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Mergers, Acquisitions and Joint

Ventures
s

MEANING
Merger
A transaction where two firms agree to integrate their
operations on a relatively co-equal basis because they
have resources and capabilities that together may
create a stronger competitive advantage.
The combining of two or more companies, generally
by offering the stockholders of one company securities
in the acquiring company in exchange for the
surrender of their stock
Example: Company A+ Company B= Company C.

ACQUISITION
A transaction where one firms buys another
firm with the intent of more effectively using a
core competence by making the acquired firm
a subsidiary within its portfolio of business
It also known as a takeover or a buyout
It is the buying of one company by another.
In acquisition two companies are combine
together to form a new company altogether.
Example: Company A+ Company B= Company
A.

MERGER
ACQUISITION
COMPANY
A

COMPANY B

Company A and Company B


together form the new
Company C

COMPANY
A

COMPANY B

Company A buys Company


B Company A

DIFFERENCE BETWEEN MERGER AND


ACQUISITION:
i.

MERGER

Merging of two
organization in to one.
ii. It is the mutual decision.
iii. Merger is expensive than
acquisition(higher legal
cost).
iv. Through merger
shareholders can increase
their net worth.
v. It is time consuming and
the company has to
maintain so much legal
issues.
vi. Dilution of ownership
occurs in merger.

ACQUISITION
i.

Buying one organization


by another.
ii. It can be friendly takeover
or hostile takeover.
iii. Acquisition is less
expensive than merger.
iv. Buyers cannot raise their
enough capital.
v. It is faster and easier
transaction.
vi. The acquirer does not
experience the dilution of
ownership.

MERGER:WHY & WHY NOT


WHY IS IMPORTANT

i. Increase Market
Share.
ii. Economies of scale
iii. Profit for Research
and development.
iv. Reduction of
competition.

PROBLEM WITH MERGER

i.

Clash of corporate
cultures
ii. Increased business
complexity
iii. Employees may be
resistant to change

ACQUISITION:WHY & WHY NOT


WHY IS IMPORTANT

i. Increased market
share.
ii. Increased speed to
market
iii. Lower risk comparing
to develop new
products.
iv. Increased
diversification
v. Avoid excessive
competition

PROBLEM WITH
ACUIQISITION

i. Inadequate
valuation of
target.
ii. Inability to
achieve synergy.
iii. Finance by taking
huge debt.
7

PROCESS OF MERGER & ACQUISITION IN INDIA:


i. Approval of Board of Directors
ii. Information to the stock exchange
iii. Application in the High Court
iv. Shareholders and Creditors meetings
v. Sanction by the High Court
vi. Filing of the court order
vii.Transfer of assets or liabilities
viii.Payment by cash and securities
Maximum Waiting period:210 days from the filing of notice(or the
order of the commission - whichever earlier).

MEANING OF JOINT VENTURE


Joint venture is the co operation of two or
more individuals or business in which
each agrees to share profit, loss and
control in a specific enterprise.

FEATURES OF JOINT VENTURE

Joint venture is a short duration special purpose partnership.


The members of joint venture are known as co-ventures.
Joint venture is a temporary business activity.
In joint venture, profits and losses are shared in agreed
proportion. If there is no agreement regarding the
distribution of profit, they will share profit equally.
Joint venture is an agreement for pulling of capital and
business abilities to be employed in some profitable
venture.

ADVANTAGES

Accessing additional financial resources:


Sharing the economic risk with co-venturer
Widening economic scope fast
Tapping newer methods, technology, and approach
you do not have
Building relationship with vital contacts

DISADVANTAGES
Shared profit Since you share assets, you also
share the profit.
Diminished control over some important matters Operational control and decision making are
sometimes compromised in joint ventures.
Undesired outcome of the quality of the product or
project.
Uncontrolled or unmonitored increase in the
operating cost

Difference between Merger, Acquisition & Joint


Venture

Merger = two companies come together "permanently" for


mutual gains or to reduce competition

Acquisition = one company buys another company which


may or may not be doing well

Joint Venture = two companies come together "temporarily"


for mutual gains for a particular project/job. after the
project/job is completed the joint venture is dissolved.

