the Jaguar/Land Rover shopping bill. Within the space of a year, Tata Motors has gone from being a developing-world success story to a cautionary tale of bad timing and overly ambitious expansion plans. Tata Motors' standalone Indian operations' profits declined by 51% in 2008-09 over the previous year.All through the fiscal year ended March 2009 the company bled money, losing a record $517 million on $14.7 billion in revenues, just on its India operations. Jaguar and Land Rover lost an additional $510 million in the 10 months Tata owned it until March 2009. In January 2009, Tata Motors announced that due to lack of funds it may be forced to roll over a part of the US$ 3 billion bridge loan after having repaid around US$ 1 billion. The financial burden on Tata Motors was expected to increase further with the pension liability of JLR coming up for evaluation in April 2009.

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Evaluation Of the Acquisition Acquisition of JLR by TATA can be evaluated on the basis of various advantages and disadvantages associated with the project:
Advantages Acquisition of two well known automobile brands that is JAGUAR and LANDROVER. Disadvantages JAGUAR was a loss making unit at the time of being acquired from its former owner FORD, LANDROVER, however recorded growth in sales but in declining trend Due to stringent availability of funds and huge capital expenditure incurred in NANO project simultaneously, TATA had to face debt burden Investors believed it was rather a time to conserve funds, moreover the balance sheet of TATA MOTORS was not in a position to absorb more loans Increasing competition from global giants like MERCEDES, BMW, LEXUS and INFINITY Benefits to be received in the long run without short term visibility , which in turn is subject to more volatility Inexperience in handling luxurious brands like JLR

TATA acquired both the brands at $2.3billion, which is less than half of the price that ford paid for acquiring both of them that is $5.7 billion RATAN TATA was of the view that it was the right time to invest as the price was cheap and there were lot of hidden opportunities to be explored in the strong R&D of JLR TATA got an opportunity to establish a global footprint In sourcing technical knowhow of JLR to achieve economies of scale and develop domestic brands Wide diversity from being the owner of the worlds cheapest car to owner of luxury brands like JLR

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Opportunities: Rising appetite for luxury automobiles in growing markets like India and China Established European brands available at affordable investment Support from Jaguar in Technology, Engine, IT, Accounting Complete product line with addition of luxury brands Access to European and American Market Strengths: Tatas strong management capability Strong monetary base to invest Synergy due to Corus, TACO and TCS Experience in growing market like India New product development and brand building experience JLR would give TAMO an inhouse R&D and designing capabilities Better utilization of cash reserves available with TAMO Reduce production cost of JLR by synergizing better with other TATA cos like Corus Threats Volatility in market driven by new products Strong presence of competitors like Mercedes, BMW, Lexus and Infinity Receding sales and brand image Downturn making Investment riskier and costlier 90% of TAMO revenues comes from one market alone-India Acquisitions like JLR will help TAMO in competing with brands like Merc. etc. Proven Management and brand building capabilities would facilitate faster JLR turnaround Strong financial muscle will help TAMO to invest in R&D and produce new better products Improve risk profile of TAMO with diversification in different markets Leverage experience gained with Tetley and Corus in allaying market apprehensions about acquisition Make Jaguar design center as their global design HQ Use Jaguar channel to distribute TAMO brands without merging the brands

Weaknesses: Inexperience in Handling luxury automobile brand Inexperience in turning around loss making company R & D and designing capabilities

JLR experience and designing capability would help TAMO in improving their existing products in Indian markets. JLRs strong brand image will ease acceptance of TAMO in international markets Keeping the existing management team of JLR make turning around easier

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Critical Self Assessment

According to us, the brand JLR has not fallen into the wrong hands, looking at Tata Motors legacy, the company is remolding the future of these two international luxury brands. The sales of Jaguar have picked up in India and Tata Motors has been successful in reinvigorating the luxury car segment in India. Tata Motors set-up an integration committee with senior executives from the JLR and Tata Motors, to set milestones and long-term goals for the acquired entities this strategy has paid off since sales of Jaguar has picked up and so has the image of Tata Motors post the merger and the Nano launch. One of the major problems for Tata Motors could be the slowing down of the European and US automobile markets. We expect that the company would address this issue by concentrating on countries like Russia, China, India, and the Middle East. The figure below shows, the Tata Motors advantage for becoming a world class.

The companies investment plans, new designs with a scope for alternate energy usage ,the new target markets and retaining the best both production units and talents, hiring fresh talents from around the world is definitely going to make the company gain a strong foothold globally.

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