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By Abhishek Bhuwania (Tata Consultancy Services, BSCC)



By Abhishek Bhuwania (07BS0178)

A report submitted in partial fulfillment of the requirements of MBA Program of ICFAI Business School

Distribution List:
Dr. S. Subramanian (Faculty Guide) Dr. Raman Agrawalla ( (Senior Economist/Scientist, Tata Consultancy Services)


Acknowledgement... List of Illustration Abstract.................. 1. Introduction. 1.1 1.2 1.3 1.4 Purpose, Scope, Limitations. Sources and Methods... Report Organization. Outline..

5 6 7 8 8 8 9 9 11 12 16 19 19 20 21

2. Types of merger.. 3. Current scenario of Mergers and Acquisitions in India.. 4. Rationale behind Mergers and Acquisitions................... 5. Some major issues and challenges found in M&A deals 4.1 4.2 4.3 6. Valuation issue Cultural issue... Communication issue..

Is it always necessary for merging firms to be profitable before entering into M&A deal ?............................................................. 22


Tata Consultancy Services Tata Infotech Merger: An example of how to make mergers a success 24


Tata Consultancy Services Computer Maintenance Corporation Ltd: An example of two separate entities sharing excellent work synergy. 29 34

9. Viability of Business Introduction...



Business viability in Mergers and Acquisitions...... 10.1 10.2 Operational Viability... Management viability.

35 36 38 39 50 55

11. Testing Business Viability For M&A. 12. Testing Viability of CMC Ltd As Potential Target For TCS Ltd... 13. Viable System Model Introduction.. 14. Applying VSM In Building Organizational Structure Post Merger. 14.1 14.2 14.3 14.4 14.5 System One - The Operation.. System Two - Stability And Conflict Resolution.. System Three Optimization System 4 Intelligence.. System 5 - Policy..

57 58 59 60 62 64 66 67 68

16. Conclusion.. 17. Annexure 15. References...



I am grateful to Prof. K V Nori, Executive Vice-President for providing me the opportunity to conduct this project and enlightening me by his knowledge. I express my sincerest gratitude to my company guide, Dr. Raman K Agrawalla, Senior Scientist / Economist, Research & Development Lab for his encouragement, support and valuable guidance throughout the project duration. The project area was entirely unknown to me and it required lot of knowledge and guidance. In spite of being fraught with unending engagements in office, he kept me motivating to try best at all times I am extremely thankful to my faculty guide Dr. S Subramanian for providing me with his constant support and guidance in preparing this report. Lastly, I would like to thank ICFAI Business School & Tata Consultancy Services Ltd. for providing me an opportunity to gain hands-on experience by working in a corporate environment.



Top deals Overseas targets.. 12 Top deals - Indian targets13 Cross-Border M&A by Indian companies...13 Metals dominate cross-border deals14 Operating profit of CMC Ltd..33 Viable System Model..57 System 1...58 System 2...60 System 3...62 System 4...63 System 5 ..64



Mergers and acquisitions, an inorganic form of growth have been the flavor of last decade and will continue to be so for many years down the line. One plus one makes the three is the special alchemy of any merger or an acquisition deal. The idea behind entering into any such deal is to increase the shareholders wealth. But from last decade it has been studied from many surveys that more than 50% of the deals fail to achieve the desired synergy. They either do not increase the shareholders wealth or result in actually decreasing their wealth. Keeping in mind the said problem this project includes study of various aspects of mergers and acquisitions. Various rationale, issues and challenges have been found out after analyzing merger or acquisition of few companies both in India and abroad. Companies enter into such deal keeping different objectives in mind. Some merge in order to achieve operational efficiency whereas some do so in order to achieve financial efficiency. Major issue in maximum merger deal is found to be payment of huge premium amount whereas cultural issue is the most critical challenge faced by the merging companies. The project includes case study on merger of Tata Consultancy Services Ltd with Tata Infotech Ltd. At the same time it has been discussed that it is not always necessary for companies to merge in order to work together. For this classic example of work synergy between Tata Consultancy Services Ltd has been studied.

Last part of the project includes study of business viability in context of mergers and acquisition in pre and post phase the deal1. For pre-phase certain criteria have been developed for assessing operational and management viability of the target firm and a scale has been prepared on the basis of which it can be assessed how much viable the target firm is. Based on this scale CMC Ltd. has been tested as potential target for acquisition for Tata Consultancy Services Ltd. For post phase Viable System Model of Stafford Beer has been used in planning organizational structure post merger.

This idea is the brain-child of Prof K. V. Nori, Executive Director, Business Systems & Cybernetics Centre (BSCC),

Tata Consultancy Services and work in this area is in progress at BSCC, TCS by Dr. Raman K Agrawalla and his team.



Purpose A study of business viability in the context of Mergers & Acquisitions. Scope To find out different forms of mergers and acquisitions and rationale behind them To find key issues and challenges in merger and acquisition Building case study on merger between Tata consultancy service and Tata Infotech Studying work synergy between Tata Consultancy Services and CMC Ltd. To study the idea of business viability in context of mergers and acquisitions.

Limitations of study The project is subject to following limitations: The project will be prepared from secondary data. The project includes only few aspects from the vast topic of Mergers and Acquisitions. The findings are exploratory and more extensive studies may be necessary

Sources and Methods 1. Print data sources Books on mergers and acquisition Books on business viability

2. Electronic Data Sources-8-

Magazines and journals Annual reports Various research papers Various other websites

Method Methodology adopted for the project is exploratory and analytical. This project will be entirely based on secondary data. It will include study of various literature, magazine articles, books and case studies on mergers and acquisitions. Report Organization Tata Consultancy Services Ltd, (Business Systems & Cybernetics Centre), Hyderabad Outline The aim of this project is to study various aspects of Mergers and Acquisitions and finding out how to make a business viable for it. Mergers and Acquisitions, an inorganic form of growth has been the flavor of the last decade and will continue to be so for many years down the line. One plus one makes three: this equation is the special alchemy of a merger or an acquisition. The objective of any merger or an acquisition is to increase the share holders value over and above the sum of the two separate companies. Symbolically,

V (AB) > V (A) + V (B), Where, V (A) = Value of firm A V (B) = Value of n firm B V (AB) = Value of merged firm

Since the project is on the study of business viability in context of Mergers and Acquisitions, so it is very important to understand what actually merger and acquisition


mean. A myth exist in the minds of many people that both merger and acquisition are synonymous. But the fact is that though both form an important way of inorganic growth but still differ from each other completely.

What is a merger? A merger happens when two firms, agree to go forward as a single new company rather than remain separately owned and operated. So both the firms cease to exist separately. This kind of action is referred to as a "merger". The stocks of both the companies are surrendered and new company stock is issued in its place. The firms merge when joining together is in the best interest of both the companies. Example: Daimler-Benz and Chrysler merged to form DaimlerChrysler, which was a new firm altogether.

What is an acquisition? When one firm completely absorbs another firm and in this scenario the acquiring firm retains its identity and acquires all the assets and liabilities of the acquired firm that ceases to exist legally, an acquisition is said to take place. When the management of the firm being acquired cooperates in the process then it is considered to be a friendly acquisition. But when the deal is unfriendly, that is, when the target company does not want to be purchased, it is regarded as hostile takeover. Example: Tata Consultancy Services Ltd. taking over Tata Infotech Ltd is an example of friendly acquisition. The recent bid by Microsoft for Yahoo is an excellent example of hostile takeover.

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Mergers and acquisitions are generally considered as a part of expansion strategy. Mergers can mainly be of three types:

Horizontal merger When two or more firms dealing in similar lines of activity combine together then horizontal merger is said to take place. Such deals involve merger between the competitors. The main purpose of Horizontal merger is to reduce or eliminate competition, which further helps in economies of scale and puts an end to price cutting. The merger of Exxon with Mobil in 1998 is an example of horizontal merger.

Vertical merger When a firm acquires upstream of it, that is, the suppliers, or downstream of it, that is, the distributors who sell eventually to the customers, then it is said to be a vertical merger. The former is called backward integration and the latter is called forward integration. Here the merging firms have actual or potential buyer-seller relationship. The purpose of such merger is to lower the buying cost of materials, lower distribution cost, assured supplies or market and also to fight competition. The merger of Merck, a pharmaceutical manufacturer, and Medco a pharmaceutical distributor in 1993 is an example of vertical merger.

Conglomerate merger Conglomerate merger is a type of combination in which a firm from one industry merges with another firm which belongs to an unrelated industry. The merging companies do not have any common business areas or common relationship of any kind between them. The rationale behind such merger is diversification of risk by obtaining greater stability of earnings, cross selling etc. but such merger is not seen very often. The merger of Kelso & Co. (a private equity firm) and Nortek Incorporated (engaged in manufacturing of fans and other electronic items) is an example of this type of merger.

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India has come a long way since the liberalization of India economy in 1991. The Indian Inc. has moved steadily towards building globally competitive enterprise. A steep and encouraging increase in both domestic and overseas M&A activity is indicative of this trend. In order to serve global markets Indian companies are spreading their wings beyond borders and acquiring foreign assets. The total value of M&A deals in India grew at a compounded annual growth rate of around 28% between 2002 and 2006 according to Dr. Sarita Nagpal, Head Manufacturing Services Division, and Confederation of Indian Industry. Most of this growth has in the year 2006, with the value of M&A deals increasing from US$ 7.5 billion in 2004 to US$ 21.4 in 2006. Year 2007 turned out to be remarkable for Indian M&A activity both at home and abroad. A growing economy, robust financial performance and a buoyant stock market supported a remarkable expansion of M&A activity. The year saw the amount invested in overseas M&A exceeded the investment by foreign companies into India. Having a sectoral outlook this time the M&A activity was more broadly based, unlike in the past when it was found in few sectors. Telecom sector dominated the M&A scene with 33% share in total deal value, followed by finance with 15%. Largest deal of the year was Indias steel giant Tata Steel, acquiring Corus, an Anglo-Dutch company for $12.1 billion. Some of the major deals that took place in 2007 were as follows:

Source: Hindu Business Line, 7th March, 2008

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Source: Hindu Business Line, 7th March, 2008

Number of cross border deals and deal value almost doubled in the financial year 2007. The bar graph below shows the number of deals and deal value in 2007.

