Merger & Acquisition
Mergers & AcquisitionsGroup:Chandha Parajuli Neupane(14521)Poojal Dahal Neupane(14522)Dinesh Shrestha(14528)Jipin Nakarmi(14520)Krishna Hari Pandey(14523)
Sanjish Wagle(14537)Suresh Kawan(14513)Ujjwal Maghaiya(14516)Madhu Sudan Dahal(14505)Narayan Desar(14508)Nakendra Dhami(14509)
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. Merger
When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition.
Acquisition is generally considered negative in nature
Trends of Merger and Acquisition in International Market
Motives for Mergers &acquisitions
Economies of large scale business large-scale business organization enjoys both internal and external economies.
Elimination of competition It eliminates severe, intense and wasteful expenditure by different competing organizations.
Desire to enjoy monopoly power M&A leads to monopolistic control in the market.
Adoption of modern technology corporate organization requires large resources
Lack of technical and managerial talent Industrialization, scarcity of entrepreneurial, managerial and technical talent
Benefits of Mergers and Acquisitions
Greater Value Generation. Mergers and acquisitions generally succeed in generating cost efficiency through the implementation of economies of scale. It is expected that the shareholder value of a firm after mergers or acquisitions.Gaining Cost Efficiency. When two companies come together by merger or acquisition, the joint company benefits in terms of cost efficiency. As the two firms form a new and bigger company, the production is done on a much larger scale.
Increase in market share - An increase in market share is one of the plausible benefits of mergers and acquisitions.
Gain higher competitiveness - The new firm is usually more cost-efficient and competitive as compared to itsfinancially weak parent organization.
Problems of Merger and Acquisitions
Large or extraordinary debt
Managers overly focused on acquisitions
Impact of Mergers and Acquisitions
Employees: Mergers and acquisitions impact the employees or the workers the most. It is a well known fact that whenever there is a merger or an acquisition, there are bound to be lay offs.
Impact of mergers and acquisitions on top level management Impact of mergers and acquisitions on top level management may actually involve a "clash of the egos". There might be variations in the cultures of the two organizations.
Shareholders of the acquired firm: The shareholders of the acquired company benefit the most. The reason being, it is seen in majority of the cases that the acquiring company usually pays a little excess than it what should. Unless a man lives in a house he has recently bought, he will not be able to know its drawbacks.
Shareholders of the acquiring firm: hey are most affected. If we measure the benefits enjoyed by the shareholders of the acquired company in degrees, the degree to which they were benefited, by the same degree, these shareholders are harmed
Strategies of Merger and AcquisitionThen there is an important need to assess the market by deciding the growth factors through future market opportunities, recent trends, and customer's feedback.
The integration process should be taken in line with consent of the management from both the companies venturing into the merger.
Restructuring plans and future parameters should be decided with exchange of information and knowledge from both ends.
Top M&A DEALS In global Market
1. Tata Steel-Corus: $12.2 billion
January 30, 2007Largest Indian take-overAfter the deal TATAS became the 5th largest STEEL co.100 % stake in CORUS paying Rs 428/- per share
2. Vodafone-Hutchison Essar: $11.1 billion
TELECOM sector11th February 20072nd largest takeover deal67 % stake holding in hutch
Image: The then CEO of Vodafone Arun Sarin visits Hutchison Telecommunications head office in Mumbai.
3. Tata Motors-Jaguar Land Rover: $2.3 billion
March 2008 (just a year after acquiring Corus)Automobile sectorAcquisition dealGave tuff competition to M&M after signing the deal with ford
4. ONGC-Imperial Energy:$2.8billion
January 2009Acquisition dealImperial energy is a biggest chinese co.ONGC paid 880 per share to the shareholders of imperial energyONGC wanted to tap the siberian market
Image: Imperial Oil CEO Bruce March.
5. RIL-RPL merger: $1.68 billion
March 2009Merger dealamalgamation of its subsidiary Reliance Petroleum with the parent company Reliance industries ltd.Rs 8,500 croreRIL-RPL merger swap ratio was at 16:1Image: Reliance Industries' chairman Mukesh Ambani.
