Mergers and Acquisitions

MERGERS AND ACQUISITIONS
- INDIAN SCENARIO 2010

ONWARDS
BHUMI MORABIYA
DPGD/JL13/1804
FINANCE
WELINGKER INSTITUTE OF MANAGEMENT

DEVELOPMENT AND RESEARCH
YEAR OF SUBMISSION: - JUNE, 2015

1
ACKNOWLEDGEMENT
With Immense pleasure I would like to present this report on MERGERS AND
ACQUISITIONS INDIAN SCENARIO 2010 ONWARDS.
I would like to thank Welingkar Institute of Management for providing me the
opportunity to present this project.
Acknowledgements are due to my parents, family members, friends and all those people
who have helped me directly or indirectly in the successful completion of the project.
BHUMI MORABIYA
UNDERTAKING BY CANDIDATE
I declare that project work entitled MERGERS AND ACQUISITIONS INDIAN SCENARIO
2010 ONWARDS is my own work conducted as part of my syllabus.
I further declare that project work presented has been prepared personally by me and it is not
sourced from any outside agency. I understand that, any such malpractice will have very serious
consequence and my admission to the program will be cancelled without any refund of fees.
I am also aware that, I may face legal action, if I follow such malpractice.
BHUMI MORABIYA
TABLE OF CONTENTS
Particulars
Page no.
1. Title page
2. Acknowledgement
3. Undertaking by candidate
4. Table of contents
5. Table of figure
6. Executive summary
A INTRODUCTION
7. Introduction to merger & acquisition
8. Merger
10
9. Classifications of mergers
12
10. Acquisition
16
11. Takeover
17
12. Types of acquisitions
17
13. Methods of acquisitions
18
14. Distinction between mergers and acquisitions
18
B HISTORY
15. History of merger & acquisition
20
C GENERAL
16. Importance of mergers and acquisitions
23
17. Motivations for mergers and acquisitions
24
18. Purpose of merger& acquisition
29
19. Phases of mergers & acquisitions

20. Stages of a mergers
32
35
21. Mergers and acquisitions: valuation
37
22. Advantages of mergers and acquisitions
41
23. Disadvantage of merger & acquisition
41
24. Costs of mergers and acquisitions
42
25. Defence strategies against mergers & acquisitions
43
D TOP MERGERS & ACQUISITIONS IN INDIA

26. Merger & acquisition in India
47
27. Mergers & acquisitions in 2010
48
53
58
61
66
72
33. Future of mergers and acquisition
79
E CONCLUSION
80
F BIBLIOGRAPHY
81
TABLE OF FIGURE
Particulars
Page no.
1. Classifications of mergers
12
2. Magic Circle for a Successful Merger
39
Executive summary
Industrial maps across the world have been constantly redrawn over the years through
various forms of corporate restructuring. The most common method of such restructuring is
Mergers and Acquisitions (M&A). The term "mergers & acquisitions (M&As)" encompasses a
widening range of activities, including joint ventures, licensing and synergising of energies.
Industries facing excess capacity problems witness merger as means for consolidation.
Industries with growth opportunities also experience M&A deals as growth strategies. There are
stories of successes and failures in mergers and acquisitions. Such stories only confirm the
popularity of this vehicle.
Merger is a tool used by companies for the purpose of expanding their operations often
aiming at an increase of their long term profitability. There are 15 different types of actions that
a company can take when deciding to move forward using M&A. Usually mergers occur in a
consensual (occurring by mutual consent) setting where executives from the target company
help those from the purchaser in a due diligence process to ensure that the deal is beneficial to
both parties. Acquisitions can also happen through a hostile takeover by purchasing the majority
of outstanding shares of a company in the open market against the wishes of the target's board.
In the United States, business laws vary from state to state whereby some companies have
limited protection against hostile takeovers. One form of protection against a hostile takeover is
the shareholder rights plan, otherwise known as the "poison pill".
Mergers and acquisitions (M&A) have emerged as an important tool for growth for Indian
corporates in the last five years, with companies looking at acquiring companies not only in
India but also abroad.
Introduction to Merger and Acquisition

Mergers and acquisitions is about the companies coming together to from another
company and companies taking over the existing companies to expand their business.
With recession taking toll of many Indian businesses and the
feeling of insecurity
surging over our businessmen, it is not surprising when we hear about the immense numbers
of corporate restructurings taking place, especially in the last couple of years. Several
companies have been taken over and several have undergone internal restructuring, whereas
certain companies in the same field of business have found it beneficial to merge together
into one company.
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.
Thus important issues both for business decision and public policy formulation have
been raised. No firm is regarded safe from a takeover possibility. On the more positive side
Mergers & Acquisitions may be critical for the healthy expansion and growth of the firm.
Successful entry into new product and geographical markets may require Mergers &
Acquisitions at some stage in the firm's development.
Successful competition in international markets may depend on capabilities obtained in

a timely and efficient fashion through Mergers & Acquisition's. Many have argued that
mergers increase value and efficiency and move resources to their highest and best uses,
thereby increasing shareholder value. To opt for a merger or not is a complex affair,
especially in terms of the technicalities involved. We have discussed almost all factors that
the management may have to look into before going for merger.
Considerable amount of brainstorming would be required by the managements to reach

a conclusion. e.g. a due diligence report would clearly identify the status of the company in
respect of the financial position along with the net worth and pending legal matters and
details about various contingent liabilities. Decision has to be taken after having discussed
the pros & cons of the proposed merger & the impact of the same on the business,
administrative costs benefits, addition to shareholders' value, tax implications including
stamp duty and last but not the least also on the employees of the Transferor or Transferee
Company.
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. The survivor acquires all
the assets as well as liabilities of the merged company or companies. Generally, the surviving
company is the buyer, which retains its identity, and the extinguished company is the seller.
Merger is also defined as amalgamation. Merger is the fusion of two or more existing
companies. All assets, liabilities and the stock of one company stand transferred to transferee
Company in consideration of payment in the form of:
Equity shares in the transferee company

Debentures in the transferee company
Cash
A mix of the above modes
In business or economics a merger is a combination of two companies into one larger
company. Such actions are commonly voluntary and involve stock swap or cash payment
to the target. Stock swap is often used as it allows the shareholders of the two
companies to share the risk involved in the deal.
A merger can resemble a takeover but result in a new company name (often combining
the names of the original companies) and in new branding; in some cases, terming the
combination a "merger" rather than an acquisition is done purely for political or marketing
reasons.
Merger is a financial tool that is used for enhancing long-term profitability by

expanding their operations. Mergers occur when the merging companies have their mutual
consent as different from acquisitions, which can take the form of a hostile takeover. The
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business laws in US vary across states and hence the companies have limited options to
protect themselves from hostile takeovers. One way a company can protect itself from hostile
takeovers is by planning shareholders rights, which is alternatively known as poison pill.
If we trace back to history, it is observed that very few mergers have actually added to
the share value of the acquiring company and corporate mergers may promote monopolistic
practices by reducing costs, taxes etc.
Managers are concerned with improving operations of the company, managing the affairs
of the company effectively for all round gains and growth of the company which will provide
them better deals in raising their status, perks and fringe benefits.
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Classifications of mergers
Mergers are generally classified into 5 broad categories. The basis of this classification is
the business in which the companies are usually involved. Different motives can also be
attached to these mergers. The categories are:
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Horizontal Merger
It is a merger of two or more competing companies, implying that they are
firms in the same business or industry, which are at the same stage of industrial
process. This also includes some group companies trying to restructure their
operations by acquiring some of the activities of other group companies.
The main motives behind this are to obtain economies of scale in
production by eliminating duplication of facilities and operations, elimination of
competition, increase in market segments and exercise better control over the
market.
There is little evidence to dispute the claim that properly executed horizontal
mergers lead to significant reduction in costs. A horizontal merger brings about
all the benefits that accrue with an increase in the scale of operations. Apart from
cost reduction it also helps firms in industries like pharmaceuticals, cars, etc.
where huge amounts are spent on R & D to achieve critical mass and reduce unit
development costs.
Vertical Merger
It is a merger of one company with another, which is involved, in a different
stage of production and/ or distribution process thus enabling backward integration
to assimilate the sources of supply and / or forward integration towards market
outlets.
The main motives are to ensure ready take off of the materials, gain control
over product specifications, increase profitability by gaining the margins of the
previous supplier/distributor, gain control over scarce raw materials supplies and in
some case to avoid sales tax .
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Conglomerate Mergers
It is an amalgamation of 2 companies engaged in the unrelated industries.
The motive is to ensure better utilization of financial resources, enlarge debt
capacity and to reduce risk by diversification.
It has evinced particular interest among researchers because of the general

