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Mergers and Acquisitions: Trends

Key points

M&A represent a major force in modern financial and economic environment
Acquisitions remain the quickest route companies take to operate in new
markets and to add new capabilities and resources to existing ones.
Events like M&A are of great significance in the modern political environment
The value of global M&A activity amounted to $3.8 trillion in the year 2006
American companies, for instance, created titanic business entities by
announcing 74,000 acquisitions and 57,000 alliances from 1996 through 2001
Merger Movement
The first wave (1890-1905)
Many of the corporate giants in the US, like General Electric, Eastman Kodak,
American Tobacco and Dupont, were formed during the first wave
The second wave of 1920s
Product extension mergers, as in the case of IBM, General Foods and Allied
Chemicals, market extension mergers in food retailing, department stores, motion
picture theatres and vertical mergers in the mining and metal industries
The third wave of 1960s
Period of conglomerate merger movement
The fourth wave of the 1980s
It specifically featured the hostile takeover and the corporate raider
The fifth wave of the 1990s
It can be categorized as strategic mergers
Largest World Wide M&A

Effective Year Acquirer Target Transaction Value in
$ Billion
June 2000 Vodafone Airtouch
PLC
Mannesmann AG $202.8
January 2001
American Online Inc Time Warner $164.7
June 2000 Pfizer Inc Warner Lambert Co $89.2
November 1999 Exxon Group Mobil Corp $78.9
December 2000 Glaxo Welcome Plc Smithkline Beecham
$76
October 1998 Travelers Group Inc Citigroup $72.6
October 1999 SBC Communication
Inc
Ameritech Corp $62.6
May 2000 Shareholders Nortel Network
Corp
$61.7
September 1998 NationsBank Corp Bank America Corp $61.6
June 1999 Vodafone Group PLC Air Touch
Communications
$60.3

Largest M&A Deals in India


SL Deal Date Value
1 Tata Steel Corus Jan 2007 $12.2 billion
2 Voda fone Hutchison Essar Feb 2007 $11.1 billion
3 Bharti-Zain March 2010 $10.7 billion
4 Hindalco Novelis Feb 2007 $6 billion
5 Ranbaxy - Daiichi Sankyo June 2008 $4.5 billion
6 ONGC- Imperial Energy Jan 2009 $2.8 billion
7 NTT DoCoMo-Tata Tele Nov 2008 $2.7 billion
8 HDFC Bank-Centurion Bank of Punjab February 2008 $2.4 billion
9 Tata Motors-Jaguar deal March 2008 $2.3 billion
10 Sterlite-Asarco May 2008 $1.8 billion
11 Suzlon RePower May 2007 $1.7 billion
12 RIL -RPL Merger March 2009 $1.68 billion
Factors influencing Cross Border M&A

Globalization of products and service goods market
Technological advancement led to massive investment and companies had to
adopt globalization through cross border mergers to achieve economies of
scale and recover cost
The economic integration of European Union and European Monetary System
Trends in equity and bond markets Financial Innovations and easy availability
of capital
Economic Liberalization and reforms in developing nations
M&A Activity in Major Sectors

Cement Industry
Banking Sector
Pharma Sector
Food & Beverages Industry
Oil & Energy
Media & Entertainment
Telecommunication Industry
Chemical Industry
IT& IT Related Services
Steel Industry
Automotive Industry
Financial Services
Metal Industry
Factors driving Indian Companies to go
in for M&A
The only way for companies with sick subsidiaries to seek a credible rehabilitation
package is to amalgamate the sick subsidiary with the parent company
Companies are seeking to consolidate the core business activities of the group
firms to attain balance sheet size and net worth to mount strategic takeovers of
companies in similar business activities
In the third category of companies, promoters have proposed to merge
investment subsidiaries with the parent to streamline their shareholding in other
group companies
Many mergers and takeovers have happened for tax advantage
Another important factor driving M&A activity is the changing role of financial
institutions
The presence of intermediaries, like investment bankers, has facilitated M&A
activity by negotiating with buyers and sellers

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