Source: Hindu Business Line, 7th March, 2008

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The pie-chart below shows the overseas M&A activity which was dominated by the metal sector taking 56 per cent of the total investments. Its two large deals were the TataCorus deal and Hindalco - Novelis.

Source: Hindu Business Line, 7th March, 2008.

Looking at the figures of merger and acquisition deal, in 2007 we can understand that M&A activity is being considered as very important by India Inc. growth. But analyzing the trends of the past the companies are not able to achieve their target after entering into such inorganic mode of expansion in maximum percentage of the case. This is not the case only with Indian companies but almost all the companies irrespective of their geographic location are facing such problem. Earlier according to some surveys conducted on merger and acquisition success rate, it was found that only one-third of the deals are able to increase wealth of share holders and the rest are not able to achieve the desired result. They have either not increased the shareholders value or have resulted in decreasing their wealth. According to Mr. Clay Deutsch, the head of the global merger management practice at McKinsey & Company, It's a very difficult undertaking, making M&A work is one of the really challenging life events that many management teams faced in the company."

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In 2007 a study was conducted by McKinsey where nearly 1,000 global mergers and acquisitions from 1997 to 2006 were reviewed. They compared share prices two days before and two days after each deal was announced. The analysis showed that value created in deals between 2003 and 2006 averaged 6% of the transaction values, whereas those between 1997 and 2000 averaged less than 2%. About 58% of all acquiring companies are still overpaying for acquisitions - but this was better than the 70% that were doing so in 2000. The analysis showed that the main reason of not achieving success is not due to failing in doing the deal or structuring the deal or negotiating. The dominant reason is failure to manage the combined entity in a superior way in postclosing phase. It's very clear to us that the overwhelming reason that an M&A fails is due to something loosely called 'culture.' And culture means failure of leadership, failure of integration, communication failures, failure to populate the new organization with sufficient talent, Mr. Deutsch said. Though some more surveys on merger or acquisition deal shows that there has some improvement in the figure, but still it is not impressive as yet. It is very important for the companies to plan the deal carefully, because in the competitive world of today where survival of the fittest is only possible, no second chance is given to any one.

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Any mergers and acquisition deal has an ultimate objective is to increase the wealth of the share holders. However, it may sound very simple but it is the most difficult task to achieve. In order to keep shareholders happy, other stakeholders like customers, employees and government cannot be ignored. Two merging companies have take along all the stake holders together to reach their final destination. Various motives and rationale of mergers and acquisitions have been found out after analyzing few case studies. The following table shows the analysis: Merging Companies Oracle - PeopleSoft Rationale Increased market share Reduce competition Issues High price paid No prior experience of M & A Challenges Poison pill strategy by PeopleSoft Conflict of interest between stake holders Downsizing the strength of employees. Repositioning of brand would be difficult.

Adidas - Reebok

E-Bay - Skype

Reduce competition Cost saving Increased distribution network, market share Economies of scale Increased revenue Fight competition in a better way Fit into overall value proposition

High price paid

High price paid

Financing through internal cash flows

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HP - Compaq

Increased savings from product rationalization. Improvement in distribution network Increase in volume sales Better position to fight IBM

Ignored customer preference Poor communi-cation of the deal to stakehold-ers

Cultural clash Heavy decrease in share price

Decreased revenue Decreased customer satisfaction

Sify - IndiaWorld Tata Tea - Tetley

Increased customer base Increased market share Strong distribution network of Tetley New market segment

Very high price paid Problem due to difference in accountin g rule

Performance was not good post deal Post deal integration


Tap emerging opportunities in petroleum sector Financial sustainability for both the companies Tax savings Cost advantages and high growth prospects

Under valuation of RPL

Stiff competition Decrease in share price of RIL

After studying the above mergers we can say that companies have different motives behind the merger or an acquisition deal. Also each merger or acquisition deal involves

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different set of issues and challenges. If we generalize, then following points can be taken as rationale for any Merger or Acquisition deal: Increased market share either by increasing customer base in the same market segment or from a new market segment. Increased revenue due to increase in sale. Savings in cost by achieving economies of scale. Reduces competition or provides better platform to cope with it. The bigger size of the merged entity enables it to negotiate prices with suppliers. Marketing and distribution network improves. Helps in financial sustainability of merging companies, the merged company can make use of each other reserves in order to increase its operation. Helps in saving tax. New technology or expertise can be exchanged between the merged companies. Various other industry specific benefits can be enjoyed by such deal.

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Valuation Issue One of the major issues found in merger deals is that of payment of high price to the target company. Maximum merger or an acquisition deal will have this issue. While analyzing the cases of the merger shown in the table above it is seen that the issue is present in almost all of them. So it is very important to understand that despite experts been employed by company to help in merger deal, still the company ends up making overpayment according to analysts. Some analysts look from financial buyer point of view while the company may act as a strategic buyer. Unlike financial buyer, who looks mainly at the financials of the target company, a strategic buyer considers many things while valuing the target companys business. So he may pay more for acquiring the target company as compared to financial buyer. It may also happen that the acquiring company might commit certain mistakes in making assumptions relating to the company they wish to acquire. The reason for overpayment can be as follows: Some of the organizations capital, like employees, customer relationship, industry standing and network capital is difficult to put in numbers. Overpayment can be due to combination of factors like over optimistic appraisal of market potential, over estimated synergy, inadequate due diligence, excessive bidding etc. or may be any intangible asset is not captured in balance sheet.

The valuation basically depends on the following factors: Management team Historical performance Future projections Industry scenario Currency scenario Business opportunity, expected growth rate, level of competition. - 19 -

Stage of the company like early stage, pre IPO stage, post IPO stage. Strategic requirement of the acquiring company. Other factors

We know that valuation is the perception in the eye of beholder. Some will feel that price paid is high while some will support the price paid by the acquiring company. But still to minimize the risk of over valuation a proper due diligence review exercise is to be done keeping in mind the value drivers and business proposition.

Cultural Issue Apart from valuation issue another important issue which cannot be ignored is the cultural issue. In fact majority of the merger and acquisition deals fail because of improper study of the target companys culture. Culture can be defined as the norms, values, beliefs, and attitudes that influence individual and group behavior within an organization. For any M&A deal, apart from checking the financial viability it also very important to give equals or rather more importance to the testing of cultural viability. Managing cultural integration is very important for the success of a merger or an acquisition deal. Merging financial statements is far easier than merging cultures. If it is ignored, the chances are great that post merger or acquisition misunderstanding, confusion, and conflict within the organization will arise. An organizational culture is "the way things are done" and includes factors such as: How employees, customers, suppliers, are treated The type and level of participation of other stake holders in decision-making The speed and process of decision-making The level of formality and controls Performance rewards Risk tolerance

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Quality and cost orientation

As we know the amount of money spent in any merger or an acquisition deal, cultural due diligence cannot be ignored at any cost otherwise it will hamper the overall objective of such deal.

Communication Issue Another important challenge a company generally faces during pre and post phase of merger or an acquisition is that of communication. According to an IABC Research Foundation study sponsored by Johnston Smith International on "How Communication Drives Merger Success," a communication strategy is an important deciding factor of the fate of the deal. Communication before, during and after the event should be given equal importance. Managers involved in merger or an acquisition activity should take utmost care of the communication pattern specially the mode and also words to be communicated. Clarity about motives and intent of entering into the deal should be communicated not only to the employees but also to the customers and suppliers. Company having open communication system can ask the stake holders about their opinion. Rumors and scuttlebutt can have enormous negative impact on the merger integration process. Healthy communication can bridge the differences within the organization as well as between the organizations.

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One important issue which can be studied in context to mergers and Acquisition is that it is not always necessary that the two merging firms need to profitable in pre merger phase. It may happen that a firm is merging or acquiring a loss making firm. This may be done to boost competitive advantage and core competency. It may so happen that the company making loss is not properly managed and its resources and opportunities are either not utilized or under utilized. So another company looking for business opportunities or willing to expand can take the advantage and may try and convince the former for merger or an acquisition. By this it may become win-win situation for both the companies and may result in increasing the wealth of shareholders of both the companies. Similar is case which can be found in case of public sector companies in India. The government divested their stake making way for the private players for running the business in a much better way and tapping market opportunities as and when they come. An example for this can be sighted that of Sun Pharmaceutical Industries of India, which agreed to buy Israeli Taro Pharma, a loss making firm for $ 454 million. The management of Sun Pharmaceutical Industries was of the opinion that Taro has a good portfolio of skin care products. The buyout may offer a strategic benefit to Sun. Besides Israel, Taro has a strong presence in Europe, Canada and US. Its customer contacts and market knowledge will help Sun Pharma to tap new opportunities in these regions. Economic slump creates opportunities for companies rich in cash to get hold of unutilized capacities of loss making competitors at attractive valuations. Another example which can be sighted is that of the famous acquisition by Hindalco of Novelis. Novelis was a loss making company and at the same time Hindalco bought it for a price which was considered to high by the analyst. But the management of Hindalco was of the view that it was a strategic deal keeping long term perspective in mind. There was a general consensus that the deal will hurt in the short term. Even Mr. Debu Bhattacharya, Managing Director, Hindalco agrees that: Hindalcos consolidated earning will get depressed in FY08. There is no question about it. But it will bounce back in FY10 and the deal will be value accretive beyond FY11.