curiosity about the nature of gains arising out of them. Economic gain arising out of
a conglomerate is not c l e a r .
Much of the traditional analysis relating to economies of scale in production,

research, distribution and management is not relevant for conglomerates. The
argument in its favor is that in spite of the absence of economies of scale and
complimentary, they may cause stabilization in profit stream.
Even if one agrees that diversification results in risk reduction, the question
that arises is at what level should the diversification take place, i.e. in order to
reduce risk should the company diversify or should the investor diversify his
portfolio? Some feel that diversification by the investor is more cost effective and
will not hamper the companys core competence.
Others argue that diversification by the company is also essential owing to

the fact that the combination of the financial resources of the two companies
making up the merger reduces the lenders risk while combining each of the
individual shares of the two companies in the investors portfolio does not. In spite
of the arguments and counter- arguments, some amount of diversification is
required, especially in industries which follow cyclical patterns, so as to bring
some stability to cash flows.
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Concentric Mergers
This is a mild form of conglomeration. It is the merger of one company with

another which is engaged in the production/marketing of an allied product.
Concentric merger is also called product extension merger. In such a merger, in
addition to the transfer of general management skills, there is also transfer of
specific management skills, as in production, research, marketing, etc., which
have been used in a different line of business. A concentric merger brings all
the advantages of conglomeration without the side effects, i.e., with a concentric
merger it i s possible to reduce risk without venturing into areas that the
management is not competent i n .
Consolidation Mergers
It involves a merger of a subsidiary company with its parent. Reasons behind
such a merger are to stabilize cash flows and to make funds available for the
subsidiary.
Market-Extension Merger
Two companies that sell the same products in different markets.
Product-Extension Merger
Two companies selling different but related products in the same market.
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Acquisition
Acquisition in general sense is acquiring the ownership in the property. 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.
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.
Acquisitions or takeovers occur between the bidding and the target company. There may
be either hostile or friendly takeovers. Acquisition in general sense is acquiring the
ownership in the property. 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.
A takeover is acquisition and both the terms are used interchangeably. Takeover
differs from merger in approach to business combinations i.e. the process of takeover,
transaction involved in takeover, determination of share exchange or cash price and the
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fulfillment of goals of combination all are different in takeovers than in mergers. For
example, process of takeover is unilateral and the offered company decides about the
maximum price. Time taken in completion of transaction is less in takeover than in
mergers, top management of the offered company being more co-operative.
Types of Acquisitions
i. Friendly takeover: Before a bidder makes an offer for another company, it

usually first informs the company's board of directors. If the board feels
that accepting the offer serves shareholders better than rejecting it, it
recommends the offer be accepted by the shareholders.
ii. Hostile takeover: A hostile takeover allows a suitor to take over a target
company's management unwilling to agree to a merger or takeover. A
takeover is considered "hostile" if the target company's board rejects the
offer, but the bidder continues to pursue it, or the bidder makes the
offer without informing the target company's board beforehand.
iii.
Back flip takeover: A back flip takeover is any sort of takeover
in which the acquiring company turns itself into a subsidiary of the

purchased company. This type of a takeover rarely occurs.
iv.
Reverse takeover: A reverse takeover is a type of takeover where a
private c o m p a n y acquires a public company. This is usually done at

the instigation of the larger, private company, the purpose being for the
private company to effectively float itself while avoiding some of the
expense and time involved in a conventional IPO.
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Methods of Acquisitions
An acquisition may be affected by:
Agreement with the persons holding majority interest in the

company management like members of the board or major
shareholders commanding majority of voting power;
Purchase of shares in open market;
To make takeover offer to the general body of shareholders;
Purchase of new shares by private treaty;
Acquisition of share capital through the following forms of

considerations viz. Means of cash, issuance of loan capital, or
insurance of share capital.
Distinction 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 established itself as the new
owner, the purchase is called an acquisition. From a legal point of view, the
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target company ceases to exist, the buyer "swallows" the business and the
buyer's stock continues to be traded.
In the pure sense of the term, a merger happens when two firms, often of
about the same size, 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." Both companies' stocks are
surrendered and new company stock is issued in its place. For example,
both Daimler-Benz and Chrysler ceased to exist when the two firms merged,
and a new company, DaimlerChrysler, 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's technically an acquisition. Being bought out often carries
negative connotations, therefore, by describing the deal as a merger, deal
makers and top managers try to make the takeover more palatable.
A purchase deal will also be called a merger when both CEOs agree that
joining together is in the best interest of both of their companies. But when
the deal is unfriendly - that is, when the target company does not want to be
purchased - it is always regarded as an a c q u i s i t i o n .
Whether a purchase is considered a merger or an acquisition really
depends on whether the purchase is friendly or hostile and how it is
announced. In other words, the real difference lies in how the purchase is
communicated to and received by the target company's board of directors,
employees and shareholders.
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History of Mergers and Acquisitions

Tracing back to history, merger and acquisitions have evolved in five stages and each of
these are discussed here. As seen from past experience mergers and acquisitions are triggered
by economic factors.
The macroeconomic environment, which includes the growth in GDP, interest rates and
monetary policies play a key role in designing the process of mergers or acquisitions
between companies or organizations.
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.
The first wave mergers that occurred during the aforesaid time period were mostly
horizontal mergers that took place between heavy manufacturing industries.
End of 1st Wave Merger

Majority of the mergers that were conceived during the lst phase ended in failure since
they could not achieve the desired efficiency. The failure was fuelled by the slowdown of the
economy in l903 followed by the stock market crash of l904. The legal framework was not
supportive either. The Supreme Court passed the mandate that the anticompetitive
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mergers could be halted using the Sherman Act.
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.
The government policy encouraged firms to work in unison. This policy was
implemented in the l920s. The 2nd wave mergers that took place were mainly horizontal or
conglomerate in nature. The industries that went for merger during this phase were producers
of primary metals, food products, petroleum products, transportation equipments and
chemicals. The investments banks played a pivotal role in facilitating the mergers and
acquisitions.
End of 2nd Wave Mergers

The 2nd wave mergers ended with the stock market crash in l929 and the great
depression. The tax relief that was provided inspired mergers in the l940s.
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.
The bidder firms in the 3rd wave merger were smaller than the Target Firm. Mergers
were financed from equities; the investment banks no longer played an important role.
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End of the 3rd wave merger

The 3rd wave merger ended with the plan of the Attorney General to split conglomerates
in l968. It was also due to the poor performance of the conglomerates. Some mergers in the
l970s have set precedence.
The most prominent ones were the INCO-ESB merger; United Technologies and OTIS
Elevator Merger are the merger between Colt Industries and Garlock Industries.
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. Foreign takeovers became common with most of them
being hostile takeovers. The 4th Wave mergers ended with anti-takeover laws, Financial
Institutions Reform and the Gulf War.
Fifth wave merger

