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à Introduction
à Definitions
à Types of M & A
à Reasons for M & A
à Overview of M&A of India
à Process of M & A
à Business Valuation
à CEO role in M & A
à CFO role in M & A
à HR role in M & A
à Regulatory Framework
à Reasons for Failure
à Conclusion
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à The phrase Mergers and Acquisitions (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.
à M&A¶s have become popular from last two decades due to globalization,
liberalization, technological developments and intensely competitive business
environment.
à The synergistic gains from M&As may result from more efficient
management, economies of scale, more profitable use of assets, exploitation
of market power, the use of complementary resources, etc.
Definitions

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A Merger is defined as the combination of two or more independent
business corporations into a single enterprise, usually involving the
absorption of one or more firms by a dominant firm.
Mergers may be broadly classified as
 
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Consolidation of two or more firms operating firms in the same stage of
production. This form of merger results in expansion of a firms
operation in a given line and at the same time eliminates competitor.
Ex..
Glaxo Wellcome + SmithKline Beecham ΠGlaxoSmithKline

McDonnell + Douglas Aircraft ΠMcDonnell Douglas + Boeing

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Consolidation of two firms that operate in different stages of production or
distribution.
Warner Communications + Time IncΠTime Warner
Oracle + sun Micro systems

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Backward Integration Forward Integration

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Merger of firms in unrelated lines of business that are neither competitors
nor potential or actual customers or suppliers of each other. Their business
are not related either horizontally or vertically.
Ex«
PepsiCo ± YUM Group (Pizza Hut, KFC«..)
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Acquisition may be defined as an act of one enterprise of acquiring, directly
or indirectly of shares, voting rights, assets or control over the
management, of another enterprise
Ex.. Bharathi Airtel Acquired Zain Africa BV
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Combination of two or more small companies into a third new company .
The new company absorbs the assets and liabilities of the original companies
which ceases to exist.
A+BŒC
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Demerger is the converse of a M&A. A corporate strategy to sell off
subsidiaries or divisions of a company.
Ex.. Reliance Industries
British Telecommunication demerged a mobile phone arm to boost the
performance of stocks. BT has taken this step as BT wireless was making
huge losses.
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à Economy of scale :
à Economy of scope :
à Increased revenue or market share :
à Cross-selling : Bank and stock broker , Intel & McAfee
à Tax Benefits: ITC - ITCBPL
à Technical Know how
à Overcoming entry barriers
à Elimination of Competition
à Patent or Copy rights
à Diversification of Risk
à Penetrating new geographic regions
 
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March 2010 Zain Africa BV Bharathi Airtel 10700 Telecommunication

Jan - 2010 Tower Portfolio GTL Infrastructure 1838.5 Telecommunication

Feb - 2010 Equipav S.A Shree Renuka Sugars 1160 Retail & Consumer
Products
March 2010 Parkway Holding Fortis Healthcare 686.1 Health care
March 2010 Trinity Coal Corp Essar Group 600 Metals & Mining

Feb - 2010 Unitech Wireless Telenor ASA 434.4 Telecommunication

Feb - 2010 Essar Telecom American Tower Corp 430 Telecommunication
Infrastructure
March 2010 Asian Genco Everstone capital, General 425 Infrastructure
Atlantic, Goldman Sachs,
Morgan Stanley and Norwest
Venture Partners
Jan - 2010 World Telecom Bharathi Airtel 300 Telecommunication
International
Feb - 2010 Tower Vision India Quadrangle Group 300 Telecommunication

 


 


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1. Key contracts
2. Financial statements, including recent audits and projections
3. Business line and Customer lists
4. Employment agreements and organizational charts
5. Professional and consulting agreements
6. Minutes and consents of the board of directors and shareholders
7. Confidentiality and Invention Assignment Agreements with employees
8. Litigation-related documents
9. Patents, copyrights, and other intellectual property-related documents
10. Licenses and permits related to operation of the business
11. Employee problems and disputes
12. Reasons for selling or Merging
13. Strategic plans
14. Inventory holding
 

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1. Market price method

2. Comparable companies' multiples method
3. Discounted Cash glows method
4. Net assets value method
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1. Type of investment (Forward or backward or competitive merger)

2. Feasible Business Line
3. Formulation of the Mission, Goals, and Policies
4. Road Map of Acquisition
5. Building the synergies
6. Assessment of expectations of shareholder
7. Analysis of company, industry, domestic economy, and international
economy
8. Evaluation of company capabilities and limitation
9. Competitive analysis ± assess clients/customers, Suppliers, new entrants
and Products
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1. Strategic Purchase
2. Investment Opportunity and internal cash flow
3. Economically feasible
4. Formation and head the Due ± Diligence Team
5. Valuation of the business
6. Financial Viability
7. Estimates the Worth of Company
8. Regulatory Frame work
9. Analysis of Synergy between two companies
10. Contractual obligations
11. Negotiation of the Deals
12. Terms of payments
13. Acquisition of Finance for M & A
14. Integration of two Organizations
 
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1. Defining organizational structure

2. Corporate and HR Strategy
3. Cultural Sensitivity
4. Corporate governance
5. Assessing people, Organisation and Cultural alignment
6. Study on Due diligence ± Organisation design and development
7. Strategic alignment of HR initiatives with the new business model
8. Exploring the synergies pertaining to HR systems, policies
procedures and Processes
9. Defining Organization Controls
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1. Counselling and career assistance services for employees in the new

organization
2. Organizational restructuring to ensure effective and efficient outcomes
3. Training and Development of the workforce according to the needs of
the new business entity
4. Recruitment and Selection of desired talent for the vacated or newly
created positions
5. Resolution of the discrepancies between the compensation
packages, payroll given to the merged or acquired workforce
6. Team structures, individual jobs and accountabilities
7. Mapping of HR policies, work systems processes and procedures
8. Leadership, organisational development and culture creation
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Companies Act
Income Tax Act SEBI Regulations
Stamp Acts Stock Exchange ± Foreign Exchange
Competition Act Listing Agreement Management Act "P
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1. Excessive Premium
2. Lack of Research
3. Diversification (Vertical Merger, Geographic)
4. Impact of Cultural Gap
5. Faulty Valuation
6. Ego Clashes
7. Incomplete and Inadequate Due ± Diligence
8. Over Leverage
9. Incompatibility of Partnership
10. Lack of Proper Communication
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ô Success of Mergers and Acquisition depends on the business

strategy as the main objective of M&A is wealth maximization of
shareholders by seeking profits in terms of synergy, economic of
scale and scope, Financial and marketing advantages, low
inventory cost and increase the market share in domestic and
international markets.
ô I think M&A are good to the company when handle Strategically
with good leadership, Accurate financial analysis and
valuation, Cultural integration and with effective communication
skills to avoid misunderstanding.
ô I do not think the M&A formed with out any strategic move would
be successful like Acquired because of low Price etc..
ô After M&A the acquired company should be treated as nursery
until it adopts to the external environment to grow well and
produce high yield.