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Another reason for acquiring a loss making firm can be, when a very profitable company combines itself with a loss making one in order to use the losses as a tax writeoff to offset the profits, while expanding the corporation as a whole. For example Global Trust Bank merged with Oriental Bank of Commerce, and losses of GTB was setoff against profit of OBC. But in many countries there are strict regulations to limit the profitable companies from acquiring loss making companies for the tax motive. But one thing that the firm should keep in mind before entering into any such deal is, to analyze various risk involved and also the amount of loss that may occur in case the deal does not works out as per the plans.

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On July 15, 2005, the boards of Tata Consultancy Services (TCS), Indias leading IT giant and Tata InfoTech Ltd (TIL) approved the merger of two companies. The Tata group wanted to consolidated its information technology-enabled services business by merging TCS with TIL. According to the deal the swap ratio was decided as 1:2, i.e. share holders of TIL would get 1 share of TCS of face value Re. 1 for every 2 shares held of TIL having the face value of Rs.10. The paid-up share capital of TCS was then Rs. 400 million, and post merger it would increase to Rs. 489 million. Tata Sons Ltd, the holding company of the Tata group, holds 80.64 per cent stake in TCS and 74.18 per cent stake in TIL. Post-merger, Tata Sons' holding will be 80.52 per cent in TCS. TCS Chief Executive Officer Mr. S Ramadorai said the merger formula was based on the recommendation of independent valuers. He said the merger would bring together two leading IT organizations and lead to efficiency in operations, particularly in the marketing of services. Commenting on the merger, F.K. Kavarana, chairman of TIL said that it is in the best long-term interests of all its stakeholders, given the trend of consolidations in the IT industry. The move will enable large clients to have a single window for a wide array of services and skills, he added Tata Consultancy Services - Background Tata consultancy services is known to be the one of the worlds largest IT company, engaged in providing IT solutions, consulting, services and business-process outsourcing. The company commenced its operations in 1968. It started of as division of Tata group under the name Tata Computer Centre, whose main activity was to provide computer services to other group companies. Soon after the era of computerization and computer services, in early 70s the company was named Tata Consultancy Services. In 1974 TCS took its first software project where it converted the hospital information system from Burroughs Medium system COBOL to Burroughs Small System COBOL. By the year 1980 TCS and a sister TATA firm accounted for nearly 65% of the total Indian software industry exports. Post liberalization of the Indian economy, the company re-invented

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itself to become software products firm. In order to tap the market potential, in the late 1990s, TCS adopted three-pronged strategy developing new products with high

revenue earning potential, tapping domestic and other fast growing markets and focusing on inorganic growth through mergers & acquisitions. The Tata group as a whole has been on an acquisition binge since 2001 including some gigantic ones like Tata Steels acquisition of Corus. TCS came up with its IPO in 2004. Now it has a vision of becoming a global top 10 company by 2010. TCS - An Experienced Player Tata Consultancy Services has been one of the most systematic players of the merger or an acquisition game. The objective behind acquisitions is to strengthen domain presence. In December 2001, a specialist M&A team was formed to function as a think-tank on strategic acquisitions both in India and overseas. The team was led by Mahesh Bhandari and Debasis Pottdar, both former M&A specialists with Arthur D. Little2 and Arthur Anderson3 respectively. Over the last 6 years, the M&A team have guided the companys spree of acquisitions. It had merged with the Tata group's holdings in Airline Financial Services, WTI and Phoenix Global Solutions to create TCS BPO. The team has played an important role in deals like Computer Maintenance Corporation (CMC) in 2001 and Tata Infotech in April this year. TCS, through its subsidiary, Diligenta, acquired a part of UKs Pearl Group in March 2006. It also acquired 75% stake in its Switzerland-based partner, TKS-Teknosoft, which was working as marketing agent for TCS in Europe. Over the next few years, the M&A team will get busier with TCS actively going after overseas acquisitions and, at the same time, consolidating the Tata group's IT holdings. Merger and the Rationale Behind Experience in any field increases the probability of success. Same is true for M & A deals. TCS with some merger or an acquisition deal under its belt has become an experienced player in this field. Merger with Tata Infotech sent the signals of TATA group taking first steps to consolidate its IT companies under TCS umbrella. The motive
2 3

Arthur D. Little, Worlds first management consultancy firm.

One of the biggest accounting firm.

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behind the merger was very easy to guess. Tata Infotech was strong in systems integration, manufacturing, education and training, and engineering. The merger was expected to bring two leading IT organizations in India together. TIL was a leading player in the IT area employing over 3,600 consultancy professionals and having strong operations in the U.S., the U.K. and Australia besides other countries. The merger would give the TCS an expanded customer base and deeper penetration in key geographies and these customers will have access to the wider range of services offered by TCS. It would also result in an improved efficiency of the various departments, as now they would get the support from each other. The merger would also prevent situations where both companies were bidding against each other in bagging the same project. Tata Infotech would get advantage of the experience of TCS in the fields they are already involved in. It would create an overall win-win situation for both the companies and the share holders. The merger also means that the combined entity would be the first IT company in India with sales of over Rs.10,000crore. They would overtake other IT giants like Wipro and Infosys. Exploiting synergies is imperative in a merger. A merger makes immense sense if one plus one can equal three. That should be the aim. We should be able to go to a customer with a wider array of services, which can provide more value," explained Mr. S. Mahalingam, Chief Financial Officer, TCS. He added that Tata Infotech, fits in nicely with four of TCS' primary businesses: IT solutions, where Tata Infotech brings 15 Fortune 500 clients to the table; infrastructure services, where Tata Infotech has a highlyskilled team of 325; products, like the Tax Mantra; and a manufacturing plant for electronic assemblies, which can enable TCS to become an end-to-end solutions provider in the engineering space, right from design to manufacture of prototypes. Also, TCS gets access to 3,500 of Tata Infotech's IT professionals. In accordance of the scheme of amalgamation Tata Infotechs assets and liabilities were transferred to and vested in Tata Consultancy Services retrospectively with effect from 1st April, 2005. The scheme was effective from 1st February 2006. The independent valuation for the deal was done using a number of methods including projections, capabilities, synergies, and market value. The merger decision, which has been under

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deliberation for several months, has been designed keeping in mind value creation for customers, shareholders, and employees, said Mr. Ramadorai. Integration Ensuring smooth integration process is critical for the success of a merger or an acquisition deal. Employees of the merging companies play a very important role in the integration process. According to Mr. Ramadorai a smooth framework was first created for the integration process for TCS and TIL merger. Two cross-functional teams, one each from Tata Infotech and TCS, were set up. Their main aim was to ensure that they understood the processes existing in the two organizations and then map each person's competency to a function that he or she is going to perform. One thing that could have gone wrong in such process is that people can develop incorrect impressions if communication was not proper. Also, if mapping was not done correctly, people could say that their competency has not been considered. The mapping criteria adopted by TCS included the person's competency, role, background experience, potential, and where he or she can enable organizational growth and take responsibility. This was done through interviews, collective dialogues, discussions and one-on-one sessions. Mapping helped employees clearly understand the role they were going to play post merger. As we know communication process is an important part of the integration process, same could be seen in this case. The whole process was communicated in a very transparent manner across TCS and Tata Infotech by the integration team. While it was impossible for HR personnel to clarify doubts and reassure staff individually, the same was done using the intranet. A website was created that allowed people to pose questions or air their opinions. It became a virtual bridge between the employees of both the companies and brought them on a single platform. The website hosted joint discussion forums where employees of both companies participated on topics such as `achieving synergies', `steps for a smooth transition' and `ten best practices'. Common goals and business interests were also shared. While this may not have impacted business costs directly, it may have prevented attrition to an extent. By this people were made to believe in the process because they were part of it throughout. According to experts the mechanism adopted for

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integration was one of the best, because the engagement, the transparency and the communication were of a very high order. Management was thinking to use the same framework, if required, for other Tata companies and also for outside companies. The Impact and the Road Ahead Primary reason that could be sighted in implementing the integration framework mentioned above was that both the companies belonged to the Tata group. Work culture throughout Tata group is almost similar. So the chances of cultural clash were minimum though its probability of occurring was not totally zero. Despite of so many acquisitions taking place TCS has the lowest attrition rate compared to other IT companies according to Mr. Surya Kant, Vice President and Head, TCS America (11.3%, well below the industry average). This shows that integration process was successful in case of TCS TIL merger too. The merger with Tata Infotech added 15 new Fortune 500 clients for TCS and enhanced the companys system integration and infrastructure service capabilities. It enabled TCS to add an Education Services practice to offer technical education as a new offering. But the merger aided the financials marginally and according to Mr. Mahalingam the net impact was negligible with revenues of Rs. 700 crore for the financial year 2005-06. Operating margins for the fiscal were impacted to the extent of 1.3% due to rupee appreciation and 1% because of the Tata Infotech merger. Market analysts are of the opinion that the merger could impact TCS' margins, both at the operating and net levels. "The merger will add Rs 79.8 crore to TCS' bottom line, but its margins will suffer. TCS can offset the impact of the lower margins by improving operational efficiencies, getting higher billing rates through better execution of fixed price projects (FPPs) and improving its business mix in favor of high-end services like consulting and enterprise business solutions," says Shah, adding: "TIL's strength in high-end systems integration will help TCS move up the value chain; and the acquisition will help TCS become an end-to-end service provider. At analysts conference call held for the 4th quarter of financial year 2007, Mr. Mahalingam said that the merger with TIL is paying out exactly what they had expected from it.

