1. ACKNOWLEDGEMENT
What we study in class is of full worth if we add some practical implementation to it. This
dissertation report project is one of the opportunity which I got from the department of
management, PGDM, BBDNITM. I would like to thank my respected Dean Sir, Prof. Atul
Kumar Singh Sir for providing such an opportunity.
I would like to thank respected Porf. R.K. Rastogi Sir, for his kind guidance in the
completion of this report. His motivations and teachings will always be a part of my
corporate life.
I would like to thank my friends, Ishan & Rishi for their kind supports. They are the
integral part of the compiler of this report.
I would like to thank the entire faculty of PGDM department at BBDNITM who taught
me the managemet lessons.
I would like the thank the owner and management staff of the google.com without
which the search of various data couldn‟t be possible.
Finally, I want to thank my family members, my parent and my dear friends who
always believed in me and gave a moral support.
Thank u all.
CHANDRESH SUPRIT SHARAN
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2. Preface
The importance of any academic schedule would gain advantage and acceptance only
through practical experience; hence it is quite necessary to put theories into practice. This
is made possible by doing the dissertation report exercise.
Through this project I tried to make future findings for telecommunication sector and
for new services which are in the queue.
This project has provided means and opportunity to have a real feel of the
telecommunication industry.
Theory and practice are two aspects of management education. In order to produce
a dynamic and promising executive, the two have to be blended together. In India, the
industrial knowledge in the domain of management course has received pivotal importance.
It exposes the potential managers to the actual work environment and makes them a rich
into what actually goes in the industrial climate. Infact it is the implementation of theory in
practice that is the life force of management.
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3. Table of Content
Mergers & Acquisitions 4
Distinction between M&A 7
Business Valuation 8
Financing M&A 8
Motives behind M&A 10
Effects on Management 13
History of M&A 17
M&A Failures 23
Major M&A 25
M&A in India 27
Company profile:
Tech Mahindra 30
Mahindra Satyam 35
Shareholding of Mahindra group 37
Financial highlights of Mahindra Satyam 38
B/S of Mahindra Satyam 40
B/S of Tech Mahindra 41
P-L statement of Tech Mahindra 43
Executive summary of the case study 45
Motive of Merger 46
Tech Mahindra Journey 47
Mahindra Satyam Journey 49
Tech Mahindra & Mahindra Satyam :
Fuel click offerings 51
Combined strategy 52
Foundation of growth 53
Significance of offerings 55
Proforma of combined metric 56
Key details of mergers 57
Process/Approvals 58
Key Advisiors 59
Growth Prospects 59
Statstics 60
Satyam Investors gain 61
Conclusion 62
Bibliography 65
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4. Mergers and acquisitions
Mergers and acquisitions refers to the aspect of corporate strategy, corporate finance
and management dealing with the buying, selling, dividing and combining of
different companies and similar entities that can help an enterprise grow rapidly in its
sector or location of origin, or a new field or new location, without creating a subsidiary,
other child entity or using a joint venture. The distinction between a "merger" and an
"acquisition" has become increasingly blurred in various respects (particularly in terms of
the ultimate economic outcome), although it has not completely disappeared in all
situations.
Acquisition
An acquisition is the purchase of one business or company by another company or other
business entity. Consolidation occurs when two companies combine together to form a
new enterprise altogether, and neither of the previous companies survives independently.
Acquisitions are divided into "private" and "public" acquisitions, depending on whether the
acquireee or merging company (also termed a target) is or is not listed on public stock
markets. An additional dimension or categorization consists of whether an acquisition
is friendly or hostile.
Laws in India use the term amalgamation for merger. Section 2(1A0 of the Income Tax
Act, 1961 defines amalgamation as the merger of one or more companies with another
company or the merger of two or more companies to form a new company in such a way
that all the assets and liabilities of the amalgamating companies become assets and
liabilities of the amalgamated company and shareholders holding not less than nine-tenths
4

5. in the value of the shares in the amalgamating company or companies become
shareholders of the amalgamated company.
"Acquisition" usually refers to a purchase of a smaller firm by a larger one. Sometimes,
however, a smaller firm will acquire management control of a larger and/or longer-
established company and retain the name of the latter for the post-acquisition combined
entity. This is known as a reverse takeover. Another type of acquisition is the reverse
merger, a form of transaction that enables a private company to be publicly listed in a
relatively short time frame. A reverse merger occurs when a privately held company (often
one that has strong prospects and is eager to raise financing) buys a publicly listed shell
company, usually one with no business and limited assets.
There are also a variety of structures used in securing control over the assets of a
company, which have different tax and regulatory implications:
This unreferenced section requires citations to ensure verifiability.
The buyer buys the shares, and therefore control, of the target company being
purchased. Ownership control of the company in turn conveys effective control over
the assets of the company, but since the company is acquired intact as a going
concern, this form of transaction carries with it all of the liabilities accrued by that
business over its past and all of the risks that company faces in its commercial
environment.
The buyer buys the assets of the target company. The cash the target receives from
the sell-off is paid back to its shareholders by dividend or through liquidation. This
type of transaction leaves the target company as an empty shell, if the buyer buys
out the entire assets. A buyer often structures the transaction as an asset purchase
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6. to "cherry-pick" the assets that it wants and leave out the assets and liabilities that it
does not. This can be particularly important where foreseeable liabilities may include
future, unquantified damage awards such as those that could arise from litigation
over defective products, employee benefits or terminations, or environmental
damage. A disadvantage of this structure is the tax that many jurisdictions,
particularly outside the United States, impose on transfers of the individual assets,
whereas stock transactions can frequently be structured as like-kind exchanges or
other arrangements that are tax-free or tax-neutral, both to the buyer and to the
seller's shareholders.
The terms "demerger", "spin-off" and "spin-out" are sometimes used to indicate a situation
where one company splits into two, generating a second company separately listed on a
stock exchange.
Based on the content analysis of seven interviews authors concluded five following
components for their grounded model of acquisition:
1. Improper documentation and changing implicit knowledge makes it difficult to share
information during acquisition.
2. For acquired firm symbolic and cultural independence which is the base of
technology and capabilities are more important than administrative independence.
3. Detailed knowledge exchange and integrations are difficult when the acquired firm is
large and high performing.
4. Management of executives from acquired firm is critical in terms of promotions and
pay incentives to utilize their talent and value their expertise.
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7. 5. Transfer of technologies and capabilities are most difficult task to manage because
of complications of acquisition implementation. The risk of losing implicit knowledge
is always associated with the fast pace acquisition.
Preservation of tacit knowledge, employees and literature are always delicate during and
after acquisition. Strategic management of all these resources is a very important factor for
a successful acquisition.
Increase in acquisitions in our global business environment has pushed us to evaluate the
key stake holders of acquisition very carefully before implementation. It is imperative for the
acquirer to understand this relationship and apply it to its advantage. Retention is only
possible when resources are exchanged and managed without affecting their
independence.
Distinction between mergers and acquisitions
The terms merger and acquisition mean slightly different things. The legal concept of a
merger (with the resulting corporate mechanics, statutory merger or statutory consolidation,
which have nothing to do with the resulting power grab as between the management of the
target and the acquirer) is different from the business point of view of a "merger", which can
be achieved independently of the corporate mechanics through various means such as
"triangular merger", statutory merger, acquisition, etc. When one company takes over
another and clearly establishes itself as the new owner, the purchase is called an
acquisition. From a legal point of view, the target company ceases to exist, the buyer
"swallows" the business and the buyer's stock continues to be traded.
In the pure sense of the term, a merger happens when two firms agree to go forward as a
single new company rather than remain separately owned and operated. This kind of action
7