MERGER BETWEEN AIR INDIA AND INDIAN AIRLINESThe government of India on 1 march 2007 approved the merger of Air India and Indian airlines. Consequent to the above a new company called National Aviation Company of India limited was incorporated under the companies act 1956 on 30 march 2007 with its registered office at New Delhi.
MERGER & ACQUISITION(2010-11) :
Cross border M&A rose significantly in East Asian Countries (Indonesia, Korea, Malaysia and Thailand) during the East Asian crisis period.Cross border merger can encourage longer-term reforms like operational restructuring and reallocation of assets in firms along with improving efficiency, competitiveness and corporate governance (UNCTAD)The need of M&A has significantly increased along with the rise of globalization.
Cross-Border Mergers and Acquisitions (Purchases), 19912009 (billion US$) Source UNCTAD 2010
1991961997992000052006200720082009World76.6406.0 409.2625.31022.7 706.5 249.7Developed Economies 65.3 376.1 347.3 497.3 841.7 568.0 160.8Developing Economies7.8 12.6 37.7 114.9 144.8 105.8 74.0Asia 4.7 9.3 27.6 70.8 94.5 94.4 67.3East Asia2.47.1 12.921.2 0.7 39.9 35.9Southeast Asia 2.1 2.6 9.6 7.5 25.9 18.9 4.3South Asia INDIA0.1 0.0 1.1 6.7 29.1 13.5 0.3
Top 10 acquisitions made by Indian companies worldwide:
AcquirerTarget CompanyCountry targetedDeal value ($ ml)Industry Tata SteelCorus Group plcUK12,000SteelHindalcoNovelisCanada5,982SteelVideoconDaewoo Electronics Corp.Korea729ElectronicsDr. Reddys LabsBetapharmGermany597PharmaceuticalSuzlon EnergyHansen GroupBelgium565EnergyHPCLKenya Petroleum Refinery Ltd.Kenya500Oil and GasRanbaxy LabsTerapia SARomania324PharmaceuticalTata SteelNatsteelSingapore293SteelVideoconThomson SAFrance290ElectronicsVSNLTeleglobeCanada239Telecom
The Future of Mergers and AcquisitionAlthough a number of factors influence M&A, the market is the primary force that drives them.
The late 1990s saw an unprecedented influx in mergers. In 1999, companies filed about three times the number received in 1995 and the total dollar value $11 trillion of mergers was ten times the amount since 1992. http://legal-dictionary.thefreedictionary.com/Mergers+and+Acquisitions Mergers rise during a booming economy and decrease as the companies forced to downsize during recession.
Trends of MA in Nepal
Causes of M&A in NepalLack of confidence in domestic institutionscompete with global players who could potentially begin their operations here owing to WTO arrangements.Regulatory Requirementcompulsive of sorts as the NRB has asked the BFIs belonging to the same business house to integrate without any ifs and butsthose who fear the complete meltdownto consolidate resources, introduce corporate best practices and reduce expensesIssues of liquidity crisis, unstable investment climate M&As establish an ideal solutionFor improving productivityeconomic conditions, capacity utilization achieving cost effectiveness of enterprises
Nepals financial market opened up for international investment on January 2010capacity of local institution to compete with its foreign counterpartsraising the capital requirement from Rs. 2 billion to Rs.5 billionthe current issues of liquidity crisis and unstable investment climate pose significant challenges for companies to expand
M&A in NepalThe first formal MergerEastern Electricity Corporation with Nepal Electricity Authority Land Reform Saving corporation and Cooperative Development Bank (now the ADB/N)Merger of dish/home TVStandard Chartered Bank acquired Grindlays Bank from the ANZ GroupButwal Power Company acquired Khimti and Bhotekoshi Hydropower companiesTeliasonera acquired Spice Nepal to form Ncell
Mergers Process in Nepalspecial decision of merger through the General Meeting of shareholdersSign a Memorandum of Understanding (MoU) for mergerLetter of IntentNRB conducts interaction, provide consultationIf BFI agreesNo MergerGo for Merger
A, B and C class financial institutions can merge into each other. D class FI can merge with another D class FI only.
FIs that want to merge should form a separate merger committee and sign Memorandum of Understanding (MoU).
The due process including MoU should be completed before applying to the Nepal Rastra Bank (NRB)for Letter of Intent (LoI). NRB should hold a meeting within 15 days of receiving LoI application.
NRB decides whe