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TATA CONSULTANCY SERVICES COMPUTER MAINTENANCE CORPORATION LTD: An Example of Two Separate Entities Sharing Excellent Work Synergy

Background In September 2001 Government of India announced it willingness of divestment from Computer Maintenance Corporation Ltd (CMC). CMC along with HTL (Hindustan Teleprinters Ltd) was the first public sector unit to be privatized. Initially many companies including multinational giants such as HP and Compaq were interested in buying stake in CMC, but later most of them backed out. This was due to SEBI clause that an open offer should be made by the company acquiring stakes in CMC Ltd. for a minimum of 20 per cent within seven days. On the last day of the bid date, there were only two bidders left. One bid was invalid, leaving- Tata Sons as the sole suitor. They had quoted Rs 197/share. The quoted price was much lower as compared to the market price of RS. 240. The deal was in trouble initially but was cleared later. Prior to disinvestment, the share price of CMC was riding high and reached a pick of Rs. 315. But against this, Tata Sons offer of Rs.152 crore for 51% stake worked out to be Rs.196 per share. This led to suspicions that the share price was being rigged just to scupper the privatization. The Department of Disinvestment was of the view that CMC has a low floating stock of around 17 per cent with public and it was easy to manipulate prices. According to them the valuation was done under various methods and committee had fixed the actual price at Rs.108.8 crore for 51 per cent stake. The Tata Sons bid was significantly above this. In October, 2001, Tata Sons finally acquired 51% stake in CMC. Then as per SEBI regulations they made an open offer to investors at Rs 280 per share, which was the average price of the scrip during the last six months and acquired 0.12% from public. CMC Ltd which now became subsidiary of Tata Sons was to work under the management of Tata Consultancy Services Ltd. Though the 51 per cent holding means that its accounts can be consolidated with parent Tata Sons, it was decided that CMC would continue to - 29 -

operate as an independent company. There are no plans of merging between them. According to Mr. S. Ramadorai, CEO, TCS, everything went smoothly because of three reasons. First, the ministry of information technology, under which CMC falls, and the ministry of disinvestment saw eye to eye on the matter. In other words, there were no ministers or bureaucrats putting up roadblocks. Secondly, it was a growth industry and different yardsticks apply there (there is no legacy of redundant labor). Thirdly, the employees were in favor of disinvestment. All the stakeholders were for it said Mr. Ramadorai. Rationale There were a number of reasons which lead Tata Sons buy stake in CMC Ltd. TCS was getting about 83% of its revenue from international market, notably from US. This acquisition provided TCS an opportunity to consolidate its operations in India. Explains an analyst: CMC has domestic sales of Rs.442 crore, which is about 85 per cent of its total revenues. (For TCS, the figure is a low 10 per cent.) What CMC brings with it is that a third of its total revenues come from the government. In the maintenance and services segment of the Indian market, which is about Rs.450 crore, CMC has a lions share of 70 per cent. As part of the deal, for the next two years TCS is guaranteed government business. This means that revenues are assured during that period while TCS uses its expertise to build on this base. According to Mr. S. Ramadorai, the main reasons for acquiring stake in CMC Ltd were as follows: Domestic presence of TCS was not much but now it would increase considerably with the help of CMC. CMC has government contracts and would help to ensure business from Government. CMCs R&D capabilities plus R&D capabilities of TCS both can be leveraged for the domestic and international markets.

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CMCs core areas of expertise was hardware maintenance, data centre management and so on, which were becoming very necessary for TCS as they were engaged in large systems integration and the outsourcing type of work.

Last but not least were CMCs education and training centre. They were generating good amount of revenue from this, so TCS wanted to scale them up by giving some input.

Mr. Rajeev Gupta, executive vice-president of DSP Merrill Lynch, which brokered the deal from the Tata side said, There are two types of takeovers. One could be for business synergies, which enable one to enhance values. The other could be for strategic reasons. From TCS standpoint, the takeover of CMC has been for strategic reasons. CMC has a significant market share in India in software development. Besides, TCS has little exposure in domain knowledge areas in railways, ports, power utilities, oil and gas. CMC has a large and comprehensive high quality exposure in these areas. Besides this, according to analysts CMC had lot of potential. The company was growing at 22% compounded over 5 year period, which was much below compared to the growth figure of Indian IT service industry, growing at 45% compounded. With CMC getting the managerial input from TCS, it was bound to grow more rapidly. A Report from Kotak Securities stated "Going forward, we see this to be a winning combination. In our opinion CMC is likely to be a major beneficiary, as we expect significant volume and margin expansion for the company,"

Synergy- How Successful They Have Been Some of the important areas where TCS and CMC could work together, included, egovernance, insurance, stock market, ports and education. Though initially the profit margin of CMC did not improve much, but the direction in which CMC started to move by working under TCS was encouraging. By the end of the financial year 2002-2003 the performance of the company was as follows:

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Due to TCS CMC synergy, income from international business was Rs. 121 crore, registering a growth of 55.7% year-on-year basis. Total revenue stood at Rs. 615 crore, up 8.7% year-on-year basis. Quality of revenue improved, with other income contributed only 1.1% to total revenue as compared to 3.3% last in the previous year.

Operating margins improved to 9.8% from 7.8%.

According to Mr. R Ramanan, Managing Director of CMC Ltd, the company embarked on the process of transformation and has grown the business potential overseas. The company grew to about 27% in the first quarter of fiscal year 2004 as compared to 18% of the first quarter of the previous year. This was possible because of the group synergies," he said and also added that CMC would collaborate with TCS wherever possible to bring in best practices. In June 2005, after years of synergy in operation, processes and culture, the management of both the companies decided to adopt joint to go market approach' in domestic as well as international markets, in order to make their combination a formidable one. TCS wanted to capitalize on CMC's strengths combined with the breadth and depth of its own global reach and capabilities. This strategy helped both the companies specially CMC to gain leverage in the international market especially from US and UK geographies. According to a report from Kotak Securities, "CMC and TCS have complementary skills and products portfolio, which they want to exploit jointly in the international market. While CMC has diversified products portfolio, TCS has strong client relationships and marketing network." The synergy revenue between TCS and CMC amounted to Rs. 255 crore, which meant a growth of 122%. Operating profit of CMC was also doubled for the year 2006-2007.

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Operating Profit CMC Ltd. 100 Operating Profit (Rs. Crore) 90 80 70 60 50 40 30 20 10 0 Mar' 03 Mar' 04 Mar' 05 Years Mar' 06 Mar' 07 41.63 60.82 62.85 44.19 93.48

By January 2008, CMC Ltd had 35% of its revenue from international market. They were planning to enhance their overseas revenue and scale up its IT education business within the next two to four years. But the management was very clear that they are not going to cannibalize into TCS revenue as most of CMC's offerings were marketed to overseas customers via the parent company. Thus we can conclude that the acquisition of majority stake in CMC by Tata group is an excellent example of two companies working together without merging and sharing very high synergy between themselves. Both the organizations are clear about their activities and both know where to draw the line. Such understanding helped TCS to benefit from operation as well as financial point by joining hands with CMC Ltd.

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Viability can be defined as ability to survive. Any business is undertaken with some predetermined objective which may be to earn profit (commercial organization) or to do some social work (non-profit undertakings). To start any business it is very important first to study the extent to which a business is viable. Until and unless a study of business viability or feasibility is done, the clear picture can never be developed which ultimately hampers the planning process. This study will not only reveal many facts which could not be known otherwise about the business, but it also gives a sense of direction. Business viability does not only mean to study whether the business would be able generate some profit though it is the most important factor. In fact viability can be studied from various dimensions. They are as follows: 1. Economic or financial viability 2. Operational viability 3. Market viability 4. Technical viability 5. Management viability 6. Exit strategy viability Business viability not only reflects the likelihood of business venture succeeding, but also its ability to deliver the entrepreneurial objectives such as creating wealth. Determining business viability is a subjective process and will vary for each business venture under consideration.

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Viability of business can be studied in context of mergers and acquisitions. It is very important to study the viability of business of a target firm which is being considered for merger or an acquisition. We know that an M&A deal is not an activity; its a strategy for growth. Whenever a company decides to merge or acquire another firm, it believes that acquisition is a more effective way to expand than the slow process of organic growth. Because of this, the impetus for a merger should emerge naturally from overall corporate strategy. But this is not found in most of the cases. In this era where mergers and acquisitions is being taking place everywhere, companies end up acquiring something, they actually did not want or need. It is being done like an impulse shopping and does not form part of the corporate strategy. As a result those acquisitions do not make any sense and almost always go sour. Thats why it is very important to have well-defined corporate strategy. It allows companies to cast aside any deal that may look incredibly attractive but does not move the strategy forward. Its not about growing for growths sake; its about building a viable company, said Mr. Edward Weiss, general counsel for Group 1 Software. Any M&A deal must consider three factors which forms the core of every analysis. They are Customer needs Strategic fit Shareholder value

Although earlier it has been said that the main aim of any merger or acquisition is to create wealth for the shareholders of the combining firms it is to be kept in mind this objective can only be achieved if interest of other stakeholders has been taken care of. Keeping in mind the above point it is very important for a company to understand whether the company which it intends to take is actually worth taking or not. In simple terms they should study whether the business is viable for them, i.e., fit in their strategic motive. This viability study will help in understanding different situations, success outcomes identifying opportunities and problems and assessing the cost and benefits associated with the business being considered for merger.

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An old saying it is better to be safe than sorry holds very much true in the corporate world. They are many people associated with a business who have different interests. But all of them will be satisfied if the business runs smoothly and successfully. So a study of business viability can give a clear picture to the management and assist them in identifying the true viability of the business that is being considered for merger or acquisition. Very few business decisions are made with absolute certainty. However greater the ground work done by the management greater is the probability that the decision made are correct. Keeping in mind the above points a management can study the business of the target firm from two main dimensions.