8. is more precisely referred to as a "merger of equals". The firms are often of about the same
size. Both companies' stocks are surrendered and new company stock is issued in its
place. For example, in the 1999 merger of Glaxo Wellcome and SmithKline Beecham, both
firms ceased to exist when they merged, and a new company, GlaxoSmithKline, was
created. In practice, however, actual mergers of equals don't happen very often.
Business valuation
The five most common ways to valuate a business are
asset valuation,
historical earnings valuation,
future maintainable earnings valuation,
relative valuation (comparable company & comparable transactions),
discounted cash flow (DCF) valuation
Financing M&A
Mergers are generally differentiated from acquisitions partly by the way in which they are
financed and partly by the relative size of the companies. Various methods of financing an
M&A deal exist:
Cash
Payment by cash. Such transactions are usually termed acquisitions rather than mergers
because the shareholders of the target company are removed from the picture and the
target comes under the (indirect) control of the bidder's shareholders.
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9. Stock
Payment in the form of the acquiring company's stock, issued to the shareholders of the
acquired company at a given ratio proportional to the valuation of the latter.
Which method of financing to choose?
There are some elements to think about when choosing the form of payment. When
submitting an offer, the acquiring firm should consider other potential bidders and think
strategically. The form of payment might be decisive for the seller. With pure cash deals,
there is no doubt on the real value of the bid (without considering an eventual earnout). The
contingency of the share payment is indeed removed. Thus, a cash offer preempts
competitors better than securities. Taxes are a second element to consider and should be
evaluated with the counsel of competent tax and accounting advisers. Third, with a share
deal the buyer‟s capital structure might be affected and the control of the buyer modified. If
the issuance of shares is necessary, shareholders of the acquiring company might prevent
such capital increase at the general meeting of shareholders. The risk is removed with a
cash transaction. Then, the balance sheet of the buyer will be modified and the decision
maker should take into account the effects on the reported financial results. For example, in
a pure cash deal (financed from the company‟s current account), liquidity ratios might
decrease. On the other hand, in a pure stock for stock transaction (financed from the
issuance of new shares), the company might show lower profitability ratios (e.g. ROA).
However, economic dilution must prevail towards accounting dilution when making the
choice. The form of payment and financing options are tightly linked. If the buyer pays cash,
there are three main financing options:
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10. Cash on hand: it consumes financial slack (excess cash or unused debt capacity)
and may decrease debt rating. There are no major transaction costs.
It consumes financial slack, may decrease debt rating and increase cost of debt.
Transaction costs include underwriting or closing costs of 1% to 3% of the face
value.
Issue of stock: it increases financial slack, may improve debt rating and reduce cost
of debt. Transaction costs include fees for preparation of a proxy statement, an
extraordinary shareholder meeting and registration.
If the buyer pays with stock, the financing possibilities are:
Issue of stock (same effects and transaction costs as described above).
Shares in treasury: it increases financial slack (if they don‟t have to be repurchased
on the market), may improve debt rating and reduce cost of debt. Transaction costs
include brokerage fees if shares are repurchased in the market otherwise there are
no major costs.
In general, stock will create financial flexibility. Transaction costs must also be considered
but tend to have a greater impact on the payment decision for larger transactions. Finally,
paying cash or with shares is a way to signal value to the other party, e.g.: buyers tend to
offer stock when they believe their shares are overvalued and cash when undervalued.
Motives behind M&A
The dominant rationale used to explain M&A activity is that acquiring firms seek improved
financial performance. The following motives are considered to improve financial
performance:
10

