1

STATEGIC FIT IN

MERGERS AND

ACQUISITIONS –

AN IMPERATIVE

2

INTRODUCTION

Mergers and acquisitions (M&A) and corporate

restructuring are a big part of the

corporate finance world. Every day, Wall Street

investment bankers arrange M&A transactions,

which bring separate companies together to

form larger ones.

Corporate mergers and acquisition is defined as “The process of

buying, selling & integrating different corporate with the desire of

expansion & accelerated growth opportunity.”

“1+1=3”

“One plus One Three, this equation is the special alchemy of an

Acquisition.”

3

DEFINATION

MERGERS

“Basically, when two companies

become one. This decision is

usually mutual between both

firms.”

“A combination of two or

more businesses into one

business.”

4

ACQUISITIONS

“ACQUIRE MEANS TO BUY

OR TO PURCHASE”

“A corporate action in which a

company buys most, if not all,

of the target company’s

ownership stakes in order to

assume control of the target

firm.”

5

Types of Corporate Mergers

• Vertical

• Horizontal

• Varieties

• Conglomeration

• Product-extension

• Market extension

Types of Corporate Acquisition

• Friendly

• Hostile • Depending upon

• Acquire or merging is or isn’t listed in public markets.

• How the communication is done and received by the target. 6

HISTORY Most of the mergers and acquisitions are an outcome of

the favorable economic factors like the macroeconomic

setting, escalation in the GDP, higher interest rates and

fiscal policies. These factors not only trigger the M & A

process but also play an active role in laying the mergers

and acquisition strategies between bidding and target

firms.

The concept of merger and acquisition in India was not popular until the year 1988.

The key factor contributing to fewer companies involved in the merger is the regulatory and

prohibitory provisions of MRTP Act, 1969. (Monopolies and Restrictive Trade Practices

Act,1969)

The year 1988 witnessed one of the oldest business acquisitions or company mergers in

India.

As for now the scenario has completely changed with increasing competition and

globalization of business. It is believed that at present India has now emerged as one of the

top countries entering into merger and acquisitions. 7

8

•Ten biggest Mergers and Acquisitions deals in

India 1. Tata Steel -Corus Group

2. Hutch / Essar –Vodafone

3. Hindalco Industries - Canada

based firm Novelis Inc

4. Indian pharma industry - Daiichi

Sankyo

5. ESSO- ONG

6. DoCoMo-Tata Tele

7. India's financial industry -

HDFC Bank and Centurion Bank

of Punjab.

8. Tata Motors - Jaguar and Land

Rover brands from Ford Motor

9. Adyta Birla Group – Columbian

Chemicals

10. Vedanta –Cairn Deal

Case study The Vedanta – Cairn acquisition

December 2011 finally saw the

completion of the much talked

about Vedanta – Cairn deal that was

in the pipeline for more than 16

months. Touted to be the biggest deal

for Indian energy sector, Vedanta

acquired Cairn India for a neat 8.6

billion dollars. Although the Home

Ministry cleared the deal, it has

highlighted areas of concern with 64

legal proceedings against Vedanta.

9

Distinction between Mergers and Acquisitions

Merger Acquisition

The case when two companies (often of same size) decide

to move forward as a single new company instead of

operating business separately.

The case when one company takes over another and

establishes itself as the new owner of the business.

The stocks of both the companies are surrendered, while

new stocks are issued afresh.

The buyer company “swallows” the business of the target

company, which ceases to exist.

For example, Glaxo Wellcome and SmithKline Beehcam

ceased to exist and merged to become a new company,

known as Glaxo SmithKline.

Dr. Reddy's Labs acquired Betapharm through an

agreement amounting $597 million.

Merging of two organizations in to one. Buying one organization by another.

It is the mutual decision. It can be friendly takeover or hostile takeover.

Merger is expensive than acquisition (higher legal cost). Acquisition is less expensive than merger.

Through merger shareholders can increase their net worth. Buyers cannot raise their enough capital.

It is time consuming and the company has to maintain so

much legal issues.

It is faster and easier transaction.

Dilution of ownership occurs in merger. The acquirer does not experience the dilution of

ownership.

10

11

MERGERS AND ACQUISITIONS

TAKEOVER

Mergers, acquisitions and takeovers have been

a part of the business world for centuries.

Merger is an economic tool that is employed

for elevating the long-standing success which is

achieved by developing their functional

competence. Acquisitions can be either friendly or

intimidating and takes place between the

bidding and the targeted firm. Reverse

acquisition take place when the target company

is bigger than the firm which offered the

takeover proposal. During the process the

bidder has the right to buy the share of the

targeted firm.

TERMINOLOGY

12

13

Preliminary Assessment or

Business Valuation

Phase of Proposal

Exit Plan

Structured Marketing

Stage of Integration

Steps of Mergers and Acquisition Process

14

REVERS MERGER

“A reverse merger is when a private company becomes a public company by

purchasing control of the public company. The shareholders of the private company

usually receive large amounts of ownership in the public company and control of its

board of directors (B of D).”

Advantages

•The ability for a private company to

become public for a lower cost and in

less time than with an initial public

offering (IPO). When a company plans

to go public through an IPO, the

process can take a year or more to

complete. This can cost the company

money and time. With a reverse

merger, a private company can go

public in as little as 30 days.

Disadvantages

•Reverse stock splits are very

common with reverse

mergers and can significantly

reduce the number of shares

owned by stockholders.

15

Merger and Acquisition Strategies

The merger and

acquisition strategies may

differ from company to

company and also depend

a lot on the policy of the

respective organization.

However, merger and

acquisition strategies have

got some distinct process,

based on which, the

strategies are devised.

16

BIBLIOGRAPHY

•WWW.GOOGLE.COM

•WWW.HATIMGLAZING.COM

•WWW.WIKIPEDIA.COM

•WWW.INVESTOPEDIA.COM

•WWW.YAHOO.COM

•WWW.SCRIBD.COM

•BUSINESS.MAPSOFINDIA.COM

•WWW.SLIDESHARE.NET

•WWW.STRATEGIC FIT IN MERGERS AND

ACQUISITIONS-AN IMPERATIVE.PPT

•WWW.INVESTOPEDIA.COM

17

THANKING YOU