MERGERS AND ACQUISITIONS IN THE AUTOMOBILE INDUSTRY

Presented By: Sonali Hatwal (26) Tejasvi Kumar (29)

PLAN OF THE PRESENTATION

Global trends Regional trends National trends Global deals for 2012 National deals An insight into five major global and national deals Role of the Competition Commission of India References

GLOBAL TRENDS
Global cross sector M&A activity fared much better than the automotive sector in 2012 with deal volumes declining by 7% and deal value declining by 17% as compared to 2011

GLOBAL TRENDS CONTD.

GLOBAL TRENDS CONTD.

After a sharp spike during the first half of 2011,deal volumes and deal values have slowed in 2012 Europes debt crisis continues to weigh heavily on the European auto sector, which in prior years has been the most active participant in global automotive M&A Factors in the overall decline of M&A activity included the uncertainty of the outcome of the presidential election, the fiscal cliff scenario in the US, and the slowdown in economic growth and transition of power in China. Automotive deal value and volumes were at lower levels during 2012 than those witnessed during the recession of 20082009
YEAR DEAL VALUE DEAL VOLUME

2012 2011

$30.2 bn $44.9 bn

490 deals 594 deals

GLOBAL TRENDS CONTD.

As can be inferred from the adjacent graph, small and mid-size deals dominated the global automotive M&A landscape The six mega-deals (>$1 billion) transacted in 2012 was consistent with the last few years The low level of mega deals being transacted relative to pre-recessionary automotive volumes is indicative of both the risk appetite of acquirers as well as the focus of the strategic buyers on achieving concentration of scale and expertise in the specific product/sectors in which they compete.

REGIONAL TRENDS
EUROPE: Due to the current economic crisis and ensuing austerity measures, Europes share of M&A activity declined. Europe accounted for the largest acquirer region in terms of value with a 43% share in 2012 Three of the top five deals by disclosed value were transacted by European acquirers of which two were intra-regional deals. NORTH AMERICA North America underwent restructuring during the 20082009 recession, but is providing strategic buyers with the financial resources to execute M&A strategies North American acquirers share of global M&A increased from 20% in 2010 to 27% in 2012

REGIONAL TRENDS CONTD.

North American entities also were the most prominent cross border acquirers, with 34 out of 102 cross border deals ASIA Asia was the most active acquirer region with more than one third of the global automotive M&A volume during 2012 A long time second place acquirer behind Europe, as of 2012, Asia took the lead as the global leader in acquisitions Most activity in Asia was within its own region, with 136 transactions between Asian entities

REGIONAL TRENDS CONTD.

REGIONAL TRENDS CONTD.

NATIONAL TRENDS

Number of deals in Indian Automobile sector

2001 48 2002 36
60 50
40 30 20 10 0 2000 2002 2004 2006 2008

2003 45

2004 36

2005 39

2006 33

2007TOTAL 38 275

Deal value in Crores

2001 743 2002 1400 8000 7000 6000 5000 4000 2003 1355 2004 957 2005 6167 2006 2026 2007 7251 TOTAL 19866

3000
2000 1000 0 2000 2002 2004 2006 2008

Reasons for low M&A

From the above analysis we observed that the number of M&A deals decreased from 1,320 to 1,077, i.e. decreased by 3.63 per cent, But the value of deal has gone up by 32 per cent, which may be because of more valuable single deals happening. The World wide economic slowdown is one of the most important factor for decrease in the no. of M&A in India during the last couple of years. The various research studies in past shows that management cannot take it for granted that synergy can be generated and profits can be increased simply by going for mergers and acquisitions. Bubble in the Financial market during the period of 2004-07 results in the overvaluation in the stock prices almost all of the companies.

LIST OF GLOBAL DEALS 2012

S. No.
1

Date effective
8/1/2012

Target name
Dr Ing hcF Porsche AG Ducati Motor Holding SpA Proton Holdings Berhad Toyota Auto Body Co Ltd GAC Changfeng Motor Co Ltd Avtovaz PSA Peugeot Citroen SA Kanto Auto Works Ltd Guangqi Mitsubishi Automobile

Target nation
Germany

Acquirer name
Volkswagen AG Automobili Lamborghini SpA

Acquirer nation
Germany

% shares acquired
50

Value of transaction ($ mil) Buyer type

8,855 TRADE

7/19/2012

Italy

Italy

100

1,046

TRADE

3 4

3/16/2012 1/1/2012

Malaysia Japan

DRB-HICOM Bhd Malaysia Toyota Motor Corp Japan

100 43

963 957

TRADE TRADE

5 6 7 8

3/20/2012 2/14/2012 3/27/2012 1/1/2012

China Russia France Japan

GAC

China

71

709 420 399 366

TRADE TRADE TRADE TRADE

Rostekhnologii Russia 29 General Motors Co United States 7 Toyota Motor Corp Japan 50