11. Economy of scale: This refers to the fact that the combined company can often
reduce its fixed costs by removing duplicate departments or operations, lowering the
costs of the company relative to the same revenue stream, thus increasing profit
margins.
Economy of scope: This refers to the efficiencies primarily associated with demand-
side changes, such as increasing or decreasing the scope of marketing and
distribution, of different types of products.
Increased revenue or market share: This assumes that the buyer will be absorbing
a major competitor and thus increase its market power (by capturing increased
market share) to set prices.
Cross-selling: For example, a bank buying a stock broker could then sell its banking
products to the stock broker's customers, while the broker can sign up the bank's
customers for brokerage accounts. Or, a manufacturer can acquire and sell
complementary products.
Synergy: For example, managerial economies such as the increased opportunity of
managerial specialization. Another example are purchasing economies due to
increased order size and associated bulk-buying discounts.
Taxation: A profitable company can buy a loss maker to use the target's loss as
their advantage by reducing their tax liability. In the United States and many other
countries, rules are in place to limit the ability of profitable companies to "shop" for
loss making companies, limiting the tax motive of an acquiring company.
Geographical or other diversification: This is designed to smooth the earnings
results of a company, which over the long term smoothens the stock price of a
company, giving conservative investors more confidence in investing in the
company. However, this does not always deliver value to shareholders.
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12. Resource transfer: resources are unevenly distributed across firms (Barney, 1991)
and the interaction of target and acquiring firm resources can create value through
either overcoming information asymmetry or by combining scarce resources.
Vertical integration: Vertical integration occurs when an upstream and downstream
firm merge (or one acquires the other). There are several reasons for this to occur.
One reason is to internalise an externalityproblem. A common example of such an
externality is double marginalization. Double marginalization occurs when both the
upstream and downstream firms have monopoly power and each firm reduces output
from the competitive level to the monopoly level, creating two deadweight losses.
Following a merger, the vertically integrated firm can collect one deadweight loss by
setting the downstream firm's output to the competitive level. This increases profits
and consumer surplus. A merger that creates a vertically integrated firm can be
profitable.
Hiring: some companies use acquisitions as an alternative to the normal hiring
process. This is especially common when the target is a small private company or is
in the startup phase. In this case, the acquiring company simply hires the staff of the
target private company, thereby acquiring its talent (if that is its main asset and
appeal). The target private company simply dissolves and little legal issues are
involved.
Absorption of similar businesses under single management: similar portfolio
invested by two different mutual funds (Ahsan Raza Khan, 2009) namely united
money market fund and united growth and income fund, caused the management to
absorb united money market fund into united growth and income fund.
However, on average and across the most commonly studied variables, acquiring firms'
financial performance does not positively change as a function of their acquisition activity.
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13. Therefore, additional motives for merger and acquisition that may not add shareholder
value include:
Diversification: While this may hedge a company against a downturn in an
individual industry it fails to deliver value, since it is possible for individual
shareholders to achieve the same hedge by diversifying their portfolios at a much
lower cost than those associated with a merger. (In his book One Up on Wall Street,
Peter Lynch memorably termed this "diworseification".)
Manager's hubris: manager's overconfidence about expected synergies from M&A
which results in overpayment for the target company.
Empire-building: Managers have larger companies to manage and hence more
power.
Manager's compensation: In the past, certain executive management teams had
their payout based on the total amount of profit of the company, instead of the profit
per share, which would give the team a perverse incentive to buy companies to
increase the total profit while decreasing the profit per share (which hurts the owners
of the company, the shareholders).
Effects on management
Merger & Acquisitions (M&A) term explains the corporate strategy which determines the
financial and long term effects of combination of two companies to create synergies or
divide the existing company to gain competitive ground for independent units. A study
published in the July/August 2008 issue of the Journal of Business Strategy suggests that
mergers and acquisitions destroy leadership continuity in target companies‟ top
management teams for at least a decade following a deal. The study found that target
companies lose 21 percent of their executives each year for at least 10 years following an
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14. acquisition – more than double the turnover experienced in non-merged firms.[10] If the
businesses of the acquired and acquiring companies overlap, then such turnover is to be
expected; in other words, there can only be one CEO, CFO, et cetera at a time.
Different Types of M&A
Types of M&A by functional roles in market
The M&A process itself is a multifaceted which depends upon the type of merging
companies.
- A horizontal merger is usually between two companies in the same business sector. The
example of horizontal merger would be if a health cares system buys another health care
system. This means that synergy can obtained through many forms including such as;
increased market share, cost savings and exploring new market opportunities.
- A vertical merger represents the buying of supplier of a business. In the same example
as above if a health care system buys the ambulance services from their service suppliers
is an example of vertical buying. The vertical buying is aimed at reducing overhead cost of
operations and economy of scale.
- Conglomerate M&A is the third form of M&A process which deals the merger between
two irrelevant companies. The example of conglomerate M&A with relevance to above
scenario would be if health care system buys a restaurant chain. The objective may be
diversification of capital investment.
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15. Arm's length mergers
An arm's length merger is a merger:
1. approved by disinterested directors and
2. approved by disinterested stockholders:
″The two elements are complementary and not substitutes. The first element is important
because the directors have the capability to act as effective and active bargaining agents,
which disaggregated stockholders do not. But, because bargaining agents are not always
effective or faithful, the second element is critical, because it gives the minority stockholders
the opportunity to reject their agents' work. Therefore, when a merger with a controlling
stockholder was: 1) negotiated and approved by a special committee of independent
directors; and 2) conditioned on an affirmative vote of a majority of the minority
stockholders, the business judgment standard of review should presumptively apply, and
any plaintiff ought to have to plead particularized facts that, if true, support an inference
that, despite the facially fair process, the merger was tainted because of fiduciary
wrongdoing.″
Strategic Mergers
A Strategic merger usually refers to long term strategic holding of target (Acquired) firm.
This type of M&A process aims at creating synergies in the long run by increased market
share, broad customer base, and corporate strength of business. A strategic acquirer may
also be willing to pay a premium offer to target firm in the outlook of the synergy value
created after M&A process.
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16. M&A research and statistics for acquired organizations
Given that the cost of replacing an executive can run over 100% of his or her annual salary,
any investment of time and energy in re-recruitment will likely pay for itself many times over
if it helps a business retain just a handful of key players that would have otherwise left. [12]
Organizations should move rapidly to re-recruit key managers. It‟s much easier to succeed
with a team of quality players that you select deliberately rather than try to win a game with
those who randomly show up to play.
Brand considerations
Mergers and acquisitions often create brand problems, beginning with what to call the
company after the transaction and going down into detail about what to do about
overlapping and competing product brands. Decisions about what brand equity to write off
are not inconsequential. And, given the ability for the right brand choices to drive preference
and earn a price premium, the future success of a merger or acquisition depends on
making wise brand choices. Brand decision-makers essentially can choose from four
different approaches to dealing with naming issues, each with specific pros and cons: [14]
1. Keep one name and discontinue the other. The strongest legacy brand with the best
prospects for the future lives on. In the merger of United Airlines and Continental
Airlines, the United brand will continue forward, while Continental is retired.
2. Keep one name and demote the other. The strongest name becomes the company
name and the weaker one is demoted to a divisional brand or product brand. An
example is Caterpillar Inc. keeping the Bucyrus International name.[15]
3. Keep both names and use them together. Some companies try to please everyone
and keep the value of both brands by using them together. This can create a
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17. unwieldy name, as in the case ofPricewaterhouseCoopers, which has since changed
its brand name to "PwC".
4. Discard both legacy names and adopt a totally new one. The classic example is the
merger of Bell Atlantic with GTE, which became Verizon Communications. Not every
merger with a new name is successful. By consolidating into YRC Worldwide, the
company lost the considerable value of both Yellow Freight and Roadway Corp.
The factors influencing brand decisions in a merger or acquisition transaction can range
from political to tactical. Ego can drive choice just as well as rational factors such as brand
value and costs involved with changing brands.[15]
Beyond the bigger issue of what to call the company after the transaction comes the
ongoing detailed choices about what divisional, product and service brands to keep. The
detailed decisions about the brand portfolio are covered under the topic brand architecture.
History of M&A
The Great Merger Movement: 1895-1905
The Great Merger Movement was a predominantly U.S. business phenomenon that
happened from 1895 to 1905. During this time, small firms with little market share
consolidated with similar firms to form large, powerful institutions that dominated their
markets. It is estimated that more than 1,800 of these firms disappeared into
consolidations, many of which acquired substantial shares of the markets in which they
operated. The vehicle used were so-called trusts. In 1900 the value of firms acquired in
mergers was 20% of GDP. In 1990 the value was only 3% and from 1998–2000 it was
around 10–11% of GDP. Companies such as DuPont, US Steel, andGeneral Electric that
merged during the Great Merger Movement were able to keep their dominance in their
17

