GLOBAL MERGER

Meaning of Merger

It is combining of different business organizations having similar entities which results in creation of new business organization which grows

more rapidly and success in global market by expanding

customer base.

TYPES OF MERGER:1. Horizontal merger2. Vertical merger3. Conglomerate merger4. Concentric merger

EXAMPLES1.Indian Fisheries results merger of Air India and Kingfisher Airlines 2.Sikkim Bank Ltd. And Union Bank of India.3.New Bank of India and Punjab National Bank.

*HP is well established in imaging and printing system . Compaq is well established company in providing PCs.

• HP is known for innovation and quality Compaq is known for its information technology service which provides one-stop solution.

• HP’s software and service businesses had great potential Compaq on other side had a strong distribution channel.  • Carleton S Fiorina strongly in favor of merger Walter B Hewlett, son of one of the founder member was against the merger.

INTRODUCTION

HP Shares fall from $23.5 billion to $17.70 billion as investors slashed value of deal from

$25 billion to $19 billion.

Improved economies and innovation

SWOT Analysis of HP & Compaq

SWOT of HP

Strengths

1. Imaging and printing system 2. Strong reputation for innovation 3. Strong in UNIX servers.

Weaknesses 1. Declining growth of PC market 2. Weak in server market

1. Expand services and enterprise solution divisions2. Increasing demand of cloud based services3. Acquisition of more technology related patents Threats1. Slow growth rate of the PC market2. Rapid Technological changes

Opportunities

 SWOT of Compaq

STRENGTH:

1. Huge Hardware business 2.Strong distribution channel3.Known for information technology

WEAKNESS:

1. At time of merger, it hade huge. inventory 2.Dell had strong position in online business 3.Less capable of taking orders and customizing computers

1.Compaq is renowned in pc hardware2.Serve the customer in a better manner

Threats1. Competitors are Dell, IBM & HP itself2. Lack of online business

Opportunities

Improved Economics and Innovation

Combined company creates economies of scale Direct sales channel More flexible distribution model

Complementary Leadership in Key Markets

Industry leading product line in entire server category Industry leader in enterprise storage segment Broader portfolio of products and services

HP-COMPAQ MERGER POSITIVES

Strengthened Business Provides Critical Mass in Key Growth Market

Accelerates growth Better customer loyalty Leading position in mission-critical services

Financial Benefits

Estimated $2.5 billion in annual cost Would allow HP to increase investment in the imaging and printing business

HP’s Business Portfolio Will Be Worse

Increased exposure in unprofitable PC businessPC market was expected to shrink

The Integration Risk of the Proposed Merger is Substantial

No significant merger involving computer companies had ever met expectations: ex. Compaq/Digital, Tandem.. HP management had no experience with large merger

HP-COMPAQ MERGER NEGATIVES

Negative Financial Impact on HP Stockholders

Dramatic drop in stock price after proposed merger was announcedWall Street predicted low estimates for future financial performance

HP’s Strategic Position Will Not Materially Improve

Neither company had a profitable PC business modelNeither company had successfully transitioned to a direct distribution model

HP TODAY AFTER MERGER

Revenue  US$ 120.357 billion (2012)[1]

Operating income  US$ 9.566 billion (2012)[1]

Net income  US$ -12.65 billion (2012)[1]

Total assets  US$ 108.768 billion (2012)[1]

Total equity  US$ 22.833 billion (2012)[1]

Employees 331,800 (2012)[1]

HP MARKET SHAREAFTER

MERGER

1)Leading global PC market for shipments 2006 – Took market leadership from Dell 18% HP, 14% Dell, 11% Acer, 7% Lenovo 2) Leading global server market 30% market share in 20133) Leading blade servers segment 47% HP, 26% IBM (2013) 4)Leading global printers market 40% market share in 2013 Competitors: Xerox, Canon 5) IT services 2 nd largest player (EDS acquisition in 2008) Competitors: Accenture, IBM 6) Branding #12 in Top 100 Best Global Brands (2008) #1 in US, #10 in world for Environment, 2008)