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Merge rs and Acquisitions

business
c ombination
Merge rs and Acquisitions

Why Business Combination?


Forms Of Business Combination
Merge rs and Acquisitions

•Mergers

business •Amalgamation

c ombination
•Acquisitions

•Takeovers
Merge rs and Acquisitions

AI & IA TO MERGE IN APRIL


TATA LIKELY TO REVISE CORUS TAKEOVER OFFER
AMTEK AUTO RENEW BID TO ACQUIRE UK COMPANY
TATA GROUP IN RACE FOR DAEWOO ROMANIA
GE SNAPS UP SMITHS AEROSPACE FOR $4.8 BILLION
HINDUJAS ENTER RACE FOR HUTCH’S HTL STAKE
IDBI BUYS 10% STAKE IN BAG FILMS RADIO UNIT
US AIRWAYS RAISES BID FOR DELTA
Merge rs and Acquisitions

When two or more companies


combines into one company

may merge with existing co,


Merger
form new company……

in India merger is called


Amalgamation
Merge rs and Acquisitions

Merging Companies
are called

Amalgamating
Companies

Merger
New Company is
called

Amalgamated
Company
Merge rs and Acquisitions

Merger
Through
Absorption

Merger
MERGER
THROUGH
CONSOLIDATION
Merge rs and Acquisitions

Merger
Through
Absorption

An Absorption is Combination of


Merger
two or more companies into an
existing company

All companies except one lose


their identity
Merge rs and Acquisitions

Western Union Bank Of New


New Bank Of
Bank Merged York Merged
India Merged
With With Mellon
With PNB
IDBI Financial
Merge rs and Acquisitions

Merger
Through
Consolidation

Merger •A consolidation is a combination of two or more


Companies into a new Company

•All companies are dissolved to form a new Company


Merge rs and Acquisitions

Merger
Through
Consolidation

Hindustan
Hindustan Indian Software
Instruments
Merger Computers Ltd Co .Ltd
Ltd

Indian
Reprographic
Ltd HCL LTD
Merge rs and Acquisitions

Acquisition

An Acquisition may be an act of acquiring


effective control by one company over assets
or management of another company without
any combination of companies……..

Companies may remain independent, separate


But there may be change in control of
Companies……..
Merge rs and Acquisitions

Acquisition

Obtaining Control over management of a Company

MRTP ACT-at least 25% voting right of a Company

Investment of more than 10% share into a company


Require approval of Shareholders & C Govt.
Merge rs and Acquisitions

Dabur Pharma to acquire Thai company

Aditya Birla Group to acquire Trinethra

China’s largest Bank to take over


Indonesian Bank
Merge
WE ARE rs andTOAcquisitions
LOOKING ACQUIRE

HOSPITALS
We are leading business house with a reputed presence in
In health care sector in the country

We are likely to acquire medium to large sized hospitals in


Metros, state capitals & tier 1 cities. They could be on out
right purchase or long term lease. We are also open to
Joint Ventures

Pl. send proposals & contact details to indianhealth@gmail.com


Merge rs and Acquisitions

Acquisition & Takeover

When Acquisition is unfriendly or hostile


It may be called Takeover
Merge and Case
rs -Arcelor
Mittal Acquisitions

Mittal Steel bids for Arcelor-27.1.06


Mittal after Arcelor’s Cash -2.2.06
Mittal and Arcelor seek Support-6.2.06
Arcelor investors favour mittal but want more-15.2
Arecelor offer sweet,hostality wanning-mittal 16.2
Arecelor declared higher dividend than mittal-16.2
Mittal Steel Launched formal take over-19.5
Mittal raised bid before share holders meet-19.5
A,lor to merge with Russian Company Severstal 26.5
Mittal –Arcelor start talks -9.6
Arecelor rejects mittal bid-12.6
Merge and Case
rs -Arcelor
Mittal Acquisitions

•Mital woos Arcelor with 70% growth-13.6


•Mittal may hike offer-21.6
•Mittal Arcelor close to friendly deal-23.6
•Mittal wins over more shareholders23.6
•Arcelor gives in to Mittal-26.6
•Did Mittal Yield too much-29.6
•Arcelor,s largest S,holder reject Severstal - 30.6
•Mittal Steel claims 92% shares of Arcelor -27.7
•Mittal steel announces post merger plan-8.8
•Merged Arcelor-Mittal named Mike Repley
•As CEO OF US operations
Merge andTakeover…..Merger
rsto Defend
Tactics Acquisitions

Divestiture
Crown Jewels
Poison Pill
Greenmail
White Knight
Golden parachutes
Merge rs and Acquisitions

FORMS OF MERGER

Horizontal Vertical
Merger Conglomerate
Merger Merger
Merge rs and Acquisitions

Faster Growth
Improving Profitability
Managerial Effectiveness
Merger Gaining Market Power
Objectives Leadership
Cost Reduction
Merge rs and Acquisitions

Are there any alternatives to Mergers or acquisitions?