18. respective sectors through 1929, and in some cases today, due to growing technological
advances of their products, patents, and brand recognition by their customers. There were
also other companies that held the greatest market share in 1905 but at the same time did
not have the competitive advantages of the companies likeDuPont and General Electric.
These companies such as International Paper and American Chicle saw their market share
decrease significantly by 1929 as smaller competitors joined forces with each other and
provided much more competition. The companies that merged were mass producers of
homogeneous goods that could exploit the efficiencies of large volume production. In
addition, many of these mergers were capital-intensive. Due to high fixed costs, when
demand fell, these newly-merged companies had an incentive to maintain output and
reduce prices. However more often than not mergers were "quick mergers". These "quick
mergers" involved mergers of companies with unrelated technology and different
management. As a result, the efficiency gains associated with mergers were not present.
The new and bigger company would actually face higher costs than competitors because of
these technological and managerial differences. Thus, the mergers were not done to see
large efficiency gains, they were in fact done because that was the trend at the time.
Companies which had specific fine products, like fine writing paper, earned their profits on
high margin rather than volume and took no part in Great Merger Movement.
Short-run factors
One of the major short run factors that sparked The Great Merger Movement was the
desire to keep prices high. However, high prices attracted the entry of new firms into the
industry who sought to take a piece of the total product. With many firms in a market,
supply of the product remains high.
18

19. A major catalyst behind the Great Merger Movement was the Panic of 1893, which led to a
major decline in demand for many homogeneous goods. For producers of homogeneous
goods, when demand falls, these producers have more of an incentive to maintain output
and cut prices, in order to spread out the high fixed costs these producers faced (i.e.
lowering cost per unit) and the desire to exploit efficiencies of maximum volume production.
However, during the Panic of 1893, the fall in demand led to a steep fall in prices.
Another economic model proposed by Naomi R. Lamoreaux for explaining the steep price
falls is to view the involved firms acting as monopolies in their respective markets. As quasi-
monopolists, firms set quantity where marginal cost equals marginal revenue and price
where this quantity intersects demand. When the Panic of 1893 hit, demand fell and along
with demand, the firm‟s marginal revenue fell as well. Given high fixed costs, the new price
was below average total cost, resulting in a loss. However, also being in a high fixed costs
industry, these costs can be spread out through greater production (i.e. Higher quantity
produced). To return to the quasi-monopoly model, in order for a firm to earn profit, firms
would steal part of another firm‟s market share by dropping their price slightly and
producing to the point where higher quantity and lower price exceeded their average total
cost. As other firms joined this practice, prices began falling everywhere and a price war
ensued.
One strategy to keep prices high and to maintain profitability was for producers of the same
good to collude with each other and form associations, also known as cartels. These cartels
were thus able to raise prices right away, sometimes more than doubling prices. However,
these prices set by cartels only provided a short-term solution because cartel members
would cheat on each other by setting a lower price than the price set by the cartel. Also, the
high price set by the cartel would encourage new firms to enter the industry and offer
competitive pricing, causing prices to fall once again. As a result, these cartels did not
19

20. succeed in maintaining high prices for a period of no more than a few years. The most
viable solution to this problem was for firms to merge, through horizontal integration, with
other top firms in the market in order to control a large market share and thus successfully
set a higher price.
Long-run factors
In the long run, due to desire to keep costs low, it was advantageous for firms to merge and
reduce their transportation costs thus producing and transporting from one location rather
than various sites of different companies as in the past. Low transport costs, coupled with
economies of scale also increased firm size by two- to fourfold during the second half of the
nineteenth century. In addition, technological changes prior to the merger movement within
companies increased the efficient size of plants with capital intensive assembly lines
allowing for economies of scale. Thus improved technology and transportation were
forerunners to the Great Merger Movement. In part due to competitors as mentioned above,
and in part due to the government, however, many of these initially successful mergers
were eventually dismantled. The U.S. government passed the Sherman Actin 1890, setting
rules against price fixing and monopolies. Starting in the 1890s with such cases
as Addyston Pipe and Steel Company v. United States, the courts attacked large
companies for strategizing with others or within their own companies to maximize profits.
Price fixing with competitors created a greater incentive for companies to unite and merge
under one name so that they were not competitors anymore and technically not price fixing.
20

21. Merger waves
The economic history has been divided into Merger Waves based on the merger activities
in the business world as:
Period Name Facet
1897–1904 First Wave Horizontal mergers
1916–1929 Second Wave Vertical mergers
1965–1969 Third Wave Diversified conglomerate mergers
1981–1989 Fourth Wave Congeneric mergers; Hostile takeovers; Corporate
Raiding
1992–2000 Fifth Wave Cross-border mergers
2003–2008 Sixth Wave Shareholder Activism, Private Equity, LBO
M&A objectives in more recent merger waves
During the third merger wave (1965–1989), corporate marriages involved more diverse
companies. Acquirers more frequently bought into different industries. Sometimes this was
done to smooth out cyclical bumps, to diversify, the hope being that it would hedge an
investment portfolio.
Starting in the fourth merger wave (1992–1998) and continuing today, companies are more
likely to acquire in the same business, or close to it, firms that complement and strengthen
an acquirer‟s capacity to serve customers.
Buyers aren‟t necessarily hungry for the target companies‟ hard assets. Some are more
interested in acquiring thoughts, methodologies, people and relationships. Paul
21