The 5th Wave Merger (l992-2000) was inspired by g l o b a l i z a t i o n , stock market
boom and deregulation. The 5th Wave Merger took place mainly in the banking and
telecommunications industries.
They were mostly equity financed rather than debt financed. The mergers were driven
long term rather than short term profit motives. The 5th Wave Merger ended with the burst
in the stock market bubble. Hence we may conclude that the evolution of mergers and
acquisitions has been long drawn. Many economic factors have contributed its development.
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IMPORTANCE OF MERGERS AND ACQUISITIONS
The 1980s produced approximately 55,000 mergers and acquisitions in the United States
alone. The value of the acquisitions during this decade was approximately $1.3 trillion as
impressive as these figures are; they are small in comparison to the merger wave that began in
the earlier 1990s approximately in 1993. The number and value of mergers and acquisitions
have grown each year since 1993. For example in 1997 there were approximately 22,000
mergers and acquisitions roughly 40% of the total acquisitions during the whole decade of the
1980s. Perhaps more significant, the value of these mergers in 1997 was $1.6 trillion. In other
words, the acquisitions completed in 1997 were valued at $300 billion more than the value of
acquisitions during the 1980s. Interestingly 1980s was often referred to as the decade of Merger
Madness. The year 1998 was no different, as noted by the huge Merger and Acquisitions
transactions listed earlier; it was predicted to be another record year. Interestingly the 6,311
domestic mergers and acquisitions announced in 1993 had a total value of $234.5 billion for an
average $37.2 million, whereas the mergers and acquisitions announced in 1998 had an average
value of $168.2 million for an increase of 352% over those of 1993. Approximately $2.5 trillion
in mergers were announced in 1999, continuing the upward trend.
The merger and acquisitions in the 1990s represent the fifth merger wave of the twentieth
century and their size and numbers suggest that the decade of 1990s might be remembered for
the megamerger mania. With five merger waves throughout the twentieth century, we must
conclude that mergers and acquisitions are an important, if not dominant. Strategy for twenty
first century organizations.
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Motivations for mergers and acquisitions

Mergers and acquisitions are caused with the support of shareholders, managers ad
promoters of the combing companies. The factors, which motivate the shareholders and
managers to lend support to these combinations and the resultant consequences they have to
bear, are briefly noted below based on the research work by various scholars globally.
1. From the standpoint of shareholders

Investment made by shareholders in the companies subject to merger should enhance in
value.
The sale of shares from one companys shareholders to another and holding investment
in shares should give rise to greater values i.e. the opportunity gains in alternative
investments. Shareholders may gain from merger in different ways viz. from the gains and
achievements of the company.
i.e. through
a) Realization of monopoly profits

b) Economies of scales
c) Diversification of product line
d) Acquisition of human assets and other resources not available otherwise
e) Better investment opportunity in combinations
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One or more features would generally be available in each merger where shareholders
may have attraction and favor merger.
2. From the standpoint of Mergers

Managers are concerned with improving operations of the company, managing the
affairs of the company effectively for all round gains and growth of the company which will
provide them better deals in raising their status, perks and fringe benefits.
Mergers where all these things are the guaranteed outcome get support from the
managers. At the same time, where managers have fear of displacement at the hands of new
management in amalgamated company and also resultant depreciation from the merger then
support from them becomes difficult.
3. Promoters Gains
Mergers do offer to company promoters the advantage of increasing the size of their
company and the financial structure and strength. They can convert a closely held and private
limited company into a public company without contributing much wealth and without losing
control.
4. Benefits of general public
Impact of mergers on general public could be viewed as aspect of benefits and costs to:
(a)
Consumer of the product or services;
(b)
Workers of the companies under combination;

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(c)
General public a f f e c t e d in general having not been u s e r or consumer or

the worker in the companies under merger plan.
a) Consumer
The economic gains realized from mergers are passed on to consumers in the form of
lower prices and better quality of the product which directly raise their standard of living and
quality of life.
The balance of benefits in favor of consumers will depend upon the fact whether or not
the mergers increase or decrease competitive economic and productive activity which
directly affects the degree of welfare of the consumers through changes in price level,
quality of products, after sales service, etc.
b) Workers community
The merger or acquisition of a company by a conglomerate or other acquiring
company may have the effect on both the sides of increasing the welfare in the form of
purchasing power and other miseries of life. Two sides of the impact as discussed by the
researchers and academicians are:
l. Mergers with cash payment to shareholders provide opportunities for them to invest this
money in other companies which will generate further employment and growth to uplift of the
economy in general.
2. Any restrictions placed on such mergers will decrease the growth and investment activity with
corresponding decrease in employment. Both workers and communities will suffer on
lessening job opportunities, preventing the distribution of benefits resulting from
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diversification of production activity.
c) General public
Mergers result into centralized concentration of power. Economic power is to be
understood as the ability to control prices and industries output as monopolists. Such
monopolists affect social and political environment to tilt everything in their favour to
maintain their power ad expand their business empire. These advances result into economic
exploitation. But in a free economy a monopolist does not stay for a longer period as other
companies enter into the field to reap the benefits of higher prices set in by the monopolist.
This enforces competition in the market as consumers are free to substitute the alternative
products.
Therefore, it is difficult to generalize that mergers affect the welfare of general public
adversely or favorably. Every merger of two or more companies has to be viewed from
different angles in the business practices which protects the interest of the shareholders in the
merging company and also serves the national purpose to add to the welfare of the
employees, consumers and does not create hindrance in administration of the Government
policies.
The Strategic Goals of Mergers and Acquisitions

1. Economies of Scale
2. Consolidation: 3. Media buyers are now consolidating to increase ad rates.
4. Globalization: -
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5. For Example Kerry Group an Irish milk processor and dairy cooperative has become a
global player after a string of acquisitions in the food and ingredients business.
6. Create or gain access to distribution channels: 7. A lack of distribution has been one of the main hindrances to growth of the wine
companies. They are overcoming this by a string of acquisitions for example Fosters.
8. Gain access to new products and technologies: 9. Pooling resources helps pharmaceutical companies to speed up research and development
of new drugs and also to share the risks and place a number of bets on emerging
technologies. In the 1990s 23 pharmaceutical merger to form the top ten players.
10. Enhance or increase products and/or services: 11. Mergers between large banks specializing in different sectors for example when Allianz
AG acquired Dresdner Bank.
12. Increase market share or access to new markets: 13. Car manufacturers turn to mergers and acquisition for this reason. For example when
Daimler Benz and Chrysler Group merged, when Ford acquired Jaguar.
14. Diversification
15. To offset threatened loss of market
16. To increase the rate of growth
17. To improve cyclical and seasonal stability
18. To improve effectiveness of the marketing effort
19. To employ excess capital
20. To change from a holding company to an operating company
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Purpose of Mergers and Acquisition
The purpose for an offeror company for acquiring another company shall be reflected
in the corporate objectives. It has to decide the specific objectives to be achieved through
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 possible purposes for acquisition are short listed below: -
a) Procurement of supplies
To safeguard the source of supplies of raw materials or intermediary product
To obtain economies of purchase in the form of discount, savings in transportation

costs, overhead costs in buying department, etc.
To share the benefits of suppliers economies by standardizing the materials
b) Revamping production facilities
To achieve economies of scale by amalgamating production facilities through more

intensive utilization of plant and resources
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To standardize product specifications, improvement of quality of product, expanding
Market and aiming at consumers satisfaction through strengthening after sale
Services
To obtain improved production technology and know-how from the offeree company
To reduce cost, improve quality and produce competitive products to retain and
Improve market share
c) Market expansion and strategy
To eliminate competition and protect existing market
To obtain a new market outlets in possession of the offeree
To obtain new product for diversification or substitution of existing products and to

enhance the product range
Strengthening retain outlets and sale the goods to rationalize distribution
To reduce advertising cost and improve public image of the offeree company
Strategic control of patents and copyrights
d) Financial Strength
To improve liquidity and have direct access to cash resource
To dispose of surplus and outdated assets for cash out of combined enterprise
To enhance gearing capacity, borrow on better strength and the greater assets backing
To avail tax benefits
To improve EPS (Earning per Share)
e) General gains
To improve its own image and attract superior managerial talents to manage its affairs
To offer better satisfaction to consumers or users of the product

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f) Own developmental plans

The purpose of acquisition is backed by the offeror companys own developmental
plans.
A company thinks in terms of acquiring the other company only when it has arrived at
its own development plan to expand its operation having examined its own internal
strength where it might not have any problem of taxation, accounting, valuation, etc. It
has to aim at suitable combination where it could have opportunities to supplement its
funds by issuance of securities, secure additional financial facilities eliminate competition
and strengthen its market position.
g) Strategic purpose
The Acquirer Company view the merger to achieve
strategic objectives through
alternative type of combinations which may be horizontal, vertical, product expansion,

market extensional or other specified unrelated objectives depending upon the corporate
strategies. Thus, various types of combinations distinct with each other in nature are
adopted to pursue this objective like vertical or horizontal combination.
h) Corporate friendliness
Although it is rare but it is true that business houses exhibit degrees of cooperative
spirit despite competitiveness in providing rescues to each other from hostile takeovers and
cultivate situations of collaborations sharing goodwill of each other to achieve performance
heights through business combinations. The combining corporate aim at circular
combinations by pursuing this objective.
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Phases of Mergers & Acquisitions
Phase 1: Strategic Planning