1. OPERATIONAL VIABILITY Thorough understanding of the target's business and knowledge of its operations are essential for evaluating potential M&A deals. This is because business organizations undertake financial risks by for mergers and acquisitions are prone to financial failure if things do not work out. So the firm that wants to merge with another should try to find how the target firm works and what operational synergies can be leveraged between them. This can be done by investigating the targets major sources of revenue, key customers and suppliers, production capabilities, expected savings in cost and other benefits which can be enjoyed. Operational viability of the firm can be assessed from following dimensions: Economic or Financial Viability Technical Viability Market viability

Economic or Financial Viability Since any business is primarily run to earn profits, so it is very important to analyze whether, the business of the target firm is financially or economically viable or not. Economic viability is ultimately linked to profit. In most simple terms it can be said any

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firm which is able to generate profit or some revenue benefits post merger is financially viable. But this profit should not be for a year or two. It must continue to come for at least some years. Even if the business is not currently profitable- perhaps it is in the early stages of development, under going a growth spurt, or just going through a bad patch, there must be an expectation that it will add to the revenue streams of the acquiring firm one day. This expectation of financial synergy will justify the investment. Technical Viability Technical viability checks the core operations of business in which the target firm is engaged. Any business works smoothly if it is capable of satisfying the needs of the customer according to their demand. This depends upon how a firm carries its operation. In M&A it is necessary for the acquiring firm to study about the operations of the targets business, their offerings, suppliers, intellectual property rights etc. By doing this, the core competencies of the target can be found out it can gives an idea about the best possible way in which it can be utilized by the acquiring company to obtain desired synergies. Market viability Testing market viability is equally important. Keeping in the mind the objective which the acquiring company wants to achieve they need to assess the market environment to which the target firm belongs. Until and unless a company does not find any opportunities in the market there is no point entering into expansion mode. So testing of market viability is equally important. The management should examine the outlook of industry, growth rate, demand - supply factors etc. Apart from this analysis of competition is also very important in testing the market viability. Horizontal mergers help in reducing competition whereas vertical merger help in fighting with competition. So keep in mind the type of merger, the company is looking for, the direct and indirect competition which they will face post merger should also be assessed.

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2. MANAGEMENT VIABILITY Apart from operational viability it is also important for the acquiring firm to screen how capable is the management of the target firm. It can give some idea of difficulty the former might face in the integration process if they go ahead with the deal. Study of management viability is important because a company may look attractive for investment financially but due to poor management capabilities the integration process might hamper which can defeat the overall purpose. So it includes studying the skill set of the management personnel, employees of the target company and assessing how efficient they are. A merger does not only involves combining the financials of two organization, rather it means two organization willing to work together so that they can achieve what they could not, working separately. For this reason it becomes important for the acquiring company to find out the culture of the target firm and assess if anything is common between them. If the target firm has competent management then the acquiring firm may not find it much difficult to plan the integration process if they decide to merge. Thus based on this they can analyze whether the target is viable from this point of view.

Note: Study of business viability M&A should not be confused with the process of due diligence. It is part of initial screening process of the target firm. Once a target firm is identified then its business viability can be checked. As we know due diligence process is time consuming and involves some investment, by analyzing the business viability of the target firm can give the management of the acquiring firm a broad overview about the target. Based on this the due diligence process can be carried more efficiently and effectively.

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To assess the viability of a firm being considered for merger or an acquisition, some criteria has been developed and are then scaled. Scaling is done with the objective of knowing how much viable the firm can be for M&A. 1. SCREEINING OPERATIONAL VIABILITY

Financial Viability What is the investment amount required? It is very important initially to find out the amount of investment required to acquire or merge with the target firm. The amount depends upon the size of the target on the basis of which the major decision of going ahead with the deal will depend. If the target firm is too big then the acquiring firm may not be capable of acquiring it and if the former is to too small then it might not make any significant increase in the revenue of the latter. But if it is somewhat similar to the acquiring firm then it can be said to be the best fit. The amount required can be scaled keeping the market value of the acquiring firm as base. On a scale of 5 we rate the target as follows:5 If the target firm is 0-20 % bigger or smaller than the acquiring firm. 4 If the target firm is 20 - 40 % bigger or smaller than the acquiring firm. 3 If the target firm is 40 60 % bigger or smaller than the acquiring firm. 2 If the target firm is 60 80 % bigger or smaller than the acquiring firm. 1 If the target firm is 80% and above bigger or smaller than the acquiring firm.

How much is margin percentage of the target firm? Margin percentage gives some knowledge about the profitability of a company. It is necessary for the acquiring firm to compare the margin percentage of the of the target firm with its own figure. If it is found more in case of the target then it becomes more attractive for the acquirer but in case it is too low, then the acquirer may not find it attractive to go ahead with the deal.

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The margin percentage (MP) of the target company can be scaled keeping the same percentage of the acquirer as the base. On a scale of 5 it can be rated as follows:3 If the MP of the target firm is equal to that of the acquiring firm 4 If the MP of the target firm is 0 3 % more than that of the acquiring firm. 5 If the MP of the target firm is 3 % and above more than that of the acquiring firm. 2 If the MP of the target firm is 0 - 3 % less than that of the acquiring firm. 1 If the MP of the target firm is 3 % and above less than that of the acquiring firm.

How is the short term debt paying capacity of the firm? Short term debt paying capacity of the firm gives an idea about the working capital of a business. It shows how efficiently a firm is operating. The acquiring firm needs to examine the short term debt paying capacity of the target firm and assess how efficient the latter is in managing its short term financial obligation. It can be done by studying the current and quick ratio and comparing them with the industry figures. If the ratio of the target is found better than the industry numbers then it can be said to be better for the acquiring firm because the amount of risk involved in form of short term obligations will be less and vice versa. The current and quick ratios can be scaled keeping industry figures as base. On a scale of 5 it can be rated as follows:3 If the above ratios are equal to industry figures. 4 If the above ratios are 0 20 % above the industry figures. 5 If the above ratios 20 % or above more than the industry figures. 2 If the above ratios 0 20 % below the industry figures 1 If the above ratios are 20 % or above less than the industry figures.

How is the ability of the firm to meet its long term financial obligations? Long term financial obligations are the fixed interest charge which the business is required to pay compulsorily to its long term debt providers. It may not be necessary for a firm to pay dividends but they have to pay interest on the loan taken. It is very important for the acquiring firm to assess the interest coverage ratio of the target firm which shows

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the number of times a company can make its fixed financial payments from the earnings before charging such financial obligations. The higher the number is the better it is considered. The long term financial obligation can be scaled keeping industry as base. On a scale of 5 it can be rated as follows:3 If the above ratios are equal to industry figures. 4 If the above ratios are 0 20 % above the industry figures. 5 If the above ratios 20 % or above more than the industry figures. 2 If the above ratios 0 20 % below the industry figures 1 If the above ratios are 20 % or above less than the industry figures.

Technical Viability Will the target firm increase the current array of products or service of the acquirer firm? A business always aims at providing its customers with variety of products or services. The wider the array of products and service it provides the more will be the number of customers for it and hence more will be the revenue generating unit. Many business organizations enter into M&A deal in order to increase their current array of goods and services or it come as complimentary to the main objective of the acquiring firm which the target firm fulfills. The additional new products or service that the acquiring firm might get access to, by merging with the target firm, can be scaled keeping the offerings of the former as base. On a scale of 5 it can be rated as follows:1- If the total no. of offering by the acquiring firm increases by 0 10% 2- If the total no. of offering by the acquiring firm increases by 10 20% 3- If the total no. of offering by the acquiring firm increases by 20 30% 4- If the total no. of offering by the acquiring firm increases by 30 40% 5- If the total no. of offering by the acquiring firm increases by 40 % and above.

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Will the current capacity of the acquiring firm increase in serving the customer? Every business has a fixed potential to serve number of customers during a particular period of time. This potential is called its capacity. Any business would aim to increase its existing capacity in order to serve more customers at a time. This can add to the sources of revenue for the firm. In M&A deal it is important for the firm to find out if the target helps in increasing its existing capacity. This is generally seen in case of horizontal merger. Increase in capacity can be scaled keeping the current capacity of the acquiring firm as base. On a scale of 5 it can be rated as follows:1 - If the capacity of the acquiring firm increases by 0 10% 2 - If the capacity of the acquiring firm increases by 10 20% 3 - If the capacity of the acquiring firm increases by 20 30% 4 - If the capacity of the acquiring firm increases by 30 40% 5 - If the capacity of the acquiring firm increases by 40 % and above.

Is any savings in cost expected? Competition is increasing day by day in the business world and only the fittest will be able to survive. So it is very important for the organizations to improve upon inefficiencies so that it can help in reducing the cost of products or services it provides. So business enterprises also enter into M&A deals in order to achieve operational synergy in terms of cost reduction. It can help the merged firm to fight competition in a better way. Cost can be reduced due to any of the following reason: Achieving economies of scale Removing redundancy occurred due to merger. Savings in cost as a result of merger can be scaled keeping current cost structure of the acquiring firm as base. On scale of 5 it can be scaled as follows:-

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1 If the savings in cost is of 0 2 % of the existing cost incurred by the acquiring firm. 2 If the savings in cost is of 2 5 % of the existing cost incurred by the acquiring firm. 3 If the savings in cost is of 5 10 % of the existing cost incurred by the acquiring firm. 4 If the savings in cost is of 10 15 % of the existing cost incurred by the acquiring. firm. 5 If the savings in cost is of 15% or above of the existing cost incurred by the acquiring firm.

What are the supply sources of the target firm? Any business organization selects its supplier of resources after considering three important points. They are Quality of resource Cheaper cost Better service quality This not only adds to quality of products or service provided by the business enterprise to its customer but also helps it deal with competition. So in M&A deals also the acquiring firms needs to assess the suppliers of the target firm and see if they can add to their existing supplier resources. The supply sources of the target firm can be scaled based on the percentage of the supplier useful for the acquiring firm (from cost, quality and service point of view) out of the total number of suppliers the former have. On a scale of 5 it can be rated as follows:1 If 0 10 % of the suppliers of the target firm are useful. 2 If 10 20 % of the suppliers of the target firm are useful. 3 If 20 30 % of the suppliers of the target firm are useful. 4 If 30 50 % of the suppliers of the target firm are useful. 5 If 50 % or more of the suppliers of the target firm are useful.