22. Graham recognized this in his 2005 essay "Hiring is Obsolete", in which he theorizes that
the free market is better at identifying talent, and that traditional hiring practices do not
follow the principles of free market because they depend a lot upon credentials and
university degrees. Graham was probably the first to identify the trend in which large
companies such as Google, Yahoo! or Microsoft were choosing to acquire startups instead
of hiring new recruits.
Many companies are being bought for their patents, licenses, market share, name brand,
research staffs, methods, customer base, or culture. Soft capital, like this, is very
perishable, fragile, and fluid. Integrating it usually takes more finesse and expertise than
integrating machinery, real estate, inventory and other tangibles.
Cross-border M&A
In a study conducted in 2000 by Lehman Brothers, it was found that, on average, large
M&A deals cause the domestic currency of the target corporation to appreciate by 1%
relative to the acquirer's local currency.
The rise of globalization has exponentially increased the necessity for MAIC Trust accounts
and securities clearing services for Like-Kind Exchanges for cross-border M&A. In 1997
alone, there were over 2333 cross-border transactions, worth a total of approximately $298
billion. Due to the complicated nature of cross-border M&A, the vast majority of cross-
border actions have unsuccessful as companies seek to expand their global footprint and
become more agile at creating high-performing businesses and cultures across national
boundaries.
Even mergers of companies with headquarters in the same country are can often be
considered international in scale and require MAIC custodial services. For example, when
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23. Boeing acquired McDonnell Douglas, the two American companies had to integrate
operations in dozens of countries around the world (1997). This is just as true for other
apparently "single country" mergers, such as the $29 billion dollar merger of Swiss drug
makers Sandoz and Ciba-Geigy (now Novartis).
M&A failure
Despite the goal of performance improvement, results from mergers and acquisitions (M&A)
are often disappointing compared with results predicted or expected. Numerous empirical
studies show high failure rates of M&A deals. Studies are mostly focused on individual
determinants. A book by Thomas Straub (2007) "Reasons for frequent failure in Mergers
and Acquisitions"[21] develops a comprehensive research framework that bridges different
perspectives and promotes an understanding of factors underlying M&A performance in
business research and scholarship. The study should help managers in the decision
making process. The first important step towards this objective is the development of a
common frame of reference that spans conflicting theoretical assumptions from different
perspectives. On this basis, a comprehensive framework is proposed with which to
understand the origins of M&A performance better and address the problem of
fragmentation by integrating the most important competing perspectives in respect of
studies on M&A Furthermore according to the existing literature relevant determinants of
firm performance are derived from each dimension of the model. For the dimension
strategic management, the six strategic variables: market similarity, market
complementarities, production operation similarity, production operation complementarities,
market power, and purchasing power were identified having an important impact on M&A
performance. For the dimension organizational behavior, the variables acquisition
experience, relative size, and cultural differences were found to be important. Finally,
23

24. relevant determinants of M&A performance from the financial field were acquisition
premium, bidding process, and due diligence. Three different ways in order to best measure
post M&A performance are recognized: Synergy realization, absolute performance and
finally relative performance.
Employee turnover contributes to M&A failures. The turnover in target companies is double
the turnover experienced in non-merged firms for the ten years following the merger.
24

25. Major M&A
1990s
Top 10 M&A deals worldwide by value (in mil. USD) from 1990 to 1999:
Transaction value (in mil.
Rank Year Purchaser Purchased
USD)
Vodafone Airtouch
1 1999 Mannesmann 183,000
PLC
2 1999 Pfizer Warner-Lambert 90,000
3 1998 Exxon Mobil 77,200
4 1998 Citicorp Travelers Group 73,000
5 1999 SBC Communications Ameritech Corporation 63,000
AirTouch
6 1999 Vodafone Group 60,000
Communications
7 1998 Bell Atlantic GTE 53,360
8 1998 BP Amoco 53,000
Qwest
9 1999 US WEST 48,000
Communications
10 1997 Worldcom MCI Communications 42,000
25

26. 2000s
Top 10 M&A deals worldwide by value (in mil. USD) from 2000 to 2010:
Transaction value
Rank Year Purchaser Purchased
(in mil. USD)
Fusion: AOL Inc. (America
1 2000 Time Warner 164,747
Online)
2 2000 Glaxo Wellcome Plc. SmithKline Beecham Plc. 75,961
Royal Dutch Petroleum "Shell" Transport & Trading
3 2004 74,559
Company Co.
4 2006 AT&T Inc. BellSouth Corporation 72,671
5 2001 Comcast Corporation AT&T Broadband 72,041
6 2009 Pfizer Inc. Wyeth 68,000
Spin-off: Nortel Networks
7 2000 59,974
Corporation
8 2002 Pfizer Inc. Pharmacia Corporation 59,515
9 2004 JPMorgan Chase & Co. Bank One Corporation 58,761
Anheuser-
10 2008 InBev Inc. 52,000
Busch Companies, Inc.
26

27. Mergers & Acquisition in India :-
Deals
Year Number Amount (Rs crore)
1998-99 292 16,071
1999-00 765 36,963
2000-01 1,177 32,130
2001-02 1,045 34,322
2002-03 838 23,106
2003-04 834 35,980
2006-07 US$ 33.1 billion
2007-08 US$ 19.8 billion
Economic reforms and deregulation of Indian economy has brought in more domestic as
well as international players in Indian industries. This has caused increased competitive
pressure leading to structural changes of Indian industries. M & A is a part of the
restructuring strategy of Indian industries. The first M&A wave in India took place towards
the end of 1990s. The data presented in a Table above reveal that substantial growth in the
M&A activities in India occurred in 2000-01. The total number of M&A deals in 2000-01 was
estimated at 1,177 which is 54% higher than the total number of deals in the previous year.
Tata Steel-Corus, $12.2 billion :- On 30 January 2007, Tata Steel purchased a 100 percent
stake in the Corus Group at 608 pence per share in an all cash deal, cumulatively valued at
27