Stage 1: Develop or Update Corporate Strategy
To identify the Companys strengths, weaknesses and needs
1.
2.
3.
4.
5.
6.
7.
8.
Company Description
Management & Organization Structure
Market & Competitors
Products & Services
Marketing & Sales Plan
Financial Information
Joint Ventures
Strategic Alliances
Stage 2: Preliminary Due Diligence

1.
2.
3.
4.
Financial
Risk Profile
Intangible Assets
Significant Issues
32
Stage 3: Preparation of Confidential Information Memorandum

1. Value Drivers
2. Project Synergies
Phase 2: Target/Buyer Identification & Screening

Stage 4: Buyer Rationale
1. Identify Candidates
2. Initial Screening
Stage 5: Evaluation of Candidates
1. Management and Organization Information
2. Financial Information (Capabilities)
3. Purpose of Merger or Acquisition
Phase 3: Transaction Structuring

Stage 6: Letter of Intent
Stage 7: Evaluation of Deal Points
1. Continuity of Management
2. Real Estate Issues
3. Non-Business Related Assets
4. Consideration Method
5. Cash Compensation
6. Stock Consideration
7. Tax Issues
8. Contingent Payments
9. Legal Structure
10. Financing the Transaction
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Stage 8: Due Diligence

1. Legal Due Diligence
2. Seller Due Diligence
3. Financial Analysis
4. Projecting Results of the Structure
Stage 9: Definitive Purchase Agreement

1. Representations and Warranties
2. Indemnification Provisions
Stage 10: Closing the Deal

Phase 4: Successful Integration
1.
2.
3.
4.
5.
Human Resources
Tangible Resources
Intangible Assets
Business Processes
Post-Closing Audit
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Stages of a Mergers
Pre-mergers are characteristics by the: -
1. Courtship: The respective management teams discuss the possibility of a merger and
develop a shared vision and set of objectives. This can be achieved through a rapid
series of meetings over a few weeks, or through several months of talks and informal
meetings
2. Evaluation and negotiation: Once some form of understanding has been reached the purchasing company
conducts due diligence a detailed analysis of the target company assets,
liabilities and operations. This leads to a formal announcement of the merger and
an intense round of negotiations, often involving financial intermediaries.
Permission is also sought from trade regulators. The new management team is
agreed at this point, as well as the board structure of the new business.
This phase typically lasts three or four months, but it can take as long as a year
if regulators decide to launch an investigation into the deal. Closure is a
commonly referred term to describe the point at which the legal transfer of
ownership is completed.
3. Planning: More and more companies use this time before completing a merger to
assemble a senior team to oversee the merger integration and to begin planning the
new management and operational structure.
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Post-Merger is characterized by the following phases: -
1. The immediate transition: This typically lasts three to six months and often involves intense activity.
Employees receive information about whether and how the merger will affect their
employment terms and conditions. Restructuring begins and may include site
closures, redundancy announcements, divestment of subsidiaries (sometimes required
by trade regulators), new appointments a n d job transfers. Communications and
human resources strategies are implemented. Various teams work on detailed plans
for integration.
2. The transition period : This lasts anywhere between six months to two years. The new organizational
structure is in place and the emphasis is now on fine tuning the business and
ensuring that the envisaged benefits of the mergers are realized. Companies often
consider cultural integration at this point and may embark on a series of
workshops exploring the values, philosophy and work styles of the merged business.
36
Mergers and Acquisitions: Valuation

Investors in a company that is aiming to take over another one must
determine whether the purchase will be beneficial to them. In order to do so, they
must ask themselves how much the company being acquired is really worth.
Naturally, both sides of an M&A deal will have different ideas about the worth of
a target company: its seller will tend to value the company at as high of a price as
possible, while the buyer will try to get the lowest price that he can. There are,
however, many legitimate ways to value companies. The most common method is
to look at comparable companies in an industry, but deal makers employ a variety
of other methods and tools when assessing a target company. Here are just a few of
them:
Comparative Ratios - The following are two examples of the many comparative
metrics on which acquiring companies may base their offers:
Price-Earnings Ratio (P/E Ratio) - With the use of this ratio, an acquiring
company makes an offer that is a multiple of the earnings of the target company.
Looking at the P/E for all the stocks within the same industry group will give the
acquiring company good guidance for what the target's P/E multiple should be.
Enterprise-Value-to-Sales Ratio (EV/Sales) - With this ratio, the acquiring

company makes an offer as a multiple of the revenues, again, while being aware of
the price-to-sales ratio of other companies in the industry.
37
Replacement Cost - In a few cases, acquisitions are based on the cost of

replacing the target company. For simplicity's sake, suppose the value of a
company is simply the sum of all its equipment and staffing costs. The acquiring
company can literally order the target to sell at that price, or it will create a
competitor for the same cost. Naturally, it takes a long time to assemble good
management, acquire property and get the right equipment. This method of
establishing a price certainly wouldn't make much sense in a service industry where
the key assets - people and ideas - are hard to value and develop.
Discounted Cash Flow (DCF) - A key valuation tool in M&A, discounted cash
flow analysis determines a company's current value according to its estimated
future cash flows. Forecasted free cash flows (operating profit + depreciation +
amortization of goodwill capital e x p e n d i t u r e s cash taxes - change in
working capital) are discounted to a present value using the company's weighted
average costs of capital (WACC). Admittedly, DCF is tricky to get right, but few
tools can rival this valuation method.
Magic Circle for a Successful Merger
A companys integration process can ensure the formation of such a circle. It

acts rather like the Gulf Stream, where the flow of hot and cold water ensures a
continuous cyclical movement. A well designed integration process ensures that
the new entitys designed strategy reaches deep
into the organization, ensuring a
unity of purpose. Basically everyone understands the purpose and logic of the deal.
The integration process can ensure that the ideas and the creativity can are not
dissipated but are fed into the emergent strategy of the organization this is achieved
through the day to day job of the encouraging and motivating people and also
creating forums where people can think the impossible. The chart below
demonstrates the relationship between designed and emergent strategy and merger
integration. It suggests how merging organizations can
38
become
learning
organization; strategy formulation and implementation merges into collective

learning.
39
Some merger failures can be explained by this model. For example, serious
problems arise when a company relies too heavily on designed strategy. If the
management team is not getting high quality feedback and information from the
rest of the organization, it runs the risk of becoming cut off. Employees may
perceive their leaders as being out of touch with reality of the merger, leading to a
gradual loss of confidence in senior managements ability to chart the future of the
new entity. Similarly, the leadership team may not receive timely information
about external threats, brought about perhaps by the predatory actions of
competitors or dissatisfies customers with the result that performance suffers and
the new management is criticized for failing to get grips with the complexities of the
changeover.
However, too much reliance on emergent strategy can lead to the sense of a
leadership vacuum within the combining organizations. The management team may
seem to lack direction or to be moving too slow. This often leads political infighting
and territory building and the departure of many talented people.
Therefore it is very important that a careful balance is struck between
designed and emergent strategy for integration after the merger between two
companies is done.
40
Advantages of mergers and acquisitions

1. To acquire a larger share of an existing market
2. Enter new markets
3. Eliminate competitors
4. Acquire expertise or assets
5. Transfer skills
6. Save costs
7. Increase efficiencies or capitalize on synergies
8. 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

1 . All liabilities assumed (including potential litigation)
2 . Two thirds of shareholders (most states) of both firms must approve
3 . Dissenting shareholders can sue to receive their fair value
4 . Management cooperation needed
5 . Individual transfer of assets may be costly in legal fees
6 . Integration difficult without 100% of shares
7 . Resistance can raise price
8 . Minority holdouts
9 . Technology costs - costs of modifying individual organizations systems etc.
10.
Process and organizational change issues every organization has its own culture
and
business processes
11. Human Issues Staff feeling insecure and uncertain.

