TATA- CORUS

(MERGER)

Presented to- The WLC’s

judgment panel
Presented by- Gaurav Manchanda
 Defining the problem
Lower chances of success
• Size of the target company- CORUS
• Other bidding co’s- CSN etc.
• Higher price per share
• Less opportunity to build relationships with
a target’s management
 Defining the problem
Other problems
• Local market’s reaction
• Arranging funds as it was an all cash deal
• Management
 Objectives..
1. To Meet the ever increasing demand
 Objectives..
2. Global presence.
 Objectives..
3. Higher profitability

• TATA’s current EBITDA is 13% & with

production of 25 mt, it is global no. 6

• By 2012, EBITDA expected is 25%,

production of 40mt, it will be global no. 2
 Objectives..
4. Consolidation/Synergy.
• As part of its integration process being
done at two levels, the steel maker
expects to cross the $450 million target by
the end of 2010. Synergy targets to be
achieved included areas of manufacturing,
procurement, research and development,
IT, Finance and capital projects
 Alternates
1. Global Expansion
• Taking the TATA trust globally.
• Joint ventures with other steel
manufacturers.
• Could have searched for reserves in
India, Singapore etc.
2. Profitability
• Could have diversified its investment
 Setting Up Criteria

Alternates Type Time Cost Mgmt Risk Remarks

Higher less less info of foreign markets,

Alternate 1 Subsidiary 4-5 yrs costs experience Severe higher expansion cost

less control over

Joint less management & sharing of
Alternate 2 Venture 1-2 yrs Shared control moderate profits

almost no support from own

Locating 6- 12 Higher govt., higher
Alternate 3 reserves months costs full control moderate transportation costs
 Analyzing alternates
• Expansion- If Tata Steel were to create, from
scratch, 19 million tons of steelmaking capacity
comparable in quality to what Corus
possesses, it would end up investing 70
percent to 85 percent more than it is paying
now.

• Besides, setting up a new factory, a three- to

five-year project if everything goes well, has
great execution risk
 Recommendations
Analysts took several years to admit that Tata's car
project came from vision, not desperation. The
wait may be a lot shorter this time.
It has helped TATA as:
3. Instant increase in size.
4. They want to have also the latest technology,
which is not easily available.
5. The third reason is acquiring a brand
6. It is in the international market for marketing.
7. To gain access to global steel market
8. And expand production capacity to keep pace
with growing demand for steel
 Contingency Plan
• The contingency plan could have been a
joint venture with MITTAL steels as it is
already into process of setting up a big
steel unit in Orissa. Tata could have
provided them with iron-ore reserves &
would have expected share in its profits.
 M&A, the Indian Way
• Step 1. Cultivate local political and community
leaders, and emphasize that your aim is to
create higher-value jobs for the local economy.
Hire a representative who is already connected
to political and labor leaders.
• Step 2. Rally the rank-and-file of the acquired
firm by presenting your business model as the
best way to retain global competitiveness. Build
the case that free enterprise is a global
phenomenon and that hiding from it is useless
 the Indian Way…
• Step 3. Retain as many important
operating and functional business leaders
in the local company as possible. Keeping
local HR leaders is important: they know
the ins and outs of the local market better
than anyone
Thank You