Value creation

SOURCES OF VALUE CREATION IN MERGER &

ACQUISITION

Members of group -A

1-SOUMYALIN SANTY2-HINA SULTANA3-SUMIT PARIDA4-SRADHANJALI BEHERA

INTRODUCTION

WHAT IS VALUE?Value: Originated from a French word: “valoir”

which means ‘be worth’.WHAT IS VALUE CREATION?Value creation means performing activities that Increases the value to customers and also to the Shareholders.

Value Creation through M&A – What it means?

• Synergies & Economies of Scale• Gain access to new markets, customers, products• Diversification of Risks• Access to New Technology and Knowledge• Ability to limit competition / gain market share

Value Creation Through M&A – Case Study

INVERTER

Manufacturer

High Level of Innovati

on

Strong Distribut

ion Network

High Custom

er Loyalty

Seasonality in

business

Primarily North India Focussed

Company A BATTERY

Manufacturer

Successful

Technology

Price Competi

tive Product

s

High Distribu

tors Loyalty

Diverse Product

Use

Strong in Western India

Company B

Value Creation Through Mergers & Acquisitions

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What benefits will potentially accrue if Company A and B were to merge?

Slide 66 April 2011

Ability to sell bundled product (inverters &

batteries)

Access to newer markets for different

products (North & West)

Use of common distribution

network

Product diversification / Season neutral

Organic Expansion – Battery Manufacturing

in North India


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“Value Creation” through this transaction.....

Company A+B =

Enhanced revenue & customer base + product diversification + cost savings + production

efficiencies + new markets

ultimately leading to…

‘Improved shareholders wealth’

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SOURCES OF VALUE CREATION IN M&A

There are four sources or models which create values-

1- ANSOFF’S PRODUCT MARKET MATRIX MODEL

2- BCG MATRIX MODEL 3- GRAND MATRIX MODEL 4- INDUSTRY/PRODUCT LIFE CYCLE

6 April 2011 Slide 8


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ANSOFF’S PRODUCT MATRIX



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Market Guru Phillip Kotler divided this into 3 stages:

• 1st stage is Intensive Growth Strategy:A. MARKET PENETRATIONB. MARKET DEVELOPMENTC. PRODUCT DEVELOPMENT• 2nd stage is Integrative Growth Strategy:A. BACKWARD INTEGRATION B. FORWARD INTEGRATIONC. HORIZONTAL INTEGRATION• 3rd stage is diversification growth strategy:A. CONCENTRIC DIVERSIFICATIONB. HORIZONTAL DIVERSIFICATIONC. CONGLOMETRIC DIVERSIFICATION




1.STAR- STRATEGIES APPLIED ARE INTENSIVE STRATEGY, INTEGRATIVE STRATEGY AND CONCENTRIC.

2.QUESTION MARK-STRATEGIES APPLIED ARE INTENSIVE GROWTH STRATEGY

3.DOG- STRATEGIES APPLIED ARE DIVESTURE AND LIQUIDATION.

4.CASH COW- CONCENTRIC CONGLOMETRIC & HORIZONTAL DIVERSIFICATION.


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GRAND MATRIX


• THERE ARE 4 STAGES OF GRAND MATRIX1. STAGE 1-STAR IN BCG MATRIX2. STAGE 2-QUESTION MARK3. STAGE 3-DOG4. STAGE 4-CASH COW



• INTRODUCTION STAGE: MARKET PENETRATION,MARKET DEVELOPMENT,CONGLOMETRIC DIVERSIFICATION & HORIZONTAL INTEGRATION

• GROWTH STAGE:HORIZONTAL MERGER, DIVESTURE, CONGLOMERATE DIVERSIFICATION

• MATURITY STAGE: HORIZONTAL MERGER, DIVESTURE .

• DECLINE STAGE:DIVESTURE CONGLOMERATE DIVERSIFICATION.

STRATEGIES APPLIED


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CONCLUSIONFrom the above discussion we come to aconclusion that for creating values for the Acquirer’s they remain an important part of any company’s long term value creation Strategy. The benefits of a well thought out M&A strategy can be a source of competitive advantage.



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THANK YOU

ANY QUESTIONS………….?


Economy & Finance

Value creation