1 2 . A very high failure rate (close to 50%)
41
Costs of mergers and acquisitions

Mergers and acquisitions can be costly due to the high legal expenses, and the cost of
acquiring a new company that may not be profitable in the short run. This is why a merger or
acquisition may be more of strategic corporate decision than a tactical maneuver. Moreover, if a
poison pill unknowingly emerges after a sudden acquisition of another company's shares, this
could render the acquisition approach very expensive and/or redundant.
Legal expenses
Short-term opportunity cost
Cost of takeover
Potential devaluation of equity
Intangible costs
M&A activity can also be exacerbated by the short-term cost of opportunity or
opportunity cost. This is the cost incurred when the same amount of investment could be placed
elsewhere for a higher financial return. Sometimes this cost does not prevent or deter the merger
or acquisition because projected long-term financial benefits outweigh that of the short-term
cost.
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Defence strategies against Mergers & Acquisitions
Companies can also adopt strategies and take precautionary actions to avoid
hostile takeover. This is very necessary in present day industrial rivalry where a
small lack in precaution can result in huge loss to the stakeholders of the firm. Some
of the defence strategies against takeover a r e :
Poison Pill
To avoid hostile takeovers, lawyers created this contractual mechanics that
strengthen Target Company. One usual poison pill inside a Corporation Statement
is the clause which triggers shareholders rights to buy more company stocks in
case of attack. Such action can make severe differences for the raider. If
shareholders do really buy more stocks of company with advantaged price, it will be
harder to acquire the company control for sure.
It is associated with high cost
It may keep the good investors away
Stock Option Workout

Poison Pill may have the same structure of stock options used for payouts.
Under these agreements, once the triggering fact happens, investor have the right
to turnkey some right. In poison pill event, most common is an option to buy more
shares, with some advantages. Priced with better conditions, lower than what
bidders does for the corporation it serves for the specific purpose of protecting the
corporation current shareholders.
The usual stock option is made to situations of high priced stocks. That usually
happens under takeover operations. A takeover hard to be defended usually will have
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a bid offer with a compatible price, at that moment which is higher than usual for
shareholders, with conditions to be accepted by stockholders.
Shark Repellent
Among shark repellent instruments there are: golden parachute, poison pills,
greenmail, white knight, etc.
White Knight
Another fortune way to handle a hostile takeover is through White Knight
bidders. Usually players of some specific market know each ones history, strategy,
strength, advantages, clients, bankers and legal supporters. Meaning beyond
similarities or not, there're communities around these companies. In this a strategic
partner merges with the target company to add value and increase market
capitalization. Such a merger can not only deter the raider, but can also benefit
shareholders in the short term, if the terms are favorable, as well as in the long term
if the merger is a good strategic fit.
White Squire
To avoid takeovers bids, some shareholder may detain a large stake of one
company shares. A white squire is similar to a white knight, except that it only
exercises a significant minority stake, as opposed to a majority stake. A white squire
doesn't have the intention, but rather serves as a figurehead in defense of a hostile
takeover.
The white squire may often also get special voting rights for their equity stake.
With friendly players holding relevant positions of shares, the protected company
may feel more comfortable to face an unsolicited offer. A White Squire is a
shareholder than it can make a tender offer. Otherwise it has so much relevance
over the company stock composition that can make raiders takeover more difficult
or somewhat expensive. Real White Squire does not take over the target company,
44
and only plays as a defense strategy.
Golden Parachute
A golden parachute is an agreement between a company and an employee
(usually upper executive) specifying that the employee will receive certain
significant benefits if employment is terminated. . Without it, officers have no
stability, and it may represent inaccurate defense strategy in case of bidders pressure.
It can further accelerate drastic and unnecessary m e a s u r e s .
From an overall analysis, cost of golden parachutes is relatively low, compared
with disadvantages of its absence. Officers can have minimum guarantees after
takeover is accomplished. Otherwise inappropriate attitudes can be taken just to
keep officers standings in the market an inside the corporation. Golden parachutes
try to make these challenges for the corporation and over officers, as natural as
possible. Studies show that these benefits can keep chiefs working without excess
pressure and drama, defending the corporation against all, till the end, but with
responsibility.
Poison Put
In stocks trading, the rights assigned to common stock holders that sharply
escalates the price of their stockholding, or allows them to purchase the company's
shares at a very attractive fixed price, in case of a hostile takeover attempt.
Super-majority amendment
Super-majority amendment is a defensive tactic requiring that a substantial
majority, usually 67% and sometimes as much as 90%, of the voting interest of
outstanding capital stock to approve a merger. This amendment makes a hostile
takeover much more difficult to perform. In most existing cases, however, the
supermajority provisions have a board-out clause that provides the board with the
45
power to determine when and if the supermajority provisions will be in effect. Pure
supermajority provisions would seriously limit management's flexibility in
takeover negotiations.
Fair Price Amendment
A provision in the bylaws of some publicly-traded companies stating that a
company seeking to acquire it must pay a fair price to targeted shareholders.
Additionally, the fair price provision mandates that the acquiring company must
pay all shareholders the same amount per share in multi-tiered shares. The fair
price provision exists both to protect shareholders and to discourage hostile
acquisitions by making them more expensive.
Classified Board
A staggered board of directors or classified board is a practice governing the board
o f directors of a company, corporation, or other organization in which only a
fraction (often one third) of the members of the board of directors is elected each
time instead of en masse. In this a structure for a board of directors in which a
portion of the directors serve for different term lengths, depending on their particular
classification. Under a classified system, directors serve terms usually lasting between
one and eight years; longer terms are often awarded to more senior board positions.
In publicly held companies, staggered boards have the effect of making hostile
takeover attempts more difficult. When a board is staggered, hostile bidders must
win more than one proxy fight at successive shareholder meetings in order to
exercise control of the target firm.
Authorization of Preferred Stock

The board of directors is authorized to create a new class of securities with
special voting rights. This security, typically preferred stock, may be issued to
friendly voting rights. The security preferred stock, may be issued to friendly in a
46
control contest. Thus, this device is a defense takeover bid, although historically it
was used to provide the board of directors with flexibility in financing under
changing economic conditions. Creation of a poison pill security could be included
in his category but generally it's excluded from and treated as a different
defensive device.
Mergers and Acquisitions in India

The process of mergers and acquisitions has gained substantial importance in today's
corporate world. This process is extensively used for restructuring the business organizations.
In India, the concept of mergers and acquisitions was initiated by the government bodies.
Some well-known financial organizations also took the necessary initiatives to restructure the
corporate sector of India by adopting the mergers and acquisitions policies.
The Indian economic reform since l99l has opened up a whole lot of challenges both in
the domestic and international spheres. The increased competition in the global market has
prompted the Indian companies to go for mergers and acquisitions as an important strategic
choice.
The trends of mergers and acquisitions in India have changed over the years. The
immediate effects of the mergers and acquisitions have also been diverse across the various
sectors of the Indian economy.
India has emerged as one of the top countries with respect to merger and acquisition
deals. In 2007, the first two months alone accounted for merger and acquisition deals
worth $40 billion in India.
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Top Mergers & Acquisitions in India

Mergers & Acquisitions in 2010
Tata Chemicals buys British salt

Tata Chemicals bought 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.
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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.
Abbotts acquisition of Piramal healthcare solutions

Abbott acquired Piramal healthcare solutions at US $ 3.72 billion which was 9 times its sales.
Though the valuation of this deal made Piramals take this move, Abbott benefited greatly by
moving to leadership position in the Indian market.
49
GTL Infrastructure acquisition of Aircel towers

This acquisition was worth about US $ 1.8 billion and brought GTL Infrastructure to the third
position in terms of number of mobile towers 33000. The money generated gave Aircel the
funds for expansion throughout the country and also for rolling out its 3G services.
ICICI Bank buys Bank of Rajasthan

This merger between the two for a price of Rs 3000 cr would help ICICI improve its market
share in northern as well as western India.
JSW acquired Ispat Industries

