Mergers, Acquisition & Strategic Alliance

Prepared By:Bhavin Agrawal(02)

Nikita Balar(04)Malvi Bhatt(08)Ishani Dave (14)

Nitin Madhvi (28)Kushal Mehta (31)

What is Merger

• Merger means the combination of two or more companies in creation of a new entity.

Tech Mahindra and Satyam merger

Tech Mahindra and Satyam merger

• Satyam Computer Services Limited was an Indian IT services company based in Hyderabad, India.

• It offered a range of services, including software development, system maintenance, packaged software integration and engineering design services.

• It subsequently merged within Tech Mahindra on 24 June 2013.

Tech Mahindra and Satyam merger

• Tech Mahindra

– Diversification

– Broadens its customer base

– Stronger merged entity

• Satyam

– Financial Support

– Relief to shareholder

– Management

Tech Mahindra and Satyam merger

• Terms of transaction: Tech Mahindra had to pay Rs. 1757 crore for 31% at Rs.58 per share whereas for 51% stake the company had to pay Rs.2890 crore.

– Rs.700 crore - internal

– Rs.2190 crore - debt

Acquisition

• A corporate action in which a company buys most of the target company's ownership stakes in order to assume control of the target firm.

• Acquisitions are often made as part of a company's growth strategy whereby it is more beneficial to take over an existing firm's operations and niche compared to expanding on its own.

• Acquisitions are often paid in cash, the acquiring company's stock or a combination of both.

Tata and JaguarJaguar Land Rover (JLR):

• Jaguar Cars bought by Ford in 1989

• Land Rover bought by Ford from BMW for $1.4bn in 1989

• A difficult relationship between the UK firm and its US owners

• Jaguar fell into heavy losses whilst owned by Ford (reaching up to $600million per year)

• However, Ford invested heavily in new model development

http://googleweblight.com/?lite_url=http://beta.tutor2u.net/business/blog/6-essential-ma-cases-tata-group-buys-jaguar-land-rover&ei=ibl78oko&lc=en-IN&s=1&m=561&ts=1443516017&sig=APONPFkMtX26gKW4T8gMbLhXLVV-DFLAdA

Tata Group:

• One of India’s largest private conglomerates -used to investing in the UK

• Bought Tetley Tea in 2000• Bought Corus Steel - a big supplier to JLR - in

2007• Tata Motors - was already India’s third largest car-

maker, but struggling with a poor image and hampered by rising raw material costs

The Deal• Ford sells JLR to Tata for in March 2008 just over £1bn - just a few

months before a collapse in global demand in the international carmarket Tata financed the takeover with $3bn of new long-term loans

• The price paid by Tata was approximately half of what Ford paid to buy Jaguar and Land Rover.; + Ford had continued to incur heavy losses in Jaguar as it failed to turn the business around.

• The deal took over a year to agree - which may have helped with the post-merger integration. Tata recognised that it would continue to need support from Ford who are a main supplier of car components to the two brands.

• No significant change proposed to the businesses by Tata. They claimed that staff, trade unions and the UK government had been kept informed about the proposed takeover and supported the move.

• The deal has been endorsed by trade unions, which secured a commitment from Tata to continue with JLR’s production plans until the end of 2011. This includes development of new models.

Benefits

• Acquiring JLR would provide significant potential for revenue synergies, including giving Tata greater international distribution, broader product range and better customer service skills

• Tata gains access to world-class engineering capability

• Strengthens relationship between Tata’s steel and motoring businesses

Strategic Alliance

• A strategic alliance is an agreement between two or more parties to share resources, capabilities and internal assets while remaining independent organizations.

• It occurs when two or more organizations join together to pursue mutual benefits.

Coca-Cola and McDonald’s

• McDonald’s and Coca-Cola alliance is a big success, making the two companies what they are today.

• McDonald’s is now the world’s leading global food service retailer with

– more than 35000 local restaurants

– serving nearly 70 million people

– more than 100 countries

http://strategic-partnering.net/case-3-coca-cola-mcdonalds/

• While Coca-Cola is the world’s largest beverage company owning and licensing around – 1.9 billion beverage servings worldwide every day– In more than 200 countries

• Customers are accustomed to enjoying a meal with a coke inside all along, which result in that the soft drink becoming a key revenue stream, covering about five percent of McDonald’s revenue.

• Moreover, the top management teams from both sides have been very careful about partnering relationship since the handshake between the two top executives in 1955.

• McDonald’s partnered with Coca-Cola in 1955 and it is in continuation.

• Despite the lack of paper contract, there is considerable contact between the two companies at board level.

• McDonald’s shared the very exact destination, expansion first across the US, then around the world with Coca-Cola.

• As the result, they managed to create and deliver excellent transformational value for both sides, mainly focusing on– Integrated supply chain– Enabling rapid entry– Large-scale expansion into new geographies.

Benefits

1) McDonald’s and Coca-Cola shared a common mission and vision to expand globally

2) The know-how and expertise from Coca-Cola benefits the product development of McDonald’s.

3) The unique supply chain co-operated by both Coca-Cola and McDonald’s creates added values.

4) Advertising• McDonald’s and Coca-Cola have stood by each other

and worked countless campaigns globally over years.