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Does the target firm have any intellectual property right which is beneficial for the acquiring firm? Intellectual Property Rights (IPR) is of huge importance for any business organization. It gives exclusive rights to the business to use the creations related to invention, designs etc which is made by them. The more IPR a business has, the more edge it has over its competitors. In M&A, acquiring firm should look up to the IPRs of the target firm which can be beneficial for them. IPR of the target firm can be scaled using based on the percentage of the IPR useful for the acquiring firm out of the total number of IPR the former have. On a scale of 5 it can be rated as follows:1 If 0 10 % of the IPR of the target firm are useful. 2 If 10 20 % of the IPR of the target firm are useful. 3 If 20 30 % of the IPR of the target firm are useful. 4 If 30 50 % of the IPR of the target firm are useful. 5 If 50 % or more of the IPR of the target firm are useful.

Market Viability Is industry life cycle in Expansion or Maturity or Contraction stage? For any business, market opportunity is dependent on the stage in which is industry is working. If the industry is relatively new or due to some development growth rate has increased, it can be said to in expansion stage. If the industry growth is stagnant and not much development takes place then it can be said to be in maturity stage. Similarly if the industry growth rate turns to be negative then it will be categorized in contraction stage. In the process of assessing market viability of the target firm, it is very important for the acquiring firm to know the stage of lifecycle in which the industry is operating. Industry lifecycle can be rated on a scale of 3 as follows: 1 If the industry is in contraction stage. 2 If the industry is in maturity stage. 3 If the industry is in expansion stage. - 44 -

What is the target companys competitive position? The acquiring firm should also know about the competitive position of the target firm. In case of horizontal merger if the target company is a market leader then it can take the acquiring firm to a different position all together in the industry. In case if the target does not have any significant position then it might not add much to the revenues of the target firm. Similarly in case of vertical merger, if the target is the leader then it will give a competitive edge to the acquirer and it will be in a better position to negotiate with the customers. But if the target firm has a non dominant position then it might not be that attractive for the acquiring firm to go ahead with the deal. Competitive position of the target company can be rated on a scale of 3 as follows:1 Non Dominant Position in the industry. 2 Prominent Position in the industry. 3 Leader in the industry.

Is it possible to get access to the targeted geographic area? Business organizations always aim to increase their customer base. This can be done by entering in to a new geographic area. In M&A deals the acquiring firms might try to expand by targeting some new geographic area. So it is important for them to know if they can get access to the target market by acquiring the target firm. This can be scaled based on the number of places the target company has presence as a percentage of the number of places the acquiring wants to enter. On a scale of 3 it can be rated as follows:1 If the target firm has presence in 0 20 % of the places the acquiring firm wants to enter. 2 If the target firm has presence in 20 50 % of the places the acquiring firm wants to enter. 3 If the target firm has presence in 50 % or more of the places the acquiring firm wants to enter. - 45 -


Management viability can be assessed from following aspects-

What is style of management in the target organization? Style of management of the target firm can give lot of idea about their culture. If the employees participate in the management decision then the culture can be said to be friendly and if they are not at all consulted then it might be tagged as authoritative management. The style of management can be rated on the scale of 3 as follows:1 If the management does not bother to ask the opinions of employees. (Authoritative) 2 If the management consult with the employees regarding various issues but ultimately they have the final say. (Consultative) 3 If the management allows employees to take part in decision making (Participative)

Employees are trained and managed properly? Employee training is very important because they not only learn what to do but also how to do their work. Every organization spends money and time in order to train the employees. In M&A also the acquiring firm must know how much the target company spends on training its employees. This is important because it will give the former an idea of how knowledgeable and efficient are the employees of the latter. Employees training can be scaled by comparing the expenses incurred in training as a percentage of total operating expenses by the target firm with the similar percentage calculated for the acquiring firm. This is because the acquiring firm should assume that the training cost they are incurring for their employees is adequate. On a scale of three it can be rated as follows:1 If the expense on training as a percentage of total operating expense of the target firm is lower than that of the acquiring firm.

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2 If the expense on training as a percentage of total operating expense of the target firm is equal to that of the acquiring firm. 3 If the expense on training as a percentage of total operating expense of the target firm is more than that of the acquiring firm.

Does the target organization supports Research and Development? Competition in business environment is increasing day by day which is making market dynamic and fast changing. In this situation it is very important for a business

organization to continually revise their range of product and services. Here comes the importance of research and development. Investment in R&D reflects an organization's willingness to use current resources or profit to improve its future performance or returns. So an organization looking forward to enter into an M&A deal must check if the target firm invests in R&D or not. This will give an indication whether the management of the latter is proactive or reactive. The acquiring firm must assume their investment in R&D as sufficient as compared to total operating expenditure. The amount invested in R&D as a percentage of total operating expenses can be compared with the similar percentage calculated for the acquiring firm. on a scale of 3 it can be rated as follows:1 If the expenditure on R&D as a percentage of total operating expense of the target firm is lower than that of the acquiring firm. 2 If the expenditure on R&D as a percentage of total operating expense of the target firm is equal than that of the acquiring firm. 3 If the expenditure on R&D as a percentage of total operating expense of the target firm is more than that of the acquiring firm.

Is the organizational structure of the target firm very different? Organizational structure speaks a lot about hierarchical levels, informational flow and decision making process. So in M&A the acquiring firm must also study the organizational structure of the target firm. It can give an idea about the level of difficulty

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they might face in the integration process post merger. The more similar the structure of the target firm with that of the acquiring firm, the easier it will be to integrate. So, the organizational structure of the target organization can be scaled on the basis of similarity with the acquiring firm. On scale of 3 it can be rated as follows:1 If the target firms structure is not at all similar to that of the acquiring firm. 2 If the target firms structure is somewhat similar to that of the acquiring firm. 3 If the target firms structure is very similar to that of the acquiring firm.

Is the work culture very different? Organizational culture plays a very important role in success of an M&A deal. So it is very important for the acquiring firm to study the target firms culture and see how smoothly they can integrate the business. In case there is a cultural conflict between the merging firms then it will hamper the objective of the deal to a very large extent. So it is necessary on the part of the acquiring firm to assess the culture of the target organization and check how similar they are. On a scale of 3 it can be rated as follows:1 If the target firms culture is not at all similar to that of the acquiring firm. 2 If the target firms culture is somewhat similar to that of the acquiring firm. 3 If the target firms culture is very similar to that of the acquiring firm.

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Maximum marks - 69 Minimum marks - 17

STATUS Viable Target Fairly Viable Target Non Viable Target

SCORE 44 - 69 34 - 43 16 - 33

The scores are set keeping a conservative approach. The lower limit of fairly viable target has been calculated taking a score of 2 in all the questions. Similarly the higher limit has been calculated taking 3 on scale of 5 and 2 on scale of 3.


Scaling has been done using a general approach. The numbers used above for scaling will vary from industry to industry. So it can be customized accordingly.

Equal weights are given to all dimensions of viability. However they can be altered depending on the objective for which a company intends to enter into M&A deal.

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CMC Ltd. once a government company has now been privatized and is a subsidiary of Indias IT giant Tata Consultancy Services which owns 51.12 % of the stake. Both the companies have been using each other capabilities well and have been able to produce excellent work synergy. The synergy revenue for 2006-2007 amounted to Rs. 406crore, a 59 % growth as compared to previous year. Though there are no plans of merger between the two companies but still according to various sources they will merge sometime in future. So it is very important to test how much viable is CMC as a potential target for TCS. Viability check of CMC can be done from operational and management dimensions.


Financial Viability Size of CMC is insignificant as compared to the size of TCS. So it will not add much to TCS from this point. Keeping this in mind the weight assigned to CMC for financial viability will be less as compared to other dimensions.

What is the investment amount required? The market capitalization of CMC is Rs.18 billion4 and that of TCS is Rs. 1200 billion. So CMC is just about 1.5 % of TCS. The amount required to acquire remaining stake in CMC is about Rs. 9 billion which is 0.75 % of total market capitalization of TCS. (Refer annexure) Score on scale 1

As on 31st March 2007

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How much is margin percentage of the target firm? The profit margin of TCS is around 29 % whereas the profit margin of CMC is around 9.5 %. This margin percentage of CMC is about 67 % lower than that of TCS. (Refer annexure) Score on scale 1

How is the short term debt paying capacity of the firm? Short term debt paying capacity shows the capability of the firm to meet its short term financial obligations. Since CMC belongs to IT industry where inventory is nil or very low, quick ratio will be a better indicator of the short term liquidity. The industry quick ratio is found to be 1.25 which is also same for CMC. (Refer annexure) Score on scale 3

How is the ability of the firm to meet its long term financial obligations? Fixed financial coverage ratio shows the ability of the firm to meet its long term fixed financial obligations. It can be of the form of lease rent or interest. CMCs fixed financial coverage ratio is 24.68 whereas that of industry is 7.74. Hence it is 218 % more in comparison to industry. (Refer annexure) Score on scale - 5

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Market Viability

Is industry life cycle in Expansion or Maturity or Contraction stage? Overall the IT industry in India is growing at an average rate of 35 %5. Hence we can say the industry is still in expansion stage. Score on scale 3

What is the target companys competitive position? CMC does not have a significant market share in the Indian IT industry. It initially served a very niche market of system maintenance and support in India. There it is still a market leader with a lion share of 70 %6. It has also expanded its wing in international market working along with TCS. Score on scale 3