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Jindal Steel Works acquired 41% stake at Rs 2,157 cr in Ispat Industries to make it the largest
steel producer in the country. This move would also help Ispat return to profitability with time.
Reckitt Benckiser acquired Paras Pharma

Reckitt acquired Paras Pharma at a price of US $ 726 million to basically strengthen its
healthcare business in the country. This was Reckitts move to establish itself as a strong
consumer healthcare player in the fast growing Indian market.
Mahindra acquired Ssang Yong

Mahindra acquired a 70% controlling stake in troubled South Korea auto major Ssang Yong at
US $ 463 million. Along with the edge it would give Mahindra in terms of the R & D
capabilities, this deal would also help them utilize the 98 country strong dealer network of Ssang
Yong.
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Fortis Healthcare acquisitions

Fortis Healthcare, the unlisted company owned by Malvinder and Shivinder Singh looks set to
make in two in terms of acquisitions. After acquiring Hong Kongs Quality Healthcare Asia Ltd
for around Rs 882 cr last month, they are planning on acquiring Dental Corp, the largest dental
services provider in Australia at Rs 450 cr.
Mergers & Acquisitions in 2011

The Reliance BP deal
The much talked about Reliance BP deal finally came through in July 2011 after a 5 month
wait. 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. Although the Indian governments
52
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.
Essar exits Vodafone

In March 2011, the Vodafone Group announced that it would buy 33 percent stake in its Indian
joint venture for about 5 billion dollars after the Essar Group sold its holding and exited
Vodafone. Healthcare giant Piramal Group too, bought about 5.5 percent in the Indian arm of
Vodafone for about 640 million dollars. This brings Vodafones current stake to about 75 percent.
The Fortis Healthcare merger

In September 2011, Indias second largest hospital chain, Fortis Healthcare (India) Ltd,
announced that it will merge with Fortis Healthcare International Pte Ltd., the promoters
privately held company. This will make Fortis Asias top healthcare provider with the
approximate total revenue pegged at Rs. 4,800 crore. Fortis India will buy the entire stake of the
Singapore based Fortis International. This company is currently held by the Delhi-based Singh
brothers (Malvinder Singh and Shivinder Singh).
53
iGate acquires majority stake in Patni Computers

In May 2011, IT firm iGate completed its acquisition of its midsized rival Patni Computers for an
estimated 1.2 billion dollars. For iGate, the main aim of this acquisition was to increase its
revenue, vertical capability and customer base. iGate now holds an approximate stake of 82.5
percent in Patni computers, now called iGate Patni.
GVK Power acquires Hancock Coal

In one of the biggest overseas acquisitions initiated by India in September 2011, Hyderabadbased GVK Power bought out Australias Hancock Coal for about 1.26 billion dollars. The
acquisition includes a majority of the coal resources, railway line and port infrastructure of
Hancock Coal, along with the option for long term coal supply contracts.
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Essar Energys Stanlow Refinery Deal with Royal Dutch Shell

The Ruias flagship company for its oil business, Essar Energy completed its 350 million dollar
acquisition of the UK based Stanlow Refinery of Shell in August 2011. In addition to a direct
access to the UK market, Essar is planning to make optimum utilization of this deal with its 100
day plan to improve operations at the UK unit.
Aditya Birla Group to acquire Columbian Chemicals

In June 2011, the Aditya Birla Group announced its completion of acquiring US based
Columbian Chemicals, a 100 year old carbon black maker company for an estimated 875 million
dollars. This will make the Aditya Birla Group one of the largest carbon black maker companies
in the world, doubling its production capacity instantly.
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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.
The Vedanta Cairn acquisition

December 2011 finally saw the completion of the much talked about Vedanta Cairn deal that
was in the pipeline for more than 16 months. Touted to be the biggest deal for Indian energy
sector, Vedanta acquired Cairn India for a neat 8.6 billion dollars. Although the Home Ministry
cleared the deal, it has highlighted areas of concern with 64 legal proceedings against Vedanta.
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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.
As a matter of concern, it is found, Yammer Inc. is an enterprise social network service which
was launched in September 2008. It was originally launched as an enterprise micro blogging
service and subsequently evolved to become a full-fledged enterprise social network. Yammer
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facilitates users to create private social networks so employees within the same company can
keep tabs on what colleagues are working on.
Presently, Yammer counts more than 80 percent of Fortune 500 companies as clients.
Segate completes LaCie acquisition

Recently, Seagate Technology and LaCie have announced an exclusive agreement with the intent
for Seagate to acquire a controlling interest in LaCie, which is a French consumer storage
company.
The transction would combine two highly complementary product and technology portfolios. It
is adding LaCies line of premium branded consumer storage solutions, network-attached storage
solutions and software offerings to Seagates array of mainstream consumer storage products.
SafeNet
strengthens its Cloud capabilities with acquisition
of Cryptocard
Acknowledging the significance of Cloud capabilities for business expansion, SafeNet has
announced its acquisition over Cryptocard, a privately held leader of Cloud based authentication
solutions
With the acquisition of Cryptocard, SafeNet is likely to enhance its market leading authentication
portfolio, providing both enterprises and service providers with one of the most advanced
authentication-as-a- service (Auth-as-a-Service) offerings in the marketplace. Cryptocards
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platform will provide a unique opportunity for mobile and telecom service providers, as well as
IT system integrators and service providers, to rapidly introduce Auth-as-a-Service and market
leading authentication solutions to their end users, sources informed.
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 atest $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. Also, the software
maker has an aggressive strategy in place for Indian market. Market experts believe, Quest
Software also looks at India as a significant market.
With its latest acquisition, Dell is planning to include Quests software solutions with its services
and enterprise solutions. Now, it can offer a better and more valuable experience to its customers.
Seems, it is the season of acquisitions. Time shall tell us how beneficial would these associations
be for the growth of the respective companies as well as economy as a whole.
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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.
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The deal will be via a slump sale, in which one or more undertakings are transferred for a lump
sum, without values being assigned to individual assets and liabilities.
Airtel will get Loops 3 million subscribers, about 400 telecom towers, optic fibre connecting the
towers, and electronic equipment on which the Loops network currently runs.
For Airtel the deal is very profitable as its subscriber base will increase which makes it no.1 in
the list followed by Vodafone.
In case of Loop mobile the employees fear of losing their job. The risk is more for lower level
employees as Airtel wasnt keen to take on board a large number of employees as it already has
workforce in the Mumbai circle, it could retain a few key senior functionaries, although
temporarily.
GlaxoSmithKline and Novartis

Britains GlaxoSmithKline and Swiss rival Novartis have agreed a multi-billion dollar swap of
assets in a move that led to a rally in pharmaceutical stocks as investors bet on a renewed burst
of deal-making across the sector.
The two drug companies will join forces in the consumer healthcare sector to combine brands
including Aquafresh, Beechams and Tixylix, while exchanging their onco-Shares in GSK rose
5.2% to 16.40 and Switzerlands Novartis rose 2% to 76.40 Swiss francs (51.28).logy and
vaccine businesses.
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Opportunity to combine high quality assets in vaccines and consumer healthcare are scarce. With
this transaction they will substantially strengthen two of their core businesses and create
significant new options to increase value for shareholders.
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, shampoos and shilajit for Dabur, Whos
core business of manufacturing and marketing fragrances, flavors and essential oils.
Northern Aromatics Ltds. Manufacturing facility in Pantnagar, Uttarakhand was on a slump sale
basis for Rs. 15 crore. Dabur said the facility will be used to manufacture its food products,
ayurvedic medicines and cosmetics. Dabur had agreed to purchase the business including
manufacturing facility and all assets and liabilities relatable to the said facility.
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. And in case of Dabur, NAL already manufactured some products for
them. So it was very profitable deal for Dabur India Ltd.
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Future lifestyle fashion ltd