28. $12.2 billion. The deal is the largest Indian takeover of a foreign company till date and
made Tata Steel the world‟s fifth largest group.
Hindalco-Novelish, $6 billion:- Aluminium and copper major Hindalco Industries, the Kumar
Mangalam Birla- led Aditya Birla Group flagship, acquired Canadian company Novelish Inc
in a $6-billion all-cash deal in February 2007.
Ranbaxy-Daiichi Sankyo, $4.5 billion:- Marking the largest ever deal in the Indian pharma
industry, Japanese drug firm Daiichi Sankyo in june 2008 acquired the majority stake of
more than 50 per cent in domestic major Ranbaxy for over Rs 15,000 crore ($4.5 billion).
ONGC- Imperial Energy, $ 2.8 billion:- The Oil and Natural Gas Corp took control of
Imperial Energy Plc for $2.8 billion in January 2009, after an overwhelming 96.8 per cent of
London- listed firm‟s total shareholders accepted its takeover offer.
28

29. Mahindra Satyam
&
Tech Mahindra Mergers
29

30. Company Profile:- Tech Mahindra
Tech Mahindra Limited is an Indian provider of information technology (IT), networking
technology solutions and business process outsourcing (BPO) services to the global
telecommunications industry. Headquartered at Pune, India. It is a joint venture between
the Mahindra Group and BT Group plc, UK with M&M (Mahindra and Mahindra) holding
44% and BT holding 39% of the equity.
Tech Mahindra clocks revenues over USD 1 billion. Its activities spread across a broad
spectrum, including Business Support Systems (BSS), Operations Support Systems (OSS),
Network Design & Engineering, Next Generation Networks, Mobility Solutions, Security
consulting and Testing. The "solutions portfolio" includes Consulting, Application
Development & Management, Network Services, Solution Integration, Product Engineering,
Infrastructure Managed Services, Remote Infrastructure Management and BSG (comprises
BPO, Services and Consulting). Tech Mahindra is ranked #6 in India's software services
firms behind Tata Consultancy Services, Wipro, Infosys, HCL Technologies and Satyam
Computer Services and overall #161 in Fortune India 500 list for 2011.Tech Mahindra has
implemented more than 15 Greenfield Operations globally and has over 128 active
customer engagements mostly in the Telecom sector. The company has been involved in
about 8 transformation programs of incumbent telecom operators. With an array of service
offerings for TSPs, TEMs and ISVs, Tech Mahindra serves.
Its executive management team consists of Vineet Nayyar (Vice Chairman, MD and CEO),
Sujit Baksi (President – Corporate Affairs & Business Services Group), Sonjoy Anand
(Chief Financial Officer), L. Ravichandran (President - IT Services), Amitava Roy (Chief
Operating Officer), Sujitha Karnad (Senior Vice President - HR & QMG for IT Services).
30

31. Milestones
1986 - Incorporation in India
1987 - Commencement of Business
1993 - Incorporation of MBT International Inc., the first overseas subsidiary
1994 - Awarded the ISO 9009 certification by BVQ
1995 - Established the UK branch office
2001 - Incorporated MBT GmbH, Germany incorporated. Re-certified to ISO
9001:1994 by BVQ
2002 - Assessed at Level 2 of SEI CMM by KPMG. Incorporated MBT Software
Technologies Pte. Limited, Singapore
2005 - Merged MBT with Axes Technologies (India) Private Limited,including its US
and Singapore subsidiaries.Assessed at Level 3 of SEI CMMI by KPMG
2006 - Name changed to Tech Mahindra Limited. Assessed at Level 4 of SEI
People-CMM (P-CMM) by QAI India. Raised Rs46.5 million ($1 million) from a
hugely successful IPO to build a new facility in Pune, to house about 9,000 staff.
Formed a JV with Motorola Inc. under the name CanvasM.
2007 - Acquired iPolicy Networks Private Limited. Launched the Tech M Foundation
to address the needs of the underprivileged in our society.
2009 - Tech M wins bid for fraud-hit Satyam Computer Services at Rs 58.90 per
share outdoing Larsen & Toubro, the other player in the fray, which bid at Rs 45.90.
Rebrands the company to Mahindra Satyam.
2010 - Tech Mahindra expands footprint in Latin America
31

32. Tech Mahindra Offices
Tech Mahindra has offices in more than 30 countries.
India:Kolkata, Pune, Noida, Chennai, Bangalore, Mumbai, Gurgaon, Chandigarh,
Hyderabad
UK:London, Milton Keynes
U.S.A:Dallas
Taiwan:Taipei
Singapore
Thailand:Bangkok
Egypt:Cairo
U.A.E: Dubai
Australia :Sydney
New Zealand:Auckland
Northern Ireland:Belfast, Newcastle, County Down
Philippines
Tech Mahindra has its BPO presence in Kolkata, Chennai, Chandigarh, Pune, and Noida. It
also has overseas office locations in Belfast and Newcastle.
Tech Mahindra has operations in more than 30 countries with 17 sales offices and 13
delivery centers. Assessed at SEI CMMi Level 5, Tech Mahindra employs over 42,000
workers.The total headcount of the company at the end of December 31, 2011 stood at
42,746 out of which software professional headcount stood at 25,218, BPO at 16,419 and
support staff at 1,109.
32

33. Acquisition of Satyam Computer Services Ltd.
After the Satyam scandal of 2008-09, Tech Mahindra bid for Satyam Computer Services,
and emerged as a top bidder with an offer of Rs 59 a share for a 31 per cent stake in the
company, beating a strong rival Larsen & Toubro. After evaluating the bids, the
government-appointed board of Satyam Computer announced on 13 April 2009: "its Board
of Directors has selected Venturbay Consultants Private Limited, a subsidiary controlled by
Tech Mahindra Limited as the highest bidder to acquire a controlling stake in the Company,
subject to the approval of the Hon'ble Company Law Board." Through a subsidiary, it has
emerged victorious in Satyam sell-off, a company probably two times its size in number of
people.
Source of Fund for thisAcquisition :-
Tech Mahindra had raised Rs550 crore from Tata Capital and IDFC to fund its takeover of
scam-hit Satyam Computer.
Tech Mahindra raised these funds by issuing debentures which are convertible into shares
of Venturbay Consultants, through which it acquired Satyam Computer.
Besides, Tech Mahindra had also borrowed Rs1,450 crore from various banks, mutual
funds, institutions and NBFCs at an interest rate of 10%, part of which had been used for
funding the acquisition of Satyam.
Disclosing Tech Mahindra‟s source of funds for the deal, a regulatory filing by the
beleaguered IT firm said the funding was from “internal resources, optionally convertible
domestic debt, equity by Tech Mahindra in Venturbay and debt extended by Tech Mahindra
to Venturbay.”
33