Takeover = same like "acquisition", but generally a company


buys another company which is not doing well or has gone
bankrupt.

TOP 11 M&A DEALS

1. Tata Steel-Corus: $12.2 billion


January 30, 2007
Largest Indian takeover
After the deal TATAS
became the 5th
largest STEEL co.
100 % stake in
Image: B Mutharaman, Tata Steel
MD; Ratan Tata, Tata chairman; J
Leng, Corus chair;
and P Varin, Corus CEO.

CORUS paying Rs
428/- per share

2. Vodafone-Hutchison
Essar: $11.1 billion
TELECOM sector
11th February
2007
2nd largest
takeover deal
67 % stake
holding in hutch
Image: The then CEO of
Vodafone Arun Sarin visits
Hutchison
Telecommunications head

3. Hindalco-Novelis:
$6 billion

June 2008
Aluminium and
copper sector
Hindalco Acquired
Novelis
Hindalco entered
the Fortune-500
listing of world's
largest companies
by sales revenues

Image: Kumar Mangalam


Birla (center), chairman of
Aditya Birla Group.

4. Ranbaxy-Daiichi Sankyo: $4.5 b

Image: Malvinder Singh (left), exCEO of Ranbaxy, and Takashi


Shoda, president and CEO of
Daiichi Sankyo.

Pharmaceuticals sector
June 2008
Acquisition deal
largest-ever deal in the
Indian pharma industry
Daiichi Sankyo acquired
the majority stake of
more than 50 % in
Ranbaxy for Rs 15,000
crore
15th biggest drugmaker

5. ONGC-Imperial Energy:$2.8billion
January 2009
Acquisition deal
Imperial energy is a
biggest chinese co.
ONGC paid Rs 880
per share to the
shareholders of
imperial energy
ONGC wanted to tap
the siberian market
Image: Imperial Oil
CEO Bruce
March.

6. NTT DoCoMo-Tata Tele: $2.7 b

Image: A man walks past a


signboard of
Japan's biggest
mobile phone operator NTT Docomo

November 2008
Telecom sector
Acquisition deal
Japanese telecom giant NTT DoCoMo
acquired 26 per cent equity stake in
Tata Teleservices for about Rs 13,070
cr.

7. HDFC Bank-Centurion Bank of


Punjab: $2.4 billion

Image: Rana Talwar (rear)


Centurion Bank of Punjab
chairman, Deepak Parekh,
HDFC Bank chairman.

February, 2008
Banking sector
Acquisition deal
CBoP shareholders
got one share of
HDFC Bank for
every 29 shares
held by them.
9,510 crore

8. Tata Motors-Jaguar Land Rover: $2.3 billion

Image: A Union flag flies


behind a Jaguar car emblem
outside a dealership in
Manchester, England.

March 2008 (just a


year after acquiring
Corus)
Automobile sector
Acquisition deal
Gave tuff
competition to M&M
after signing the
deal with ford

9. Sterlite-Asarco: $1.8 billion

May 2008
Acquisition deal
Sector copper

Image: Vedanta Group


chairman
Anil Agarwal.

10. Suzlon-RePower: $1.7 billion

Image: Tulsi Tanti, chairman


&
M.D of Suzlon Energy
Ltd.

May 2007
Acquisition deal
Energy sector
Suzlon is now
the largest wind
turbine maker in
Asia
5th largest in the
world.

11. RIL-RPL merger: $1.68 billion

Image: Reliance Industries'


chairman Mukesh Ambani.

March 2009
Merger deal
amalgamation of
its subsidiary
Reliance
Petroleum with
the parent
company Reliance
industries ltd.
Rs 8,500 crore
RIL-RPL merger
swap ratio was at
16:1

THANK YOU