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Ashfaque ul haque
Anshita Kashyap
Aamir Rahman
Atisha Parashar
Khusboo Kumari
Manoj Kumar
The concept of merger and acquisition in India was not popular until the year
1988.
The key factor contributing to fewer companies involved in the merger is the
regulatory and prohibitory provisions of MRTP Act, 1969. (Monopolies and
Restrictive Trade Practices Act,1969)
The year 1988 witnessed one of the oldest business acquisitions or company
mergers in India.
As for now the scenario has completely changed with increasing competition and
globalization of business. It is believed that at present India has now emerged as
one of the top countries entering into merger and acquisitions.
WHAT IS MERGER?
A merger is a combination of two or more companies where one corporation
is completely absorbed by another corporation.
WHAT IS ACQUISITION?
Acquisition essentially means to acquire or to takeover. Here a bigger
company will take over the shares and assets of the smaller company.
A merger is a transaction that result in
the transfer of ownership and control of a
corporation.
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This type of merger involves a customer and a company
or a supplier and a company merging. Imagine a bat
company merging with a wood production company.
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It refers to the merger of two companies who
are direct competitors of one another. They serve
the same market and sell the same product
This type of merger occurs frequently as a
result of larger companies attempting to create
more effective economies of scale.
Example-
The formation of Brook Bond Lipton India Ltd
through the merger of Lipton India and Brook
Bond
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A merge between firms that are involved
in totally interrelated business activity.
By purchasing of assets
By purchase of common shares
By exchanging of shares for assets
By exchanging of shares for shares
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By purchase of
assets
By purchase of
common shares
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By exchanging of
shares for assets
By exchanging of
shares for shares
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Different Types of acquisitions
Friendly acquisition - Both the companies approve
of the acquisition under friendly terms.
18
Motives for Mergers &acquisitions
Economies of large scale business
large-scale business organization enjoys
both internal and external economies. Economies of
Elimination of
large scale
competition
business
Elimination of competition
It eliminates severe, intense and wasteful
expenditure by different competing organizations. Desire to enjoy Adoption of
monopoly modern
Desire to enjoy monopoly power power technology
M&A leads to monopolistic control in the market.
Increase in market share - An increase in market share is one of the plausible benefits of
mergers and acquisitions.
Overly Diversified
PROCESS OF MERGER & ACQUISITION IN INDIA:
Cultural Difference
Flawed Intention
No guiding principles
No ground rules
No detailed investigating
Market-extension Product-extension
Conglomeration
merger merger
January 2009
Acquisition deal
Imperial energy is a
biggest chinese co.
ONGC paid 880 per
share to the shareholders
of imperial energy
ONGC wanted to tap the
Image: Imperial Oil
siberian market
CEO Bruce March.
SunPharma Ranbaxy Acquisition
SunPharma + Ranbaxy
= Profile of a New Global Leader
Acquisition
Apr 06, 2014: To create worlds 5th largest
specialty generic pharma company
No. 1 pharma company in India with
leadership position in 13 specialty segments
No. 1 Indian pharma company in the US
Daiichi Sankyo to become the second largest
shareholder in Sun Pharma
Financial Strength
Sun Pharma
Established in 1983, listed since 1994 and headquartered in
India, Sun Pharma is an international, integrated, specialty
pharmaceutical company.
In India, the company is a leader in niche therapy areas of
psychiatry, neurology, cardiology, diabetology,
gastroenterology, orthopedics and ophthalmology.
The company has strong skills in product development,
process chemistry, and manufacturing of complex dosage
forms and APIs.
The 2014 acquisition of Ranbaxy will make the company
the largest pharma company in India, the largest Indian
pharma company in the US, and the 5th largest speciality
generic company globally.
Ranbaxy
Ranbaxy Laboratories Limited is an Indian
multinational pharmaceutical company that was incorporated in
India in 1961. The company went public in 1973 and Japanese
pharmaceutical company Daiichi Sankyo acquired a controlling
share in 2008.
Ranbaxy Limited is an integrated, research based, international
pharmaceutical company producing a wide range of quality,
affordable generic medicines, trusted by healthcare professionals
and patients across geographies.
Ranbaxy serves its customers in over 150 countries and has an
expanding international portfolio of affiliates, joint ventures and
alliances, ground operations in 43 countries and manufacturing
operations in 8 countries.
In 2011, Ranbaxy Global Consumer Health Care received the OTC
Company of the year award.
Why Ranbaxy?
Operating income (EBITDA) Rs. 973.20 Rs. 2,259.80 Rs. 1,775.40 Rs. 1,975.20
Operating profit (EBIT) Rs. 4,97.00 Rs. 1,689.00 Rs.13,63.00 Rs. 1,503.00
NOPAT [EBIT(1-t)] Rs. 153.5.00 Rs. 1378.80 Rs. 1,040.00 Rs. 1,015.00
change in NWC Rs. 326.00 Rs. 324.00 Rs. 323.00 Rs. 339.00
Free Cash Flow Rs. - 477.70 Rs. 1,129.70 Rs. 599.30 Rs. 625.80
WACC 8.72%
Reference Values
Wd* 85%
We* 15%
Beta** 0.59
Rf*** 8%
Rm-Rf**** 8%
Ke 13%
Kd 12%
Tax 34%
Sources
*www.moneycontrol.com
**Reuters g = 0.0514
***www.investing.com
****EY-india-cost-of-capital-a-survey.pdf
References
http://www.ranbaxy.com/sun-pharma-to-acquire-ranbaxy-in-a-us4-billion-landmark-transaction/
http://businesstoday.intoday.in/story/ranbaxy-acquisition-good-for-sun-pharma-shareholders-
experts/1/205526.html
http://www.business-standard.com/article/companies/sun-pharma-draws-up-plan-to-fix-ailing-ranbaxy-
114091101300_1.html
http://www.business-standard.com/article/companies/sun-pharma-buys-ranbaxy-from-japan-s-daiichi-
114040700737_1.html
http://www.livemint.com/Money/1V8H9u0YoEyKFZ3vM7AcYL/Sun-Pharmas-Ranbaxy-acquisition-
winners-and-losers.html
http://www.livemint.com/Companies/lNC0kH0QAs2TSqlapEXO0N/Sun-Pharma-to-acquire-Ranbaxy-in-
32-billion-deal.html
http://articles.economictimes.indiatimes.com/2014-04-11/news/49058869_1_daiichi-sankyo-sun-
pharma-share-swap-ratio
http://www.ndtv.com/article/india/sun-pharma-to-acquire-ranbaxy-in-4-billion-all-stock-deal-505205
http://www.dnaindia.com/money/report-sun-pharma-s-ranbaxy-deal-on-course-hints-at-more-
acquisitions-2010611
http://www.edupristine.com/blog/ranbaxy-financial-model/
http://www.outlookbusiness.com/printarticle.aspx?290218
http://profit.ndtv.com/news/corporates/article-benefit-of-ranbaxy-deal-to-accrue-in-few-years-sun-
pharma-672688