34. In the first phase of acquisition, Tech Mahindra had paid about Rs1,756 crore for 31%
equity through preferential allotment of shares in Satyam which was also listed at NYSE
besides Indian bourses.
The filing with the US market regulator SEC said that “Tech Mahindra has infused funds in
Venturebay by using cash on hand” in connection with the initial 31% stake purchase and
the subsequent Rs1,129 crore open offer for further 20% equity.
Competitors
Its competitors are
i) Tata Consultancy Services,
ii) Cognizant Technology Solutions,
iii) HCL Technologies,
iv) Infosys,
v) Wipro,
vi) Accenture
34

35. Company Profile:- Mahindra Satyam
Mahindra Satyam formerly Satyam Computer Services, is an Indian IT services company
based in Hyderabad, India. It was founded in 1987 by B Ramalinga Raju. Mahindra Satyam
is a part of the Mahindra Group which is one of the top 10 industrial firms based in India.
The company offers consulting and information technology (IT) services spanning various
sectors, and is listed on the Pink Sheets, the National Stock Exchange (India) and Bombay
Stock Exchange (India). In June 2009, the company unveiled its new brand identity
“Mahindra Satyam” subsequent to its takeover by the Mahindra Group‟s IT arm, Tech
Mahindra on April 13,2009. It is ranked #5 in Indian IT companies and overall ranked #153
by Fortune India 500 in 2011.
Industry Presence
Mahindra Satyam provides services in the following areas:
 Aerospace and Defence
 Banking, Financial Services & Insurance
 Energy and Utilities
 Life Sciences & Healthcare
 Manufacturing, Chemicals & Automotive
 Public Services & Education
 Retail
 Consumer Packaged Goods
 Travel, Transport, Logistics
 Telecom, Infrastructure, Media and Entertainment & Semiconductors
35

36. Offices of Mahindra Satyam Across The Globe
Mahindra Satyam headquartered in Hyderabad, India has development centres and/or
regional offices in USA, Canada, Brazil, the United Kingdom, Hungary, Egypt, UAE, India,
China, Malaysia, Singapore, and Australia.
Competencies
Mahindra Satyam offers the following „horizontal‟ services.
Extended Enterprise Solutions
Web Commerce Solutions
Business Intelligence Services
Quality Consulting
Strategic Outsourcing Services
Industry Native Solutions
Business Services Group - BSG (BPO)
Engineering Services
Product management
Accounting scandal of 2009
In addition to other controversies involving Satyam, on January 7, 2009, Chairman Raju
resigned after publicly announcing his involvement in a massive accounting fraud.
Ramalinga Raju is currently in a Hyderabad prison along with his brother and former board
member Rama Raju, and the former C.F.O Vadlamani Srinivas.
36

37. Shareholding of The Mahindra Group
Share holding
31/03/2012 31/12/2011 30/09/2011
pattern as on :
Face value 5 5 5
No. Of % No. Of % No. Of
% Holding
Shares Holding Shares Holding Shares
Promoter's holding
Indian Promoters 154374167 25.14 154824006 25.22 153852126 25.06
Foreign Promoters 731772 0.12 731772 0.12 731772 0.12
Sub total 155105939 25.26 155555778 25.34 154583898 25.18
Non promoter's holding
Institutional investors
Banks Fin. Inst. and
Insurance 108853061 17.73 104402738 17 104641408 17.04
FII's 162573443 26.48 161483160 26.3 162041227 26.39
Sub total 289385891 47.13 285693065 46.53 288311392 46.96
Other investors
Private Corporate
Bodies 58548990 9.54 62570789 10.19 57471273 9.36
NRI's/OCB's/Foreign
Others 23307820 3.8 23214321 3.78 23039253 3.75
GDR/ADR 34293405 5.59 35339610 5.76 40001494 6.52
Govt 450124 0.07 451324 0.07 449422 0.07
Others 1202671 0.2 1142596 0.19 812678 0.13
Sub total 117802038 19.19 122717668 19.99 121773148 19.83
General public 51679999 8.42 50007356 8.14 49305429 8.03
Grand total 613973867 100 613973867 100 613973867 100
37

38. Financial Highlights of Mahindra Satyam
Particulars 2010-11 2009-10
Income from Operations 47,761 51,005
Other Income 2,899 129
Total Income 50,660 51,134
Operating Profit / (Loss) (PBIDT) 7,263 5,781
Interest and Financing Charges 92 254
Depreciation / Amortization 1,499 1,908
Exceptional items 6,411 4,169
(Loss) before Tax (739) (550)
Provision for Tax 537 162
(Loss) after Tax (1,276) (712)
Equity share capital 2,353 2,352
Reserves and Surplus 43,881 43,963
Debit balance in Profit and Loss Account 24,622 23,346
Earnings per share
(Rs Per equity share of Rs 2 each)
- Basic (Rs) (1.08) (0.65)
- Diluted EPS (Rs) (1.08) (0.65)
38

39. The monthly high and low stock quotations during the financial year
2010-11 and performance in comparison to broad based indices are
given below.
Month& Year Price-BSE SENSEX Price-NSE NIFTY
High Low High Low High Low High Low
Apr-10 98.20 89.60 18,047.86 17,276.80 98.25 75.85 5,399.65 5,160.90
May-10 96.35 79.75 17,536.86 15,960.15 96.40 72.95 5,278.70 4,786.45
Jun-10 94.80 82.75 17,919.62 16,318.39 94.70 82.70 5,366.75 4,961.05
Jul-10 93.65 86.00 18,237.56 17,395.58 93.60 86.00 5,477.50 5,225.60
Aug-10 90.90 78.55 18,475.27 17,819.99 91.00 78.50 5,549.80 5,348.90
Sep-10 113.80 79.00 20,267.98 18,027.12 113.85 78.90 6,073.50 5,403.05
Oct-10 92.05 78.50 20,854.55 19,768.96 92.70 78.40 6,284.10 5,937.10
Nov-10 90.65 59.75 21,108.64 18,954.82 90.70 59.55 6,338.50 5,690.35
Dec-10 70.80 58.90 20,552.03 19,074.57 70.80 59.00 6,147.30 5,721.15
Jan-11 73.90 60.00 20,664.80 18,038.48 73.90 59.90 6,181.05 5,416.65
Feb-11 66.50 54.40 18,690.97 17,295.62 66.85 54.20 5,599.25 5,177.70
Mar-11 69.85 61.60 19,575.16 17,792.17 70.50 61.60 5,872.00 5,348.20
39

