Case STUDY on New Balnace Shoes

7/31/2019 Case STUDY on New Balnace Shoes

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Liberalization opened doors to many businesses in India

TNS Technologies was born in 1993.


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TNS started in Mumbai with 10 IT engineers under the leadership of

Mr .K .V. Rao

Now the talent pool at TNS is as huge as 50,000 employees from over 30

nationalities and 42 plus global delivery centers in over 30 countries.

Their service span :o Product engineering

o Application development

o IT Infrastructure Management

o Testing

Keeping Business expansion in mind TNS offered a public issue in the year

2000


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More

Due to its excellent performance and history ,the issue observed a

subscription of about 20 times before it got listed on the NSE

In 2007, TNS had a client data base of more than 800 that includes major

giants from various sectors like :

Banking & Finance Health care

Manufacturing

Education Institutions

Government bodies

Media It was a 5bn industry competing with global leaders like Infosys and

cognizant


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Effect of Recession

Towards the end of 2008,the west observed a financial turmoil.

Many companies had to wind up their businesses and suffered huge losses

worth billions of dollars

The effect of recession was also felt by the IT sector and TNS became one

of its victims

Due to which many existing contracts were taken back, the receivables

turned into bad debts and now the future of TNS was at stake

The expenses of the company was steady but the income was declining

Q-o-Q.


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Some steps were taken by the company

to utilize its reserves and meet it

expenses :o Cost reduction at the senior level in the form of

reductions in their major allowances.

o All the talent transformation programmes as well

as trainings were put on hold

o HR terminated its employees who are not able toachieve the desired productivity

o Working hours were made intensive

o No increments

o No new recruitments

The entire company was at a freeze


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The Management, HR team as well as the Employees faced

tough time.

The company ran out of liquidity

The salaries of the Employees were not paid for two months As a result the company started taking some aggressive steps

in order to clear the pay rolls of the Employees

They started selling assets


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What went wrong for downfall for TNS

Effects of Recession

Inability in getting back its receivables on time

Down grading of credit ratings ; which lead to:

-No new bussiness orders-Expenses remain the same and income was declining

-Depletion of reserves

-Selling off assets to pay employees salary

-Huge Debt

-Stock were traded at discounted rate


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Options for sustain

TNS had excellent history

Temporary down turn

Other corporates believed that TNS will come back strongly

due to its strong work force with great technical expertise. TNS had three best options:

1. Joint venture with Eastern Communications

2. Merger with ACS Software

3. Acquisition by CH Technologies


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Joint Venture

A joint venture takes place when two parties

come together to take on one project. In a joint

venture, both parties are equally invested in the

project in terms of money, time, and effort to

build on the original concept


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Joint venture with

Eastern Communications

It is a Telecom company having business on

cellular and land based communication

Established in 1995 with yearly revenue of

$8Bn and net profit of $2.1Bn

Showed steady increase in number of

subscribers during recession


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Cont..

Management team identified serious issues with data

management system of customers

Due to which marketing team could not implement their CRM

(Customer Relation Management)

They concluded that to get it done by experts like TNS instead

of hiring a team to manage their data base

EC was also planning to come up with other services like dth

srvices,3rd generation mobile and broad band internet in

couple of years

Need to increase its IT Infrastucture management and Data

Base Management


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Cont..

EC analyzed to do it mutually by sharing profits through Joint

Venture instead of offering them a contract a getting it

outsourced

Profits earned by this JV will be channelized for upcoming

business which will initiate in next 2 years

Negotiation for JV would help EC as TNS was financially bad


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Disadvantages

Major share of the JV will be from EC.

Might lose core business after the down turn is over.

The business proposal of EC may be too optimistic


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Acquisition with CH Technologies

CH Technologies, a firm based out of China

It has acted as a rival to TNS technologies for long.

It has been successful in overpowering TNS technologies by

bagging high profile contracts

CH main intention is to monopolize the IT industry by offering

to acquire majority stake in TNS technologies at three times

the present value of the firm.


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Advantages

Capital infusion that TNS technologies can enjoy post

acquisition is not something that it can experience elsewhere

It can find itself in an altogether new base with fresh goodwill

and brand identity


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Disadvantages

Get acquired by this Chinese entity and be with a minority

stake

The chances of spinoff in future into its original identity would

stand nil


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Merger

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.

Basically, two companies become one.

This decision is usually mutual between both firms.

To achieve greater efficiencies of scale and

productivity


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Merger with ACS Software

ACS is entity from Europe with 150 branches around 40

countries all over the world

Provides world class IT based and business solutions with 15

years of work experience

Exellence in execution

Deliver highly efficient products due to strategic alliance with

IT majors

Company earns revenue from E-commerce solution

The firm had revenue of $50 Million in year 2000 and it

crossed $5 Billion in 2010.


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Cont..

The sales turnover has raised 100 times in past 10 years

The net profit for the company was around $1.75 Billion

Company withheld the recession storm by searching for newuntapped market

During recession firm took various cost cutting measures andposted growth of over 20% over previous year

The company is also poised to grow over 20% for next 5 years

Signed many long term deals with renewed companies

Educated various other entities in the emerging market abouthow IT based solutions would help them to check cost andgrow their businesses


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Cont..

It is cash rich company with zero debt

It has cash reserves around $ 1 Billion which can be used for

any strategic Merger

Firm is also enjoying a credit rating of B++


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Advantages to TNS

Huge access to the domestic market of ACS software

Financial support & flow of new orders

International Competition

Protect it from closing its business Greater Efficiency

Diversification


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Advantages to ACS

ACS software will be able to use its human capital &

technology for further development

Expertise labour of TNS

Access to Advanced technology of TNS

Brand name and goodwill

Expand its business


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Final Result through Merger

Case STUDY on New Balnace Shoes

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