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PRESENTATION SKILL

TOPIC
ISSUES IN MERGER & ACQUISITION
PRESENTED BY
NAME :- RAVI BHUSAN
COURSE :- PGDM (MCM)
ROLL NO :- 10
SEM :- I
WHAT IS MERGERS?
In business or economics a merger is a
combination of two company into one larger
company. Such actions are commonly voluntary
and involve stock swap or cash payment to the
target. Stock swap is often used as it allows the
shareholders of the two companies to share the risk
involved in the deal. A merger can resemble a
takeover but result in a new company name (often
combining the names of the original companies)
and in new branding; in some cases, terming the
combination a "merger" rather than an acquisition is
done purely for political or marketing reasons.
TYPE OF MERGERS
● Horizontal Mergers
● Vertical Mergers
● Conglomerate Mergers
● Concentric Mergers
1. Horizontal Merger

Combination of two or more firms operating in the
same stage of production.
2. Vertical Merger
 Combination of two firms that operate in different
stages of production.
- Textiles firm merges raw materials firm.
3. Conglomerate Mergers

Merger of firms in unrelated lines of business that are
neither competitors nor potential or actual customers
or suppliers of each other.

Buying and selling ability to manage
Example: General Electric buying
NBC television
4. Concentric Mergers
 Merger of two firms that are so related that there is a
carryover of specific management functions
(research, manufacturing, finance, marketing, etc.)
Example: Citigroup (principally a bank)
buying Salomon Smith Barney (an
investment banker/stock brokerage
operation)
WHAT IS ACQUISITIONS ?
 An acquisition, also known as a takeover or
a buyout, is the buying of one company (the
‘target’) by another. An acquisition may be
friendly or hostile. In the former case, the
companies cooperate in negotiations; in the
latter case, the takeover target is unwilling to
be bought or the target's board has no prior
knowledge of the offer. Acquisition usually
refers to a purchase of a smaller firm by a
larger one.
contd..
Sometimes, however, a smaller firm will acquire
management control of a larger or longer
established company and keep its name for the
combined entity. This is known as a reverse take
over. Another type of acquisition is reverse
merger, a deal that enables a private company
to get publicly listed in a short time period. A
reverse merger occurs when a private company
that has strong prospects and is eager to raise
financing buys a publicly listed shell company,
usually one with no business and limited assets.
Reasons for Acquisitions
Increased market power
Learning and Developing new capabilities
Overcoming entry barriers
Cost of new product development
Increase speed to market
Lower risk than developing new products
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.
Distinction between mergers and
acquisitions
When one company takes over another and clearly
establishes itself as the new owner, the purchase is called
an acquisition. From a legal point of view, the target
company ceases to exist, the buyer "swallows" the
business and the buyer's stock continues to be traded
In the pure sense of the term, a merger happens when two
firms, often of about the same size, agree to go forward as
a single new company rather than remain separately owned
and operated. This kind of action is more precisely referred
to as a "merger of equals". Both companies' stocks are
surrendered and new company stock is issued in its place.
M&A Activities in India:
In 2007, there were a total of 676 M&A deals and 405
private equity deals, in 2007, the total value of M&A
and PE deals was USD 70 billion, Total M&A deal
value was close to USD 51 billion, Private equity
deals value increased to USD 19 billion.
In year 2008..
• M&A deals in India in 2008 totaled worth USD 19.8 bn
• Less compared to last year which stood at 33.1 bn $.
• Decline of M&A activity was in line with the global
activity.
• Cross border M&A totaled 8.2 bn $ compared to 18.7
bn $.
Major M&A Deals Undertaken
Abroad by India Inc.
 Tata steel buys Corus Plc : 12.1$ billion
 Hindalco acquired novelis: 6$ billion
 Tata buy jaguar and land rover : 2.3$ billion
 Essar steel buys Algoma Steel: 1.58$ billion
 Vodafone buys hutch : 11$ billion
 POSCO to invest in building steel manufacturing
plants and facilities in India by 2016
 Goldman Sachs Plans investment in private equity,
real estate, and private wealth management
Tata Steel has acquired the 5th largest steel producer
of the
world, Corus, scoring over Brazil's CSN at $12.15 billion
(around Rs. 55,000 crore) in cash, making it the largest
acquisition by an Indian company and the second
largest in the
industry after Mittal Steel's $38.3 billion acquisition of
Arcelor.
Tata's bid of 608p per share, which beat a price from CSN
of
603p, was 33.6 per cent higher than its original bid. By
some
measures, it exceeded the price paid in other recent
industry
deals, such as Mittal Steel's acquisition of Arcelor last
year.
Netherlands-based Mittal Steel on Tuesday claimed it has met the
minimum conditions for takeover of Arcelor by acquiring 50 per cent of
the Luxembourg-based company's outstanding shares.
"Mittal Steel announces today that... on a preliminary basis and based on
statements made by financial intermediaries, the minimum tender
condition of the offer (that is acquisition of 50 per cent of Arcelor's
outstanding shares on a fully diluted basis) has been met," the company
said in a statement.
After an intense battle of nerves that lasted five months since January, the
Arcelor Board last month accepted Mittal's improved takeover bid worth
$34 billion. A merger of the two would create the world's largest steel
entity Arcelor-Mittal, which would be three times bigger than its nearest
rival.
The results of the offer will be published on July 26, Mittal Steel said.
Under the revised offer, Arcelor shareholders would get 13 Mittal Steel
shares and 150.60 euros for every 12 Arcelor shares.
If the takeover is accepted by 100 per cent of current Arcelor
shareholders, they will end up owning 50.5 per cent of the combined
group, with the Mittal family owning 43.6 per cent of the capital and
voting rights.
SOME FAIL CASES IN M&A.
Quaker Oats bought in 1994 Snapple for $ 1,7 bn.
$ 500 mil. lost on announcement, $ 100 mil. a year later
Snapple was spun off 2 years later at 20% of price

Anheuser-Busch bought in 1982 Campbell-Taggart at $


560 mil
Closed down after 13y of struggling for survival

IBM bought Lotus for $ 3,2 bn. (more than 100% premium)
Probably never to be recouped
THANK YOU