Is it possible to get access to the targeted geographic area? When TCS acquired stake in CMC in 2001, it wanted to increase its presence in India. CMC did not only have significant domestic presence but also has government business which TCS wanted to include in its revenue pie. Now TCS apart from CMC has an established presence in the domestic market. CMC also has significant domestic presence and a sizeable government clientele. So it will add more to the market share of TCS in India. Score on scale - 3

5 6

http://www.businessweek.com/adsections/indian/infotech/2001/growth.html www.tata.com/tata_sons/media

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What is style of management in the target organization? Initiatives, policies and procedures in CMC have evolved through a consultative process with a high degree of employee involvement. This kind management style is seen in maximum percentage of organizations where employees are consulted but the final decision is taken by the top management. (Refer annexure) Score on scale 2

Employees are trained and managed properly? Employees are the backbone of any organization. CMC being a part of service industry is completely dependent on its people. So training and management of employee is very important for CMC. The percentage of total expenditure spent on training by CMC is compared with that of TCS. It is assumed that higher the percentage is the better it is for the organization. The training expense in TCS is 4.9 % of the total operating expenses and it is 5.8 % in case of CMC. (Refer annexure) Score on scale 3

Does the target organization supports Research and Development? Research and development shows how active the management is in terms of tapping future market opportunity. Here the expense on R&D is scaled on similar lines of training cost. The R&D investment in TCS and CMC is found to be equal at 1.2 % of total operating cost. (Refer annexure) Score on scale - 2

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Is the work culture very different? TCS culture includes integrity, progress leaders, excellence, respect for the individual, and fostering an environment of learning and sharing. Similarly CMCs core value and beliefs are trust and faith on each other, flexibility, focus on learning, concern for individuals etc. they both can be said to have somewhat similar culture. (Refer annexure) Score on scale 2

Conclusion: We can see that CMC is turning out to be a viable target for merger from few dimensions that could be studied. We can also conclude that since CMC has major percentage of its earning coming from domestic market, its major earning is in rupee and can help TCS to offset the margin loss which is occurring due to rupee appreciation. In this way it can work as hedge against its dollar earning to an extent.

Limitations: Viability test of CMC Ltd. has been tested taking data as on 31.3.07 as data for all the criteria is not available for the present. Technical viability of CMC could not be found out due to limited knowledge about their business and so its viability score could not be calculated. Management of the acquiring firm is in better position to assess the viability of the target firm for M&A deal. .

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Viable system model or VSM was developed by Stafford Beer, a leading figure in the field of cybernetics. He studied extraordinary beauty of the human form, and made an organizational model on the methods used by the central and autonomic nervous systems to manage the workings of the organs and muscles. The intention of his study was to find out the why an organizations have so much trouble meeting their objectives or why they are not able to improve things with change in the environment. For this he studied the human form, the way the organs, muscles, nervous system works and got inspired to build VSM model. The peculiar feature of this approach was its fresh unconventional relation with the human body. Beer related the functioning of an organization to the central nervous system and demonstrated how firms must operate in order to be viable. According to him living organisms and human organizations both share a capacity to maintain their identity in the face of pressures from their environment. It is estimated that in every seven years, all the molecules in humans body are replaced by new ones, but they are still recognizably the same person, i.e. they do not loose their identity. This ability to maintain identity is related to the fact that people have purposes. Similarly an organization has a purpose of its existence and it must aim to continue working at least until the time when their purpose has been achieved. The Viable System Model claims to reveal the underlying structures of the organization necessary for a system to meet this criterion of viability so that it can reach where it wants to. Beer divided the human body into five interacting systems:

SYSTEM 1: This forms the Operational System of both the human body and the organization. In the human body, it is the muscles and the organs which actually perform a task. The muscles perform the motor activities like writing, reading, speaking and the vital organs like the heart, kidney and liver are the most essential for the living organisms. So these together perform the primary activities of the human body.

SYSTEM 2: It consists of the sympathetic nervous system which monitors the muscles and organs and ensures that their interactions are kept stable.

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SYSTEM 3: it consists of the Base Brain which oversees the entire complex of the muscles and organs and hence controls their functioning. It plays an important part in optimization and regulation of the activities of the human body like consciousness and sleep. It maintains the synergy between the various functions of the organs and the brain thus maintaining internal regulation.

SYSTEM 4: It consists of mid brain which gives human beings the ability to understand the environmental changes and getting accustomed to it. It is the connection of the body with the outside world through the senses.

SYSTEM 5: This system performs the higher brain functions and consists of cerebral cortex. It plays a key role in memory, attention, and perceptual awareness, thought, language and consciousness. Hence it performs the ultimate control function of the body.

Based on these 5 systems, the structuring of an organization can also be done which we can say will be viable from all aspects.

System 1 System 2 System 3 System 4 System 5

Primary activities, basic operations Conflict resolution, stability, coordination Internal regulation, optimization, synergy Adaptation, forward planning, strategy Policy, ultimate authority, identity

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A basic VSM model can be drawn as shown below.

Source: The Viable System Model Guide

Here E is for environment which includes all those parts of the outside world which directly affects the organization, M stands for Metasystem which ensures that various operational unit work together in integrated and harmonious way. It consists of system 2, 3, 4 and 5. Finally O stands for Operation which constitutes the basic work. The arrow shows some of the many and various ways the three elements interact with each other.


Mergers and acquisitions have always been risky. With billions of rupee at stake it is very important for the merging companies to plan as much as possible in order to achieve what they intend to. But business, cultural and technology integration threaten to derail the entire effort. Transferring one firms processes and procedures to another can be of great challenge. Avoiding disconnect between the two firms requires a systematic process for capturing, connecting and communicating the processes and work-around that are vital to each ones operations. But this is not an easy task. Huge percentage of merger failure depicts this. To avoid these, organizational structure of the combining firms can be planned using the VSM Model. Though this model shows organizational structure in an

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ideal situation it should be customized to depending upon the situation prevailing at the time of merger.

System One - The Operation When two firms decide to merge into one, their primary motive is to operate together in order to achieve what they cannot working separately. The decision of merger only comes when they see certain benefits they can harvest by working together. So the integration process of the firms should start by initially deciding the primary activities they are going to do post merger. Thus System 1 should consist of operational units of the combined firms which will carry out the primary activities. Without System 1 there would be no reason for the combined firms to exist. If they are into manufacturing business then the production unit, distribution, warehousing will constitute this system. Those who are into service sector, then the service they provide will form System 1.

Source: The Viable System Model Guide - System 1

The diagram above shows few operational unit of the combined firm. Each operational element will interact with the external environment to an extent irrespective of their nature. The external environment for the operational units is known as local environment

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which consists of suppliers or customer or local government. These local environments are shown as small grey amoeboid shapes lying within the large environment. Also the operational units will have some interactions between them which are shown by squiggly lines between each unit. The local environment is shown as overlapping each other due to the fact that some operational unit may work in a common environment.

System Two - Stability and Conflict Resolution As two entities combine to become one it is very important for the management of both the organizations to find the way to deal with conflict between their operations. It is in fact due to conflicts in the System 1 that most M&A deal fail. If the deal is a type of vertical merger then the management needs to make some plans to stabilize the functioning of manufacturing unit with that of distribution unit or suppliers unit which form System 1. In case of horizontal merger the operating units of combined firm will be engaged in similar kind of activity. So the management needs to decide how to avoid conflict occurring between them. It is known that post merger the new firm faces the problem of stability due to many reasons like conflict of interest, cultural conflict etc. So there is need of some way for dealing with the instabilities otherwise the merged firm will fall into pieces. Thus the importance of System 2 arises here which also forms the part of the Metasystem. The job of System 2 is to ensure that the operational units of the combined firm should cooperate and not compete with each other. In this way harmony can be maintained between them and they can interact in a stable manner.

To make the new firm viable, it must have system 2 which can deal with the following: Resolving conflicts Dealing with instability

A good example of System 2 is a production plan, or a school timetable. These are usually arranged voluntarily between System 1units and is not required to be imposed from senior management. The senior management only needs to intervene to settle

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disagreements between the elements. Emphasis on integrating the culture, internal company news letter can be used as effective System 2 tool.

Source: The Viable System Model Guide - System 2

In the figure above System 2 is shown as a triangle in the Metasystem and it passes through all the operational units. It works as regulatory center and maintain coordination between the units of System 1.

System 3 Optimization Achieving synergy is the basic objective behind any M&A deal. So it is important on the part of the management of the combined firm to see that the new organization formed does not only maintain harmonious relationship between the operating units but they should also try to optimize their working in order to achieve desired operational synergy. Here comes the role of System 3 which includes senior management and it is engaged in supervision of System 2. System 3 should sit right in the middle of all the primary activities, thinking about ways of optimizing the whole thing. This system can work by the help of formation a committee consisting of one delegate from each segment of operation. They can sense the problem they are facing in their respective units and can discuss with others the ways and means to improve the overall efficiency. So System 3 should involve in the following function: - 60 -

It should look the way the operational elements interact. It should consider ways of optimizing the overall efficiency of the entire collection of operational elements.

This improvement in efficiency can bring the synergy which the merging companies intend to achieve. If the companies just merge assuming that working together will help them to leverage synergy automatically, then they might up end up gaining nothing or may loose whatever they had before merger. So they should think of the importance of System 3 and should plan about it to reach to the desired destination. In order to achieve the above objective, System 3 should be designed to do the following task: Resource Bargain

In any organization resources are limited and hence should be used in way to get maximum result. In M&A the combining firms gets access to each other resources. So System 3 should have flexibility to divert resources of the individual firms to the combined firm and allocate them to operational units in such a way, so as to generate maximum synergy between them. Manipulation of resources will provide means of optimization. Operational Accountability

Once an operational unit gets its share of resources, it must demonstrate that they are being used properly. So the operational elements must be made accountable to System 3. By this the operational units can justify of getting adequate resources. In order to ensure that operations are going fine, System 3 can send task forces to into the operations in order to carry out spot checks and audit. In case of human body we can see the similar feature. Every part of the body sends continuous messages to the base brain which knows just what's going on in real time. During periods of intense activity, this information is used by the base brain to modify the flow of adrenaline to the organs and muscles to optimize their operation.

