Vriddhan 2018

M&M-SYMC DEAL
Submitted By: Team IIFTian Marketers

Axar Lathia
Pushprajsinh Zala
Parth Parekh
 Case Introduction
Company Introduction:
• Ssangyong Motor Co Ltd - SYMC is a Korean
company manufacturing auto and aggregates
with 7 models under 5 brands that include 2
large sized sedans, 4 SUVs and 1 MPV
• Established in 1954 and in 1988 established
itself as SUV manufacturer by developing a
compact SUV under korando name in korea
• SYMC is a significant player in SUV segment in
South Korea having recorded 1.3 million SUV
sales from 1990-2009
Insolvency:
• SYMC, in 2009, was put under court receivership in South
Korea after incurring a loss of USD 75.42 million company
• The SYMC was controlled by China’s SAIC Motor
Corporation which had 51% stake in SYMC
• Post receivership SAIC ended its 4 year control over SYMC
management
M&M buys SYMC :
• M&M participated in the bidding process for SYMC along
with SM Aluminium, Seoul Investments, Essar group of
Ruia Group of India, French owned Renault Samsung of
South Korea
• In July 2010 M&M Ltd was chosen as the preferred
bidder for Ssangyong
• The deal was completed in Feb 2011
 The Deal

• On Feb 9 2011 the deal was sealed

Payment Details
and M&M Ltd was formally allotted
70% of SYMC’s shares
• M&M would keep SYMC as an M&M proposed to
independent entity with Korean acquire 70% stake in
management SYMC for USD 463
million.
• In Feb 2013, SYMC issued
additional shares to increase the
paid-in capital by 12% 82% of the amount i.e
USD 85 million would be
• Following which, M&M’s holding USD 378m was
paid as debt returnable
proposed to be spent on
increases from 69.63% to 72.85%. 70% equity purchase
to M&M.
 Valuation of Ssangyong Motors

Discounted Cash Flow Method -1 Discounted Cash Flow Method -2

Source : Bloomberg Terminal and Given Case Study Source : Bloomberg Terminal and Given Case Study

• WACC = 5.157% • WACC = 5.157%

• Terminal Growth Rate = 3.1%
• Using Min. Revenue Growth Rate and
constant(inflation adjusted) SG&A.
• Total DCF Valuation = 4,33,690.37
Million INR
• Per share Value in KRW = 59,110.86
Detailed calculations along with
assumptions is attached here with.xlsx
• Terminal Growth Rate = 3.1%
• Using Average Revenue Growth Rate and
SG&A as percentage of Revenue.
• Total DCF Valuation = 4,073.20 Million
INR
• Per share Value in KRW = 555.17
Detailed calculations along with
assumptions is attached here with.xlsx
 Valuation of Ssangyong Motors

Relative Valuation using Multiples 52 Week High-Low

Per share Value in KRW

• Multiples used EV/EBITDA and EV/EBIT.
52 Week High = 12,300
• Comparable peers are Kia Motors, TATA Motors 52 Week Low = 6,400
and Hyundai Motors. Basic Shares Outstanding = 137.2 million
• Analysis carried using Average and Median of Valuation Using above value is between
Multiples. 16,87,560 million and 8,78,080 million.
• The price range per share is
• From EV/EBITDA multiples 5118.94 – 8478.06
• From EV/EBIT multiples 5817.84 – 5982.43
 Football Field Analysis
Ssangyong Motors - Valuation
25th to Median Median to 75th

52 - Week High-Low

12/31/2013 EV / EBITDA

12/31/2013 EV / EBIT

DCF Valuation

0.00 5,000.00 10,000.00 15,000.00 20,000.00 25,000.00 30,000.00 35,000.00 40,000.00

Per share price in KRW

Was the Mahindra-Mahindra and SsangYong
Corporation deal an undervalued buyout?
• Yes, it was an undervalued buyout.
• Actual price paid by Mahindra and Mahindra was 3436 KRW per share.
• Based on the FootBall Field Analysis :
• Based on Multiples valuation, the company is valued Greater than 5000 KRW per
share.
• Based on DCF analysis, It is valued more than 10,000 KRW per share
• In either case, the buyout was Undervalued.

• The figures are calculated at the following exchange rates :

• 1 INR = 17.04 KRW
• 1 KRW = .00098 USD (2010)
 The Perfect Partners
Company Brief : Mahindra A perfect fit due to:

• The company was founded in 1945 by K.C. Deal Details: Complementary Portfolio:
Mahindra, J.C. Mahindra and Malik Ghulam
Mohammed. M&M has entry and SsangYong has
Mahindra emerged as the preferred bidder mid-level products premium SUV (above
• It is ranked 21 in the list of top companies
among 5 companies (up to Rs1m price Rs1m) and luxury car
• Product portfolio includes: utility vehicles
including two wheelers to UVs, SUVs and CVs, range)
70% share of SsangYong was acquired by
tractors, information technology, aerospace,
Mahindra & Mahindra Limited due to following M&M trying to enter SsangYong is known
real estate, hospitality and logistics
reasons:
• Huge cash reserves electric vehicle name in sports utility
• Outbreak of Labor crisis in South Korea market Vehicle
• SsangYong- A loss making Unit
Company Brief : SsangYong Motor • Sound background of M&M SsangYong exports in
• Opportunity for both the companies M&M is a popular about 90 countries
• The company was founded in 1945 by K.C. name in India through 1200 global
Mahindra, J.C. Mahindra and Malik Ghulam • Total cost of acquisition of US$ dealers.
Mohammed. 463 million with US$ 378 million
• It is ranked 21 in the list of top companies in new stocks and US$ 85 million
• Product portfolio includes: Premium SUVs ,
RVs, luxury sedans, Pick ups, Vans
in corporate bonds
• Core competency: strong in R&D In short, The combined entity will,
thus, have a larger market and
expanded product basket.
 Benefits Of Collaboration

1 2
Economies of scale and Scope
• Low cost combined component sourcing
• Economies of scale for global sourcing
• Reduction in product development and time to market
• Sharing of product platforms, engines and powertrains
Increased technical strength
• SYMC's ~600 R&D staff and modern R&D infrastructure
will significantly enhance M&M's R&D efforts
• Optimization of investments in product development
• Enhance capabilities in engine development

3 4
Access to high potential export markets
• SYMC has a presence in Europe, Russia, South America,
the Middle East, Africa and Asia
• SYMC has well established distribution network
• M&M can eye entry into the US car market
Focused management, financial stability of SYMC
• Twice change in ownership since 1997 in SYMC
• Possible Reduction in debt and interest burden with
M&M acquiring SYMC
• So increased focus on product development and
business

5
Financial Synergy
• The acquisition helped lower Ssangyong lower its D/E ratio and
improve its cost of capital
• Lower CAPEX requirements to support existing operations
• Improved PAT level for SYMC