b usiness c ombination

Mergers Acquisitionsand

business

combination


Why Business Combination?Forms Of Business Combination


business

combination

Mergers

Amalgamation

Acquisitions

Takeovers


AI & IA TO MERGE IN APRILTATA LIKELY TO REVISE CORUS TAKEOVER OFFERAMTEK AUTO RENEW BID TO ACQUIRE UK COMPANYTATA GROUP IN RACE FOR DAEWOO ROMANIAGE SNAPS UP SMITHS AEROSPACE FOR $4.8 BILLIONHINDUJAS ENTER RACE FOR HUTCH’S HTL STAKEIDBI BUYS 10% STAKE IN BAG FILMS RADIO UNITUS AIRWAYS RAISES BID FOR DELTA


Merger

When two or more companies

combines into one company

may merge with existing co,

form new company……

in India merger is called Amalgamation


Merger

Merging Companies are called

AmalgamatingCompanies

New Company is called

AmalgamatedCompany


Merger

MergerThroughAbsorption

MERGERTHROUGHCONSOLIDATION


Merger

MergerThroughAbsorption

An Absorption is Combination of two or more companies into an existing company

All companies except one lose their identity


Western UnionBank Merged

WithIDBI

New Bank OfIndia Merged

With PNB

Bank Of New York MergedWith Mellon

Financial


Merger

MergerThroughConsolidation

A consolidation is a combination of two or more Companies into a new Company

All companies are dissolved to form a new Company


Merger

MergerThroughConsolidation

HindustanComputers Ltd

HindustanInstruments

Ltd

Indian SoftwareCo .Ltd

IndianReprographic

Ltd HCL LTD


Acquisition

An Acquisition may be an act of acquiring

effective control by one company over assetsor management of another company withoutany combination of companies……..

Companies may remain independent, separateBut there may be change in control ofCompanies……..


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.


Dabur Pharma to acquire Thai company

Aditya Birla Group to acquire Trinethra

China’s largest Bank to take over Indonesian Bank

Mergers AcquisitionsandWE ARE LOOKING TO ACQUIRE

Pl. send proposals & contact details to [email protected]

HOSPITALSWe are leading business house with a reputed presence inIn health care sector in the country

We are likely to acquire medium to large sized hospitals inMetros, state capitals & tier 1 cities. They could be on outright purchase or long term lease. We are also open to Joint Ventures


Acquisition & Takeover

When Acquisition is unfriendly or hostileIt may be called Takeover

Mergers AcquisitionsandMittal -Arcelor Case

Mittal Steel bids for Arcelor-27.1.06Mittal after Arcelor’s Cash -2.2.06Mittal and Arcelor seek Support-6.2.06Arcelor investors favour mittal but want more-15.2Arecelor offer sweet,hostality wanning-mittal 16.2Arecelor declared higher dividend than mittal-16.2Mittal Steel Launched formal take over-19.5Mittal raised bid before share holders meet-19.5A,lor to merge with Russian Company Severstal 26.5Mittal –Arcelor start talks -9.6Arecelor rejects mittal bid-12.6

Mergers AcquisitionsandMittal -Arcelor Case

•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

Mergers AcquisitionsandTactics to Defend Takeover…..Merger

Divestiture Crown Jewels Poison Pill Greenmail White Knight Golden parachutes


HorizontalMerger

VerticalMerger

ConglomerateMerger

FORMS OF MERGER


MergerObjectives

Faster GrowthImproving ProfitabilityManagerial EffectivenessGaining Market PowerLeadershipCost Reduction


Are there any alternatives to Mergers or acquisitions?


MergerAlternatives

Joint VentureStrategic AllianceEliminating Inefficient OperationsProductivity ImprovementHiring Capable Managers


MOTIVES & BENEFITS OF

MERGERS

Limit Competition Market Power Diversification Growth Economy of Scale Access to Foreign Market Resources Displace existing Management Circumvent Govt Regulations Aggressiveness Diversifying Risk Profitability



MERGERS

Accelerated Growth

Expanding Existing MarketsEntering New MarketsExpand InternallyExpand ExternallyDeveloping Operating FacilitiesPrice Paid for Merger



MERGERS

Enhanced Profitability

Economies of ScaleOperating EconomiesSynergy



MERGERS

Reduction in Tax Liability

Carry forward Losses

Tax on Share



MERGERS

Financial Benefits

Eliminating Financial Constraints

Deploying Surplus Cash

Enhancing Debt Capacity

Lowering Financial Costs



MERGERS

Increased Market Power

Market Share

Bargaining Power

Technological Advancement

Pricing

Limiting Competition


Steps inAnalysisOfMergers&Acquisitions

Planning

Search & Screening

FinancialEvaluation

Mode ofMerger

Negotiation

PostMerger



Planning

Industry Data

Market GrowthCompetitionEase Of EntryCapital & LabourDegree of Regulation

Target Firm

Quality Of MgtMarket Share SizeCapital StructureProfitabilityProduction &MarketingCapabilities etc

Objective of AcquisitionsStrengths & WeaknessesBusiness Units-dropped or Added



Search & Screening

Where to look for candidatesIs it too large or smallEngaged in related or unrelated ActivityExport oriented or LocalAmenable or not amenable to merger



FinancialEvaluation

Determining

•Earnings•Cash flows•Areas Of Risk•Maximum Price Payable•How to Finance Merger

Current Market Value

PremiumValue



Mode ofMerger

Regulations

Time frame

Resources

Degree of control

Assume hiddenliabilities



Negotiation

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



PostMerger

Check Hostility

Anticipate Problems

Solve Problems

Treat peopleWith Dignity

“Art of taking overCompany

Without overtakingIt”


Economic Advantage (EA) if

VPQ > (VP + VQ)

Where VPQ =Combined PV of merged firms

VP= Worth of Firm P

VQ=Worth of firm Q

Value Created by Merger


Economic Advantage

EA = VPQ - (VP + VQ)

Value Created by Merger


New Bank Of India merged with Punjab National BankGlobal Trust Bank Taken over by OBCWestern United Bank taken over by IDBIInternational Data Management By HCL LtdChhabrias took over Shaw Wallace, Dunlop Ashok Leyland By HindujasSpensers By GoenkasVSNL by TataTata Tea Ltd Acquired Consolidated Coffee CompanyTomco with HLLTata Fertilizers Merged With Tata ChemicalsSundaram Clayton Merged With TVS-suzuki LtdMITTAL STEEL'S ACQUISITION OF ARCELOR

Few Mergers, Acquisitions, Take over

Documents

b usiness c ombination