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Making Intervention Rules

An organization formed of combining two different firms are bound to face problem in their operations. So the management should design certain rules to deal with them. Since system three is concerned with optimizing the work process, so it should also be given authority to intervene any operational unit in case it turns out to be a threat to the new entitys existence. But the intervention rules must be clearly defined, so that the operational units know their boundary.

Source: The Viable System Model Guide - System 3

In the above diagram the system 3 is shown to be passing from all operating activities. It would give suggestions to the operating units of the combined firm as to ways of improving the overall efficiency.

System 4: Intelligence This system is the most important part of the VSM model. The organization as modeled so far is only capable of dealing with immediate concerns. In a changing world, organizations which fail to adapt and cease to be viable, so an intelligence function is necessary. But this activity is usually undertaken only as the last resort.

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The firms while entering into M&A deal know what they want to achieve. But how they are going to achieve it depends upon how well they can sustain their combination in the ever changing environment. They should find out what is happening in the outside world and its likely effect on their company. So the combining firms should adapt to changing environments and make strategies in context of the environmental information. This should be the responsibility of System 4. System 4 fulfills the intelligence function. It studies the environment in which the new organization is embedded and then should list the activities under the following headings: Activity Type of planning to be done. Time scale Period for which the planning should be done. Priority Prioritizing the activity to be done. System 4 in order to work properly should know the current status of the combined firm via System 3. Until and unless it does not get the understanding of the internal environment, intelligent adaptation will not be achieved. The quality of this internal model is crucial to the capability of the organization to adapt to change. The information gathered from outside should also be in conjunction with the internal capabilities. So System 4 should continuously come up with future strategies which can be related to marketing, organization, new products etc. A Research and Development department can help in this regard.

Source: The Viable System Model Guide - System 4

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The figure above shows System 4 of the combined firm which interacts with the external environment. The thick curved arrows between System 3 and System 4 are intended to indicate the very rich interaction that needs to exist between these two functions.

System 5: Policy The new organization formed as a result of merger will have its own ethos, its own distinctive identity. So the personality and the purpose of the new firm will be defined by System 5. It should be concerned with policy, with establishing the context within which the merged organization will function. Both the combining firm should know their limitations and where they want to together. Keeping this in mind the policies should be designed and ensured that nobody tries to go beyond the defined boundaries. This system should have mainly two roles to play: To supply logical closure to the viable system of the merged firm. To make Top level Ethos in order to support the complex interaction between System 3 and System 4. The System 5 in the VSM model as shown in the figure below.

Source: The Viable System Model Guide - System 5

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In the figure above it is observed that system 5 completes controls the function of system 3 and system 4. The intelligence system does not work in vacuum. It works under the boundaries provided by System 5. Thus system 5 answers as to why the two firms have merged.

Thus by defining all the system properly, the combined new firm can be said to be viable. The model looks easy to discuss but it is difficult to implement. But still in merger if integration process can be planned based on the above model it will give a strong base to the organization to be tagged as a viable one.

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This exploratory study includes some important insights on Mergers and acquisitions. Starting from introduction to the world of mergers and acquisitions, it includes things like various rationales which push a company to enter into deal and various issues and challenges faced by companies in it. The project includes a case study on merger between Tata Consultancy Services Ltd. and Tata Infotech Ltd which is an excellent example of how to make a merger successful. The efficient integration process adopted by TCS in the merger deserves special mention. Along with this another case study on work synergy between Tata Consultancy Services and Computer Maintenance Corporation Ltd. has been build which shows that it is not always necessary to merge in order to work together. The importance of this form of inorganic growth is increasing day by day which is clear by looking at the current scenario of Mergers and Acquisition in India. Based on various surveys it has been found out that maximum mergers fail to achieve the result that is desired by the management of the merging firms. So here comes the importance of study of business viability in context of mergers and acquisition. An analysis of the target firm from different dimensions of viability can give the management of the acquiring firm an idea about how much is it worth to merge with the former. This can actually save lot of time and money in carrying out the due diligence process also. Finally the post merger organizational structure of the new firm can be planned based on Viable System Model, which can help in ensuring the merging firms to work in a profitable way.

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Particular Market capitalization calculation Calculation Number of outstanding share X closing prices as on 31.3.07 Source of data www.abnbroking.co.in

Margin percentage Short term debt paying capacity Long term financial obligation Style of management

www.abnbroking.co.in www.abnbroking.co.in


www.tcs.com www.cmcltd.com It has been calculated as Annual report of TCS and CMC for 2006-07

Employee training cost

percentage of total operating expenses.

Research & Development cost

It has been calculated as percentage of total operating expenses. Annual report of TCS and CMC for 2006-07


www.tcs.com www.cmcltd.com

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Part I Are Companies Getting Better At M&A?, www.mckinseyquarterly.com/Strategy/ Assessing Business Viability and Beginning a Turnaround Process,

www.michaelgoldman.com/assessing_viability Beer S, 1985, Diagnosing the System for Organizations, England Business feasibility study outline, bestentrepreneur.murdoch.edu.au/Business_Feasibility_Study_Outline.pdf Case Study on Mergers and Acquisitions -Volume II, ICMR. Dimensions of business viability, bestentrepreneur.murdoch.edu.au/Understanding_Dimensions_of_Business_Viabil ity.pdf. Four Primary Reasons Growth-Through-Acquisition Strategies Fail, Wiley, Chichester,

corp.bankofamerica.com/.../abf/capeyes/archive_index&dcCapEyes=indCE&id=2 09 - 47k How Culture Affects Mergers and Acquisitions.www.allbusiness.com Marion Devine, Successful Mergers - Getting The People Issues Right, The Economist, Profile Books Ltd Positioning Your Company For A Merger Or Acquisition from: http://corp.bankofamerica.com/public/public.portal?_pd_page_label=products/abf/ca peyes/archive_index&dcCapEyes=indCE&id=172

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http://corp.bankofamerica.com/public/public.portal?_pd_page_label=products/abf/ capeyes/archive_index&dcCapEyes=indCE&id=172 Rationale and Valuation Techniques for Mergers and Acquisitions, Harish H.V. and C.G. Srividya, The Chartered Accountant, May 2004 Running a winning M&A shop, www.mckinseyquarterly.com Study Reveals The Long And The Short Of Successful Mergers from: http://corp.bankofamerica.com/public/public.portal?_pd_page_label=products/abf/ capeyes/archive_index&dcCapEyes=indCE&id=182. The Viable System Model, from: www.users.globalnet.co.uk/~rxv/orgmgt/vsm.pdf The Viable System Model Guide, from: www.esrad.org.uk/resources/vsmg_3/screen.php?page=home Unlocking shareholder value: the keys to success Mergers ,

www.dur.ac.uk/p.j.allen/kpmgm&a_99.pdf www.michaelgoldman.com/assessing_viability.htm Why M&A deals fail or succeed, www.rediff.com/money/2007/jun/27deal.htm

Part- II (TCS TIL) Annual Report, Tata Consultancy Services, 2005-06, 2006-07 Analysts/Investors Conference Call, Tata Consultancy Services, January 12, 2006 Businessworld: Awake and hungry, www.businessworldindia.com/nov2105 Dataquest : Focus : Goliath Wins Again!, www.dqindia.ciol.com.

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Tata Infotech to merge with TCS, www.tata.com/tcs/media/20050716.htm Tata Infotech merges with TCS at 1:2 swap, in.rediff.com/money/2005/jul/16tata.htm

TCS eyes multi-million $ acquisition, media room, Tata Consultancy Services, November 19, 2004

The integrated future, Interview with Dr. Nirmal Jain, Tata Group Media Room Tata Infotech building overseas direct marketing network, www.domain-b.com. IT Giants: TATA Group - Merger on the Mind, www.dqindia.ciol.com Tata Infotech on the upswing, Tata Media Release, May 11, 2005 TCS : Acquiring capabilities through M&As news, www.domain-b.com TCS posts 33 pc rise in Q1 net Adds 68 clients; hires 2,690 people, Business Line, July 16, 2005

'Tata Infotech Ltd Merges With Tata Consultancy Services Ltd, http://in.syscon.com/read/110871.

Urge To Merge, Business Today, October 2005 We are not merely a low-cost hub', www.tata.com/tcs/media/20051129

Part III (TCS CMC) Annual Report, Computer Maintenance Ltd., 2005-06, 2006-07 A painless privatization, www.tata.com/tata_sons/media/20011015 CMC aims to improve overseas revenues, Business Line, January 18, 2008 CMC shapes up to face competition, Express Computer, August 11, 2003 - 70 -

CMC plans to focus more on international business, www.domain-b.com Chairmans address at the 30th AGM, www.cmcltd.com/investor Price bids called for CMC, HTL, Business Line, September 19, 2001 Synergies with TCS help CMC, Business Line, August 28, 2002 TCS emerges lone bidder for CMC, Business Line, September 29, 2001 TCS quote of Rs. 196 queers CMC sell-off, Business Line, October 03, 2001 TCS, CMC join hands to tap domestic, int'l markets, Tata Group Media reports, June 21, 2005

TCS is not undercutting anybody, Business Standard, January 25, 2002 TCS sets up squad to steer acquisitions, Business Standard, December 3, 2001 TCS, CMC to adopt 'joint go to market approach', Financial Express, June 21, 2005

3-year lock-in period for CMC divestment, Business Line, August 2, 2001

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