10/11/2012

China

10

3/28/2012

Man Force Trucks Pvt Ltd India

Investor Group Japan MAN Nutzfahrzeuge AG Germany

50

219

FIN

50

202

TRADE

LIST OF NATIONAL DEALS

S. No.
1 2 3

Date effective
Mar-08 Mar-10 Apr-05

Acquirer Target name Target nation name

Jaguar land rover Hispano Carrorcera SA UK Spain Tata motors Tata motors Tata motors

Acquirer nation
India India India

% shares acquired
100 100 Merger

Value of transaction ($ mil)

2300 N.A. N.A.

4 5 6 7 8 9 10

Mar-04 Apr-11 Aug-06 Dec-10 Jul-13 Feb-09 Nov-07

Tata finance India Daewoo Commercial Vehicle company Korea HV Transmissions India Avia Optare Erik Buell Racing Universal Components KTM power sports AG

Tata motors HV Axles

India India

100 Merger Merger 75.1 49.2 100 47

102

Czech Republic Ashok leyland India UK US UK Austria Ashok leyland India Hero motor corp India TVS Bajaj India India

35 5 10 6600 69

AN INSIGHT INTO FIVE MAJOR DEALS

TATA MOTORS AND FORD

Tata motors, the Indian auto company acquired Jaguar Land Rover from Ford Motors for $2.3 billion in June 2008 At the time, Ford was raising money to ensure its own survival, and it sold the brands for several billion dollars less than it had paid to acquire them years earlier Tata Motors appears to have succeeded in large part because it did not seek to run Jaguar Land Rover from Tata headquarters in India Instead, it left day-to-day management in the hands of executives in England It also benefited from projects started under Ford ownership Initially the deal did not look promising as the financial crisis hit soon after the deal closed, and demand for luxury cars tumbled in Europe and North America its two biggest markets

TATA MOTORS AND FORD CONTD.

Initially the deal did not look promising as the financial crisis hit soon after the deal closed, and demand for luxury cars tumbled in Europe and North America its two biggest markets Struggling with a $3 billion debt it took on to pay for the deal, Tata Motors was forced to put more money into the company after it failed to secure financial aid from Britain

PORSCHE AND VOLKSWAGEN

TIME PERIOD: 2004-2008 ORIGIN: Both were German companies Initially, Porsche took a holding of 30.9% over the company, as it announced it did not intend to take over Volkswagen On March 3 2008, Porsche announced that it would increase its VW stake up to 51 per cent, making them the top dog over at Volkswagen

BAJAJ - KTM
In addition to selling imported as well as locally assembled KTM branded bikes in India, Bajaj Auto intends to utilize the partnership for jointly manufacturing complex, high-end and powerful engines in the near future The alliance gave Bajaj Auto a much needed access to KTMs intricate engine technology Bajaj will tap into KTMs extensive service and dealer network spread across premium markets like Europe, while KTM will use Bajajs influence in China, one of the worlds largest two-wheeler markets. Bajaj spent about Rs 700 crore in KTM, mainly to buy shares in KTM, earlier it spent Rs 135 crore to buy 10% share in KTM.

TATA - DAEWOO
Tata Motors, today completed the acquisition of the Korea-based Daewoo Commercial Vehicle Co.(DWCV) for $102 million as part of its strategy to become a global player The acquisition would mark a major commitment on behalf of the Tatas to make DWCV an "extremely profitable' Tata Daewoo exports trucks to more than 40 countries including the UAE, Algeria and South Africa, as well as domestic sales in India. Tata Motors' plan for M&As is clear. Praveen Kadle, executive director finance and corporate affairs, says, "We acquire a company only if it gives us a new technology, new markets, new products, new customer bases or a new product development capability. The deal must also make financial sense."

CHRYSLER AND FIAT

YEAR : 2009 Fiat and Chrysler LLC announced that they were going to form a global alliance Under the terms of the agreement, Fiat took a 35% stake in Chrysler and gained access to a North American dealer network in exchange for providing Chrysler with the platform to build smaller, fuel-efficient vehicles The partnership would provide each company with economies of scale and geographical reach at a time when both are struggling to compete with larger rivals such as Toyota, Volkswagen, Renault and Nissan On April 30, 2009 the deal became official

ROLE OF COMPETITION COMMISSION OF INDIA

The Competition Commission of India is inquiring into alleged anticompetitive practice of carmakers who sell spare parts at higher prices to consumers, and only through their authorized dealers and stockists International car makers, Honda, Hyundai and Volkswagen, have come under the scanner of the competition watchdog CCI for abusing their dominant market position by selling auto parts to customers at high prices.

REFERNCES
http://www.automopedia.org/2009/05/05/a-brief-history-of-automotivemergers/ http://www.cbc.ca/news/canada/a-timeline-of-auto-industry-mergers1.709231 http://www.tata.com/article.aspx?artid=4A44Rb8r5C8= Driving Value:2012 Automotive M&A Insights ; Published in April 2013 www.pwc.com/auto

THANK YOU