WELCOME

MERGERS
AND
ACQUISITIONS
PRESENTED BY

NAME ROLL NO.

KARAN UMRALKAR 657

SALONI VARDHAN 658

RUSHIKESH ZINE 659

ABHINAV KATLOTAR 663

 MERGER
A merger is when you integrate the business with
another and share control of the combined businesses
with other owner. A merger involves the mutual
decision of two companies to combine and become
one entity. i.e. a + b = c

Merger: 2 firms combine all Assets and Liabilities

Acquirer Target
Usually take a new name
 Types of Mergers

Horizontal Merger
Combination of two or more firms operating in the same
stage of production.
Example: The merger of ACC with Damodar Cements.
Vertical Merger
Combination of two firms that operate in different stages
of production.
Example: Cement manufacturing company acquires a
company engaged in civil construction.
 Types of Mergers
Conglomerate Merger
Merger of firms in unrelated lines of business
that are neither competitors nor potential or
actual customers or suppliers of each other.
Example: General Electric buying NBC
television.
 Types of Mergers

Product Extension Merger

It is executed among companies which sell
different products of a related category.

Market Extension Merger

It occurs between two companies that sell
identical products in different markets.
 Vodafone-Hutchison Essar: $11.1 billion

On February 11, 2007, Vodafone agreed to buy out the

controlling interest of 67% held by Li Ka Shin

Holdings in Hutch-Essar for $11.1 billion.

This is the second-largest M&A deal ever involving an

Indian company.

Vodafone Essar is owned by Vodafone 52%, Essar Group

33% and other Indian nationals 15%.
 ACQUISITION
Acquisition may be defined as an act of
acquiring effective control over assets or
management of a company by another
company without any combination of
businesses or companies. i.e. a + b = a
 Types of Acquisition

Friendly Acquisition

Hostile Acquisition
 Parties in the Acquisition
Holding company– It is a company that holds
more than half of the nominal value of the
equity capital of another company, or controls
the composition of its Board of Directors.

Subsidiary company – The company with the

lesser number of share is called subsidiary
company.
Distinction between mergers and
acquisitions
Mergers Acquisitions
Both firms share the One firm acquires the
liabilities. liabilities of the other
firm completely
Both firms together Business continues
create a new firm under the buyer firm
under a new name. name.
Both firms have a say The target firm has no
in the transactions of say in the transaction
the new firm
Divestitures and Restructurings

Divestiture

Equity carve-out

Spin-off

Split-up
The major M&A deal undertaken
abroad
Tata Steel buys Corus Plc USD 12.1
billion

Hindalco acquired Novelis USD 6

Inc. billion

Tata buys Jaguar and USD 2.3

Land Rover billion

Essar Steel acquired USD 1.58

Algoma Steel billion
 Tata Steel-Corus: $12.2 billion

On January 30, 2007, Tata Steel purchased a 100%

stake in the Corus Group at 608 pence per share in an
all cash deal, cumulatively valued at $12.2 billion.

The deal is the largest Indian takeover of a foreign

company till date and made Tata Steel the world's
fifth-largest steel group.
 Financing M&A
Cash: Payment by cash. Such transactions are usually
termed acquisitions rather than mergers

Financing: Financing capital may be borrowed from a

bank, or raised by an issue of bonds. Alternatively, the
acquirer's stock may be offered as consideration.

Hybrids: An acquisition can involve a combination of

cash and debt or of cash and stock of the purchasing
entity.
 Motives & Benefits of M&A
Economies of large scale
Increased Revenue/ Increased Market Share
Synergy
Taxes
Expansion and Growth
Surplus Resources
Wider customer base and increase in market share
Product , services and business diversification
Reducing competition
 Reasons for M&A
# Accessing new markets 
# maintaining growth momentum
# acquiring visibility and international brands 
# buying cutting edge technology rather than
importing it 
# taking on global competition
# improving operating margins and efficiencies
# developing new product mixes
Google bought YouTube ($1.65B in 2006)
Why?
Google bought a rival.
YouTube had four times as many hits as
Google Video
YouTube streamed nine times as many clips
as Google Video.
Google’s choice to buy rather than build
marked a big strategic change.
YouTube = 53% of video users in the world.
 Problems of M&A
Integration Difficulties: Differing financial
and control systems can make integration of
firms difficult.

Inadequate Evaluation of Target: Acquirer

to overpay for firm.

Large or Extraordinary Debt: Costly debt

can create burden on cash outflows.
Inability to Achieve Synergy: Justifying
acquisition can increase estimate of expected benefits.

Overly Diversified: Acquirer doesn’t have expertise

required to manage unrelated businesses.

Managers Overly Focused on Acquisition:

Managers may fail to objectively assess the value of
outcome achieved through the firm’s acquisition
strategy.

Too Large: Large bureaucracy reduces innovation

and flexibility.
Regulations governing Merger and
Acquisition in India
The provision of the Companies Act,1956.
The Competition Act ,2002 
The Foreign Exchange Management
Act,1999.
SEBI Take over Code , 1994
The Income Tax Act,1961 and
 Legal procedures
Permission for merger: The amalgamation of two
companies should be permitted under their
memorandum of association. The acquiring company
should have the permission in its object clause to carry
on the business of the acquired company.

Information to the stock exchange: The acquiring and

the acquired companies should inform the stock
exchanges (where they are listed) about the merger.
Approval of board of directors: The board of directors of the individual
companies should approve the draft proposal.

Application in the High Court: The draft proposal approved by the board of
directors should be made to the high court.

Shareholders' and creditors' meetings: The individual companies should

hold separate meetings of their shareholders and creditors for approving the
amalgamation scheme.

Sanction by the High Court: The amalgamation is sanctioned after it is

satisfied that the scheme is fair and by the high court.
Filing of the Court order: After the Court order, its
certified true copies will be filed with the Registrar of
Companies.

Transfer of assets and liabilities: The assets and liabilities

of the acquired company will be transferred to the acquiring
company.

Payment by cash or securities: As per the proposal, the

acquiring company will exchange shares and debentures
and/or cash for the shares and debentures of the acquired
company.
 Some M&A in India
India Aluminium and copper giant Hindalco
Industries purchased Canada-based firm Novelis
Inc in November 2007
In November 2008 NTT DoCoMo acquired 26%
stake in Tata Teleservices for USD 2.7 billion. 
2009 saw the acquisition Asarco LLC by Sterlite
Industries Ltd's for $1.8 billion
In May 2007, Suzlon Energy obtained the
Germany-based wind turbine producer Repower.
 LTV ( Ling-Temco-Vought)
corporation
Started by James Ling in 1947 with $2000
investment as LING electric company.
He used securities ( convertible
debentures) which inc. p/e ratio. With this
he was able to buy company much larger
than parent company
Bought TEMCO reaching in fortune 500
In 1967 bought WILSON (a conglomerate)
Did hostile takeover of VOUGHT
 Johnson & Johnson
Instead of growing internally pursues company
who developed successful product
Instead of surpassing competitor by internal
growth will buy them
But pays a huge premium for this.
For ex: it bought CORDIS( medica stent
manufacturer) when deal failed to put J&J as
leader in this field it went on to buy guidant but
the deal failed so it bought pfizer.
THANK
YOU