Future Lifestyle Fashion Ltd, part of the Kishore Biyani-led Future Group, has divested its
minority stakes in ethnic wear firm Biba Apparels and designer Anita Dongre-owned AND
Designs. The divestment was for Rs. 450 crore. Future Lifestyle Fashion Ltd demerged its
fashion business in November, 2012 and formed a new company called Future Lifestyle
Fashions. It has a portfolio of over two dozen fashion and lifestyle brands. Both investments
were made more than five years ago. The Future Group generally exits investments when they
become large.
The company has stated that it made a profit of Rs 190 crore from sale of stake in Biba. It had
22.9 per cent stake in AND Designs and 25.8 per cent stake in BIBA Apparels. They had first
acquired a 6.5 per cent stake in Biba in 2007, which was gradually increased to 25.8 per cent in
2011.
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Blackberry and Fairfax

BlackBerry Ltd. completed the $1-billion US financing in November 2013 after Fairfax
Financial scaled down a larger plan to buy the company outright.
More than half of the money came from two institutional investors they are: $300 million from
Canso Investment Counsel Ltd. of Richmond Hill and $250 million from Fairfax Financial
Holdings Ltd., which is BlackBerrys largest shareholder.
Fairfax and the other investors had 30 days to buy an additional $250 million of the interestpaying notes, which could be used to buy BlackBerry shares for $10 US each.
BlackBerry shares were at $6.77 in Toronto stock exchange and $6.475 on Nasdaq, where most
of the companies trade their shares, down from $7.77 US on Nov. 1, before Fairfax changed its
proposal.
In a way it was a fair deal for the smart phone maker blackberry. It was going through a bad time
as its smart phone market was taken over by other players like Samsung, Nokia and Apple which
are among the top 5 ranking companies in the market. This had also leaded to possible new
routes for blackberry to revive. Even if its share prices went down the deal was for blackberrys
overall benefit.
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Flipkart- Myntra
The huge and most talked about takeover or acquisition of the year. 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.
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Asian Paints- Ess Ess Bathroom Products

Asian
signed a
paints
deal with Ess Ess Bathroom
products Pvt Ltd to acquire its front end sales

business for an undisclosed sum in May, 2014. The company on May 14, 2014 has entered into
a binding agreement with Ess Ess Bathroom Products Pvt. Ltd and its promoters to acquire its
entire front-end sales business including brands, network and sales infrastructure, Asian Paints
said in a filing to the BSE on Wednesday.Ess Ess produces high end products in bath and wash
segment in India and taking them over led to a 3.3% rise in share price for Asian paints.
RIL- Network 18 Media and Investments

Reliance Industries Limited (RIL) took over 78% shares in Network 18 in May 2104 for Rs
4,000 crores. Network 18 was founded by Raghav Behl and includes moneycontrol.com, In.com,
IBNLive.com, Firstpost.com, Cricketnext.in, Homeshop18.com, Bookmyshow.com while TV18
group includes CNBC-TV18, CNN-IBN, Colors, IBN7 and CNBC Awaaz.
66
Merck- Sigma Deal

One of the leading Indian manufacturers, Merck KGaA took over US based Sigma-Aldrich
Company for $17 billion in cash, hoping the deal will help boost its lab supplies business.
Sigma is the leading supplier of organic chemicals and bio chemicals to research laboratories and
supplies groups like Pfizer and Novartis with lab substances.
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.
TCS- CMC
Tata Consultancy Services (TCS), the $13 billion flagship software unit of the Tata Group, has
announced a merger with the listed CMC with itself as part of the groups renewed efforts to
consolidate its IT businesses under a single entity.
67
At present, CMC employs over 6,000 people and has annual revenues worth Rs 2,000 crores.
The deal was inked a few days back. TCS already held a 51% stake in CMC.
Tata Power- PT Arutmin Indonesia

Indias largest private power producer, Tata Power, purchased 30% stake in Indonesian coal
manufacturing firm for Rs 47.4 billion. Earlier this year, they sold off 5% of its stake in PT
Arutmin Indonesia (Arutmin) and PT Kaltim Prima Coal (KPC) for Rs. 250 billion due to falling
coal prices globally. It plans to sell the remaining 25% stake for $ 1 billion soon too.
Tirumala Milk Lactalis

The largest dairy player in the world, Groupe Lactalis SA, acquired the 18 year old Hyderabad
based Tirumala Milk products for a whopping Rs 1750 crore ($275 million) in January, 2014.
Founded in 1896 by D Brahmanandam, B Brahma Naidu, B Nageswara Rao, Dr N Venkata Rao
and R Satyanarayana, Tirumala is the second largest private dairy company in South India.
Lactalis acquired 100% of their shares.
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Aditya
Birla Minacs- CSP CX
Aditya Birla Nuvo Ltd (ABNL) owned ABNL IT & ITeS Ltd. was sold to a Canadian based
technology outsourcing firm marking Aditya Birlas exit for the IT industry.
The deal was chalked out with a group of investors led by Capital Square Partners (CSP) and CX
Partners (CXP) for $260 million (approximately Rs. 1,600 crore).
Sterling India Resorts- Thomas Cook India

Billionaire Prem Watsa owned Thomas Cook India bought the Sterling Resorts India for Rs 870
crores in , marking Thomas Cooks entry into the hospitality sector. Thomas Cook had earlier
acquired Ikya Human Solutions in 2013.
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Yahoo- Bookpad
The search engine giant, Yahoo, acquired the one year old Bangalore based startup Bookpad for
a little under $15 million, though the exact amount has not been disclosed by either of the two
parties concerned. While the deal value is relatively small, this was the first acquisition made by
Yahoo, and was much talked about and hence finds a mention in our list.
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Flipkart Acquires Mobile Marketing Platform Appiterate

Making its second acquisition in the year, Countrys largest ecommerce firm Flipkart India has
acquired Delhi based Appiterate, a mobile marketing start-up owned by DSYN Technologies Pvt.
Ltd. The financial details of the deal remain undisclosed.
Post the acquisition, Appiterate will be integrated into Flipkart's mobile app, which enable
eCommerce firm targeting users based on their activity on the app and website. Also, Appiterate
team will join Flipkart board.
Flipkart is looking for more investments and acquisitions in other mobile companies to improve
its mobile app capabilities.
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Myntra Acquires Mobile App Developer Nnative5

Online fashion and lifestyle store Myntra has acquired Bengaluru-based mobile application
development platform Native5. The financial details of the deal remain undisclosed.
As a part of deal founders of Native5 will be absorbed into the Flipkart technology team. Last
year, Flipkart acquired Myntra for $330 Mn.
With this acquisition, Myntra is looking at escalating its website to a mobile friendly one.
Bharti Airtel To Raise Funds From Chinese Banks

Indian multinational telecommunications services company, Bharti Airtel to raise around R15925
Cr ($2.5 Bn) from China Development Bank and Industrial and Commercial Bank of China.
The company will utilise these funds for the growth of data networks and is subject to final
agreements and the requisite approvals, as applicable, including RBI approvals.
The China Development Bank has committed financing of upto $2 Bn with an average maturity
of about 9 years and the Industrial and Commercial Bank of China has committed $0.5 Bn with
an average maturity of about 9 years making it the largest and longest bilateral commitment to an
Indian telecom operator.
72
Airtel To Buy Augere Wireless Broadband

Telecommunications services company, Bharti Airtel is in advanced talks to buy out Augere
Wireless Broadband India for about R150 Cr. The deal is subject to regulatory approvals.
Founded in 2007, Augere offers affordable and accessible broadband internet services to
communities worldwide. The company has so far launched broadband internet services in
Pakistan and Bangladesh under the brand name Qubee. It also has licenses to operate
broadband wireless networks in Madhya Pradesh and Chhattisgarh states in India and is in the
phase of testing a pilot wireless network based on LTE technology in Madhya Pradesh.
Currently, Bharti Airtel holds 4G airwaves in the 2300 MHz band in 8 of 22 circles across the
country. In 2010, it had purchased 4 airwaves circles and later acquired San Diego based
Qualcomm's airwaves in another four circles, including Delhi and Mumbai.
73
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.
This would be PVRs second attempt towards acquisition of DT Cinemas after 2009, as the deal
was called off due to some legal issues.
Cipla To Acquire Uganda Based Quality Chemical