Merge rs and Acquisitions

Joint Venture
Strategic Alliance
Eliminating Inefficient
Operations
Merger Productivity Improvement
Alternatives Hiring Capable
Managers
Merge rs and Acquisitions

Limit Competition
Market Power
Diversification
Growth
Economy of Scale
MOTIVES & BENEFITS Access to Foreign Market
OF Resources
Displace existing Management
MERGERS Circumvent Govt Regulations
Aggressiveness
Diversifying Risk
Profitability
Merge rs and Acquisitions

• Accelerated Growth

MOTIVES & BENEFITS •Expanding Existing Markets


OF •Entering New Markets
MERGERS •Expand Internally
•Expand Externally
•Developing Operating Facilities
•Price Paid for Merger
Merge rs and Acquisitions

• Enhanced Profitability

MOTIVES & BENEFITS


OF
MERGERS •Economies of Scale
•Operating Economies
•Synergy
Merge rs and Acquisitions

• Reduction in Tax Liability

MOTIVES & BENEFITS


OF
•Carry forward Losses
MERGERS
•Tax on Share
Merge rs and Acquisitions

• Financial Benefits

•Eliminating Financial Constraints

MOTIVES & BENEFITS •Deploying Surplus Cash


OF
•Enhancing Debt Capacity
MERGERS
•Lowering Financial Costs
Merge rs and Acquisitions

• Increased Market Power

•Market Share

MOTIVES & BENEFITS •Bargaining Power


OF
MERGERS •Technological Advancement

•Pricing

•Limiting Competition
Merge rs and Acquisitions

Planning
Steps in Search &
Analysis Screening
Of
Mergers Financial
& Evaluation
Acquisitions
Mode of
Merger
Negotiation
Post
Merger
Merge rs and Acquisitions

Objective of Acquisitions

Steps in Planning Strengths & Weaknesses


Business Units-dropped
Analysis or Added
Of
Mergers
&
Acquisitions Industry Data
Target Firm

Quality Of Mgt
Market Growth Market Share Size
Competition Capital Structure
Ease Of Entry Profitability
Capital & Labour Production &Marketing
Degree of Regulation Capabilities etc
Merge rs and Acquisitions

Search &
Screening
Steps in
Analysis
Of
Mergers
& Where to look for candidates
Acquisitions Is it too large or small
Engaged in related or unrelated Activity
Export oriented or Local
Amenable or not amenable to merger
Merge rs and Acquisitions

Financial
Evaluation
Steps in
Analysis
Of
Mergers Current
& Market
Acquisitions Value
Determining

•Earnings
•Cash flows
•Areas Of Risk Premium
•Maximum Price Payable Value
•How to Finance Merger
Merge rs and Acquisitions

Mode of
Merger
Steps in
Analysis
Of
Mergers
& Regulations
Acquisitions
Time frame

Resources

Degree of control

Assume hidden
liabilities
Merge rs and Acquisitions

Negotiation

Steps in
Analysis
Of
Mergers
&
Acquisitions
Your intentions should be to pay one dollar
more than the value to the next highest bidder
and an Amount that is less than the value to you
Merge rs and Acquisitions

Post
Merger
Steps in
Analysis
Of Check Hostility
Mergers
& Anticipate Problems
Acquisitions “Art of taking over
Solve Problems Company
Without overtaking
Treat people
It”
With Dignity
Merge rs and Acquisitions

Value Created by Merger

Economic Advantage (EA) if


VPQ > (VP + VQ)
Where VPQ =Combined PV of merged firms
VP= Worth of Firm P
VQ=Worth of firm Q
MergeValue and Acquisitions
rs Created by Merger

Economic Advantage

EA = VPQ - (VP + VQ)


Merge and Acquisitions
rs Acquisitions,
Few Mergers, Take over

•New Bank Of India merged with Punjab National Bank


•Global Trust Bank Taken over by OBC
•Western United Bank taken over by IDBI
•International Data Management By HCL Ltd
•Chhabrias took over Shaw Wallace, Dunlop
•Ashok Leyland By Hindujas
•Spensers By Goenkas
•VSNL by Tata
•Tata Tea Ltd Acquired Consolidated Coffee Company
•Tomco with HLL
•Tata Fertilizers Merged With Tata Chemicals
•Sundaram Clayton Merged With TVS-suzuki Ltd
•MITTAL STEEL'S ACQUISITION OF ARCELOR