Merger and Acquisition

MERGER AND ACQUISITION

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DEFINITION:

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.

Example: Company A+ Company B= Company C.

ACQUSITION: It also known as a takeover or a buyout, is the buying of one company by another. In acquisition two companies are combine together to form a new company altogether.

Example: Company A+ Company B= Company A.

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MERGER ACQUISITION

DIFFENCE BETWEEN MERGER AND ACQUISITION:

i. Merging of two organization in to one.

ii. It is the mutual decision.iii. Merger is expensive than

acquisition(higher legal cost).iv. Through merger shareholders

can increase their net worth.v. It is time consuming and the

company has to maintain so much legal issues.

vi. Dilution of ownership occurs in merger.

i. Buying one organization by another.

ii. It can be friendly takeover or hostile takeover.

iii. Acquisition is less expensive than merger.

iv. Buyers cannot raise their enough capital.

v. It is faster and easier transaction.

vi. The acquirer does not experience the dilution of ownership.

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TYPES OF MERGER:

MERGER

HORIZONTAL

ACC & DAMODAR

CEMENT(2006)

CONGLOMARATION

L&T & VOLTAS LTD

VERTICAL

FORD &BENDIX.

PRODUCT EXTENSION

PEPSICO & PIZZA HUT(November

1977)

MARKETEXTENSION

RBC CENTURA & EAGLE

BANCSHARES(july,2002)

(US$153 million)

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TYPES OF ACQUISITION:

ACQUISITION

HOSTILE(MICROSOFT FOR

YAHOO,2008,bid offer $44.6 billion)

FRIENDLY(WALT DISNEY CORP. & PIXAR ANIMATION,2006

$7 .4 billion.)

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WHY IS IMPORTANT PROBLEM WITH MERGER

MERGER:WHY & WHY NOT

i. Increase Market Share.ii. Economies of scaleiii. Profit for Research and

development.iv. Benefits on account of tax

shields like carried forward losses or unclaimed depreciation .

v. Reduction of competition .

i. Clash of corporate culturesii. Increased business complexityiii. Employees may be resistant to

change

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WHY IS IMPORTANT PROBLEM WITH ACQISITION

ACQUISITION:WHY & WHY NOT

i. Increased market share.ii. Overcome entity barriersiii. Increased speed to marketiv. Lower risk comparing to

develop new products.v. Increased diversificationvi. Avoid excessive competition

i. Inadequate valuation of target.

ii. Inability to achieve synergy.iii. Fiance by taking huge debt.

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PROCESS OF MERGER & ACQUISITION IN INDIA:The process of merger and acquisition has the following steps:i. Approval of Board of Directors for merger or acquisition.ii. Information to the stock exchange.iii. Application in the High Court.iv. Shareholders and Creditors meetings.v. Sanction by the High Court.vi. Filing of the court order.vii. Transfer of assets or liabilities.viii. Payment by cash and securities.

Maximum Waiting period:210 days from the filing of notice(or the order of the commission - whichever earlier).

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LAWS REGULATING MERGER & ACQUISITION IN INDIA:

The Companies Act , 1956.The Competition Act ,2002 .Foreign Exchange Management Act,1999.The Indian Income Tax Act (ITA), 1961.SEBI Take over Code 1994.

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Year Purchaser Purchased Transaction value (in mil. USD)

2010 Hindalco Novelis 5,982

2007 Tata Steel Corus Group 12,000

2006 Dr. Reddy's Labs Beta pharm 597

2006 Ranbaxy Labs . Terapia SA 324

2006 Suzlon Energy Hansen Group 565

2006 Videocon Daewoo Electronics Corp 729

2008 HPCL Kenya Petroleum Refinery Ltd 500

2006 VSNL. Teleglobe 239

2005 Centurion Bank Bank of Punjab 82.1

2008 HDFC Bank Centurion Bank of Punjab 206

2008 Tata Motors Jaguar Land Rover 2.3 billion

2009 Reliance Industries Reliance Petroleum Limited 1.6 billion.

MAJOR MERGER & ACQUISITION BY INDIAN COMPANIES:

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WORLD’S BIGGEST M&A :DATE PURCHASER PURCHASED DEAL VALUE($

mm)05/03/2009 Liberty Entertainment

Inc.DIRECTV Group Inc. 12,735

22/06/2009 Frontier Airlines Holdings Inc

Republic Airways Holdings Inc

568.0

25/3/2010 Bharti Airtel Zain 10.7 blln

31/12/2008 ONGC Imperial 2.80 billion

26/03/2009 NTT Docomo Tata Teleservices 2.70 billion

2/02/2010 Kraft Cadbury 19.6billion

11/11/2009 Hewlett Packard 3Com 2.70 billion

28/04/2010 Hewlett Packard PALM 1.2blln

Expected in December,2010

M&M Ssangyong Motor 500

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Amongst BRIC Nations, India second most targeted country for Mergers & Acquisitions(2010):

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MERGER & ACQUISITION(2009-10) :

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ICICI BANK & BANK OF RAJASTHAN(19th MAY,2010):

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15ADVANTAGES FROM THIS MERGER: This amalgamation would substantially enhance ICICI Bank's branch

network(23 per cent increase apprx). Strengthen ICICI bank’s presence in northern and western India. ICICI has now moved to a branch-led business model. The acquisition will help ICICI increase CASA (current and savings

account) flows, as also help in cross-selling products. Both banks working on the same platform, integration will also be

less taxing.

GROWTH RATE OF MERGER & ACQUISITION IN WORLDWIDE:

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SUCCESS & FAILURE RATE(2009-10):

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THANK YOU. Chadni. Saurav. Surajit. Priyanka.

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