BSE Listed Cipla Limited, today announced that it has entered into a definitive agreement to
acquire a 51% stake in Quality Chemicals Limited for R190.96 Cr ($30.05 Mn) of which $8 Mn
payable upfront on completion and 5 equal installments of USD 4.41 million payable at annual
intervals.
The acquisition will be routed through Cipla (EU) Limited UK, the wholly owned subsidiary of
Cipla Limited and it will strengthen Ciplas overall presence in the African market and the deal is
expected to be completed by end of July 2015, subject to regulatory approvals.
74
Royal Enfield Buys Design And Engineering Firm Harris Performance

Two wheeler division of Eicher Motors, Royal Enfield has acquired UK based design and
engineering company Harris Performance Products Ltd for an undisclosed amount. Through the
deal, it will acquire all assets, employees, trade names, technical know-how and intellectual
property of Harris Performance.
Being the first acquisition of Royal Enfield, it will enhance its engineering and product design
capabilities.
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.
75
Vodafone India Exits Bharti Airtel

British telecom company Vodafone has exited from Bharti Airtel by selling its 4.2% stake in the
Indian telecom major to an arm of Bharti Group for $200 Mn (R 1274.70 Cr), through its wholly
owned subsidiary.
Vodafone has to sell its entire stake in Bharti Airtel following new norms issued by government
that bars a telecom operator from holding any kind of stake in competition under unified
licences.
Vodafone had bought a 10% stake in Bharti Airtel in 2005 and sold a part of it in 2007 post its
acquisition of Hutchison-Essar, now renamed Vodafone India.
Mahindra Holidays To Buy Additional Stake In

Holiday Club
Chennai based, Mahindra Holidays and Resorts has announced to buy additional 64% stake for
about R200 Cr in Finland based Holiday Club Resorts, by exercising its Call Option and the deal
expected to be completed in 2-3 months, subject to regulatory approvals.
Post deal, Mahindra Holidays stake will rise up to 88% from the current holding of 23.3% in
Holiday Club and the balance 12% stake are primarily held by the management. Initially it had
acquired 18.8% stake in Holiday Club in July, 2014 and subsequently raised its stake to 23.3%
76
Snapdeal Buys Mobile Payment Startup Freecharge

In the biggest startup acquisition deal, ecommerce marketplace Snapdeal has snapped up
Freecharge, an online platform for recharge, utility payments, promotions and couponing. The
deal size was not disclosed, however, reports peg to be around $400 Mn.
The deal beats the largest acquisition till of Flipkart buying out Mnytra, strengthening its fashion
portfolio.
Future of Mergers and Acquisition

Number of factors have influenced Mergers and Acquisition in 2015 but market is the
primary force that drives them. Another factor in the rise in mergers is a booming economy,
which is growing at unprecedented levels. As the country faced recession in the past decade,
many companies were forced to downsize, and the number of major mergers decreased
accordingly. Improvements in the economy, as well as potential legislative changes, very well
sparked another wave of mergers.
Despite negative studies and resistance from the economists, Mergers and Acquisitions
continue to be an important tool behind the growth of a company. The reason is that the
expansion is not limited by internal resources; no drain on working capital, stocks is attractive as
tax benefit and above all can consolidate industry and increase firms market power.
77
With the FDI policies becoming more liberalized, Mergers and Acquisitions talks are
heating up in India and are growing with an ever increasing cadence. They are now not limited to
one particular type of business. The past mergers cover every size and variety of business.
Mergers and Acquisitions are on the increase over the whole marketplace, providing platforms
for the small companies being acquired by bigger ones.
Indian markets have witnessed an increasing trend in mergers which may be due to
business consolidation by large industries, consolidation of business by multinationals operating
in India, increasing competition against imports and acquisition activities. Therefore, it is ripe
time for business houses and corporates to watch the Indian market, and grab the opportunity.
Conclusions
The following conclusions have been drawn from the study:
1. Post- liberalization, most Indian business houses are undergoing major structural
changes, the level of restructuring activity is increasing rapidly and the
consolidations through M&A have reached every corporate boardroom.
2. Most of the mergers that took place in India during the last decade seemed to have
followed the consequence of mergers in India corroborate the conclusions of research
work in U.S. with most of the M&A are taking place in India to improve the size to
withstand international competition which they have been exposed to in the Postliberalization regime.
78
3. The M&A activity is undertaken with the objective of financial restructuring and to
avail of the benefits of financial restructuring. Nowadays, before financial
restructuring, it has become a pre-requisite that companies need to merge or acquire.
Moreover, financial restructuring becomes easier because of M&A. the small
companies cannot approach international markets without becoming big i.e. without
merging or acquiring.
4. Market capitalalisation of a company sometimes is found to be going up or down

without any corresponding change in the EVA and MVA since the stock may be
strong because of the general bullish scenario in the market, s is observed in most of
the cases in our study.
Bibliography
Books
1) Mergers and Acquisitions A Guide to creating value for Stakeholder

-Micheal A. Hilt
-Jefferey S. Harrison
-R. Duane Ireland
2) Independent Project on Mergers and Acquisitions in India A Case Study

-Kaushik Roy Choudry
79
-K. Vinay Kuma
3) Cases in corporate Acquisitions, Mergers and Takeovers

-Edited by Kelly Hill
4) Successful mergers getting the people issues right

-Marion Devin
5) Merger, Acquisition and corporate restructuring in India

-Rachna jawa
6) Financial services 3
-M.Y.khan
rd
edition
Websites
www.investopedia.com
www.wallstreetjournal.com
www.ny-times.com
www.economictimes.com
www.google.com
www.wikipedia.com
www.mergersindia.com
www.mergerdigest.com
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MERGERS AND ACQUISITIONS

- INDIAN SCENARIO 2010

WELINGKER INSTITUTE OF MANAGEMENT

YEAR OF SUBMISSION: - JUNE, 2015

12. Types of acquisitions

13. Methods of acquisitions

14. Distinction between mergers and acquisitions

17. Motivations for mergers and acquisitions

18. Purpose of merger& acquisition

19. Phases of mergers & acquisitions

21. Mergers and acquisitions: valuation

22. Advantages of mergers and acquisitions

23. Disadvantage of merger & acquisition

24. Costs of mergers and acquisitions

25. Defence strategies against mergers & acquisitions

D TOP MERGERS & ACQUISITIONS IN INDIA

27. Mergers & acquisitions in 2010

28. Mergers & acquisitions in 2011

29. Mergers & acquisitions in 2012

30. Mergers & acquisitions in 2013

31. Mergers & acquisitions in 2014

32. Mergers & acquisitions in 2015

33. Future of mergers and acquisition

2. Magic Circle for a Successful Merger

Introduction to Merger and Acquisition

With recession taking toll of many Indian businesses and the

Successful competition in international markets may depend on capabilities obtained in

Considerable amount of brainstorming would be required by the managements to reach

Merger is defined as combination of two or more companies into a single company

Equity shares in the transferee company

Merger is a financial tool that is used for enhancing long-term profitability by

It has evinced particular interest among researchers because of the general

Much of the traditional analysis relating to economies of scale in production,

Others argue that diversification by the company is also essential owing to

This is a mild form of conglomeration. It is the merger of one company with

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

An Acquisition usually refers to a purchase of a smaller firm by a larger one. Acquisition,

In business, a takeover is the purchase of one company (the target) by another

i. Friendly takeover: Before a bidder makes an offer for another company, it

Back flip takeover: A back flip takeover is any sort of takeover

in which the acquiring company turns itself into a subsidiary of the

Reverse takeover: A reverse takeover is a type of takeover where a

private c o m p a n y acquires a public company. This is usually done at

Agreement with the persons holding majority interest in the

Purchase of shares in open market;

To make takeover offer to the general body of shareholders;

Purchase of new shares by private treaty;

Acquisition of share capital through the following forms of

Distinction between Mergers and Acquisitions

History of Mergers and Acquisitions

First wave mergers

End of 1st Wave Merger

mergers could be halted using the Sherman Act.

Second wave mergers

End of 2nd Wave Mergers

End of the 3rd wave merger

Forth wave mergers

Fifth wave merger

IMPORTANCE OF MERGERS AND ACQUISITIONS

Motivations for mergers and acquisitions

1. From the standpoint of shareholders

a) Realization of monopoly profits

2. From the standpoint of Mergers

4. Benefits of general public