MERGERS AND ACQUISTIONS

Sourabh Mittal (110) Siddharth Jhunjhunwala (108) Shreyansh Gardi (107) Soumya Basu (109) Sreeja Mukherjee (112) Souvik Bandopadhyay (111)

MERGERS AND ACQUSITIONS Definition The phrase 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. ACQUISITION Acquisition, also known as a takeover or a buyout or "merger", is the buying of one company (the target) by another. An acquisition may be friendly or hostile. In the former case, the companies cooperate in negotiations; in the latter case, the takeover target is unwilling to be bought or the target's board has no prior knowledge of the offer. Acquisition usually refers to a purchase of a smaller firm by a larger one. Sometimes, however, a smaller firm will acquire management control of a larger or longer established company and keep its name for the combined entity. This is known as a reverse takeover. Another type of acquisition is reverse merger, a deal that enables a private company to get publicly listed in a short time period. A reverse merger occurs when a private company that has strong prospects and is eager to raise financing buys a publicly listed shell company, usually one with no business and limited assets. Achieving acquisition success has proven to be very difficult, while various studies have shown that 50% of acquisitions were unsuccessful. The acquisition process is very complex, with many dimensions influencing its outcome MERGERS Mergers on the other hand are quite different from Acquisitions. It is the combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock The combining of two or more entities into one, through a purchase acquisition or a pooling of interests. Differs from a consolidation in that no new entity is created from a merger. DIFFERENCE 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 establishes 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.
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In the pure sense of the term, a merger happens when two firms 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". The firms are often of about the same size. Both companies' stocks are surrendered and new company stock is issued in its place. For example, in the 1999 merger of Glaxo Wellcome and SmithKline Beecham, both firms ceased to exist when they merged, and a new company, GlaxoSmithKline, 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 is technically an acquisition. Being bought out often carries negative connotations, therefore, by describing the deal euphemistically as a merger, deal makers and top managers try to make the takeover more palatable. An example of this would be the takeover of Chrysler by Daimler-Benz in 1999 which was widely referred to in the time.

STEPS IN MERGERS AND ACQUSITIONS

Strategic criteria and cultural fit Identify and evaluate targets Valuation and transaction structure Diligence and definitive terms Funding options and sources Post closing integration

Top 10 mergers and acquisitions in 2010

1. Reliance Power and Reliance Natural Resources merger 2. Airtels acquisition of Zain in Africa 3. Abbotts acquisition of Piramal healthcare solutions 4. GTL Infrastructure acquisition of Aircel towers 5. ICICI Bank buys Bank of Rajasthan 6. Emami - Zandu merger 7. Reckitt Benckiser acquires paras pharmaceuticals
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8. Mahindra goes international 9. Fortis Healthcare acquisitions 10. Tata Chemicals buys British salt MOTIVES OF MERGERS AND ACQUISITIONS There are various advantages of Mergers and Acquisitions. These are evident in the consequent ease of management and also in the functioning of the companies. However it is not always a cake walk after M&A. It can seriously destroy leadership among the companies and its internal functioning Economy of scale: This refers to the fact that the combined company can often reduce its fixed costs by removing duplicate departments or operations, lowering the costs of the company relative to the same revenue stream, thus increasing profit margins. Economy of scope: This refers to the efficiencies primarily associated with demand-side changes, such as increasing or decreasing the scope of marketing and distribution, of different types of products. Synergy: For example, managerial economies such as the increased opportunity of managerial specialization. Another example are purchasing economies due to increased order size and associated bulk-buying discounts. REASONS FOR FAILURE

NEGLECTING THE CORE BUSINESS CONFLICTING THE CORPORATE CULTURE HAMPERING THE DAY-TO-DAY BUSINESS REVENUES GET DILUTED

ACQUISITION

Case study- Tata Steel and Corus

TATA STEEL CORUS STEEL

CONTRIBUTION OF COUNTRIES TO GLOBAL STEEL INDUSTRY

SNAPSHOT OF THE DEAL The $8 billion Tata Steel-Corus deal is at No 5 among the top deals witnessed by the steel industry over the last couple of years. It is one of a very good examples of an Acquisition. Purchaser: Tata Steel Purchased: Corus Deal: $8 billion In 2005, Tata Steel was only the world's 56th biggest steel producer and its takeover of Corus represents its first expansion outside Asia.
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The combined entity will have a turnover of $32 billion by 2011-12 with an EBIDTA margin of 25% As per the agreement, 75 per cent of Corus shareholders would have to tender their shares for the acquisition to be complete Company Arcelor - Mittal Nippon Steel Posco JEF Steel Tata Steel - Corus Bao steel China US Steel Capacity(in million tonnes) 110 32 30.5 30 27.5 23 19

CHANGES IN THE COMPANY AFTER THE DEAL

POSITIVE EFFECT:

TATA become 5th largest steel producing company in the world TATA pay off debt into CORUS pension scheme No short term plans to reallocate plant

NEGATIVE EFFECT: Heavy job losses from both side TATA bid undervalue CORUS

FINANCIAL RESULTS:
Loss in quarter 1 of 2009 2010 TATA Steel posted a consolidated net loss (including Corus) of Rs 2,209 crore ($461 million). Sales volume of Indian operations was higher by 22 percent but sales from its European operations (Corus) fell heavily. Group consolidated turnover was Rs.23,292 crores as compared to Rs. 43,496 crores.

MERGERS
Case study- NTT DoCoMo and Tata teleservice In the world of telecom if Airtel is Microsoft, Tata DOCOMO is google

NTT CoCoMo- JAPAN TATA TELESERVIVE-INDIA

SNAPSHOT OF THE DEAL What happens when you combine Tata Teleservices with NTT DoCoMo (NYSE: DCM)? Well, its obvious, at least now Tata DoCoMo. And thats exactly the new name of the GSM operator owned by Tata Group and partly (26%) by the Japanese leading mobile operator. The new brand along with the new website was developed by the Business and Technology Cooperation Committee that DOCOMO and TTSL have jointly established, and it symbolizes the two companies strong partnership.
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NTT DoCoMo- Japan TATA- India

CHALLENGE
1. INTERNAL Cultural fit Mind set Employment terms

2. EXTERNAL Social Political Environmental

CHANGES IN THE COMPANY AFTER THE DEAL

Pay for What You Use,Per Second Paradigm Comes to INDIA Moment of Triumph For Indian Consumer Ratan Tata From Today Subscribers can call anywhere at 1 Paisa Per Second Best Coverage at the Time of Launch Executed Country-Wide rollout of its services within one Year First Private Sector Telecom Company to start 3G services Tata DOCOMO has pulled in 30 million customers and a 7 per cent share of GSM telephony market. Wide Variety of Plan,and has eventually forced competitors to follow suit

Overcoming Challenges Right Mix of Talent from Both Sides Continious Communication 4 Zones Capacity to Innovate
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Utilisation of ones capabilities efficiently

Conclusion
I believe this will be the first step in showing that Indian industry can step outside the shores of India in an international market place and acquit itself as a global player

- Ratan Tata