40. 40

41. Balance sheet of Tech Mahindra
Mar '
Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08
07
Sources of funds
Owner's fund
Equity share capital 126 122.3 121.7 121.4 121.22
Share application
money - 0.2 - - 0.14
Preference share
capital - - - - -
Reserves & surplus 3,258.00 2,744.20 1,759.20 1,107.00 756.76
Loan funds
Secured loans 1,183.70 1,517.70 - - 10.01
Unsecured loans 622.7 617.2 - 95 42.64
Total 5,190.40 5,001.60 1,880.90 1,323.40 930.78
Uses of funds
Fixed assets
Gross block 1,248.50 1,112.80 896.2 550.5 442.75
Less : revaluation
reserve - - - - -
Less : accumulated
depreciation 648.5 518.8 406.1 259.6 195.72
Net block 600 594 490.1 290.9 247.04
Capital work-in-
progress 110.3 320.8 154.1 138.5 54.65
41

42. Investments 3,114.90 3,113.90 453.5 298.6 283.21
Net current assets
Current assets, loans &
advances 2,244.70 1,807.80 1,654.10 1,488.00 984
Less : current liabilities
& provisions 879.5 834.9 870.9 892.6 638.12
Total net current
assets 1,365.20 972.9 783.2 595.4 345.88
Miscellaneous
expenses not written - - - - -
Total 5,190.40 5,001.60 1,880.90 1,323.40 930.78
Notes:
Book value of
unquoted investments 3,114.90 3,113.90 453.5 298.6 283.21
Market value of
quoted investments - - - - -
Contingent liabilities 341.4 335.5 138.7 169.5 136.38
Number of equity
sharesoutstanding
(Lacs) 1259.55 1223.2 1217.34 1213.63 1212.17
42

43. P-L Statement of Tech Mahindra :-
Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07
Income
Operating income 4,965.50 4,483.80 4,357.80 3,604.70 2,753.22
Expenses
Material
consumed - - - - -
Manufacturing
expenses 1,435.90 1,176.00 966.1 729.5 574.69
Personnel
expenses 1,943.80 1,598.70 1,419.70 1,222.40 840.41
Selling expenses 4.9 9.8 10 20.3 24.96
Adminstrative
expenses 630.2 605.8 711.7 793.1 592.29
Expenses
capitalised - - - - -
Cost of sales 4,014.80 3,390.30 3,107.50 2,765.30 2,032.34
Operating profit 950.7 1,093.50 1,250.30 839.4 720.88
Other recurring
income 27.6 35.6 18.8 10 14.93
Adjusted PBDIT 978.3 1,129.10 1,269.10 849.4 735.81
Financial expenses 122.7 171.8 2.5 28.3 28.09
Depreciation 138.3 129.9 107.4 73.6 46.28
Other write offs - - - - -
Adjusted PBT 717.3 827.4 1,159.20 747.5 661.43
Tax charges 109.3 131.4 103.9 68.9 61.51
Adjusted PAT 608 696 1,055.30 678.6 599.92
Non recurring
items 80.8 22.9 -80.5 -361.8 -534.69
Other non cash
adjustments 7.9 23.9 11.8 25.4 33.95
Reported net
profit 696.7 742.8 986.6 342.2 99.18
Earnigs before
appropriation 2,470.60 2,092.50 1,506.80 768.3 553.15
Equity dividend 51 42.8 48.8 66.8 26.62
Preference
dividend - - - - -
Dividend tax 8.3 7.3 8.3 11.3 3.73
Retained earnings 2,411.30 2,042.40 1,449.70 690.2 522.8
43

44. 44

45. Executive Summary for the mergers of Tech Mahindra & Mahindra
Satyam
► The Board of Directors of Mahindra Satyam and Tech Mahindra have approved the
merger of Mahindra Satyam with Tech Mahindra through a Share Swap
► The swap ratio for the merger is 2 shares of Tech Mahindra (face value of Rs. 10
each), for every 17 shares of Mahindra Satyam (face value of Rs. 2 each)
► Rationale for the merger:
Creation of a single „go-to-market‟ strategy with benefits of scale and enhanced
depth and breadth of capabilities, translating into increased business opportunities
and reduced expenses
Stronger merged entity – financially and in industry positioning
Unified management focus and fungible talent pool
De-risked business profile
Optimized costs and productivity improvement with benefits of scale
► Pro forma combined entity:
LTM Revenue : US$ 2,432 MM
LTM EBITDA : US$ 392 MM
Total Headcount : 75,026
45

46. Motioves for the Merger :-
The merger will result in the creation of a new offshore services leader with
revenues of approximately US$2.4bn in revenues, approximately 75,000+ strong
work force and 350+ active clients (including Fortune Global 500 companies),
across 54 countries.
The joint entity will have a unified „go-to-market‟ strategy with deep competencies
and a balanced mix of revenues from Telecom, Manufacturing, Technology, Media &
Entertainment, Banking Financial Services and Insurance, Retail and Healthcare.
Revenues will be well balanced with a diversified global footprint that would boast of
contribution from Americas at 42%, Europe at 35% and Emerging Markets at 23%,
The combined entity will leverage Tech Mahindra‟ s expertise in Mobility, System
Integration, and delivery of large transformations and to better penetrate the
opportunity presented by Mahindra Satyam‟ s diverse set of clients across multiple
verticals.
Likewise Mahindra Satyam‟ s expertise in Enterprise Solutions will enable a more
complete value proposition to be delivered to Tech Mahindra‟ s clients.
The combination will benefit from operational synergies, economies of scale,
sourcing benefits, and standardization of business processes.
46

47. Tech Mahindra’s Journey: FY 2006 to FY 2009
985
3.5x
280
FY 2006 FY 2009
EBITDA (1) (US$ MM) Client Contribution to Revenue
282
4.7x 32% Others
42%
60 Top
68% 58%
Client
FY 2006 FY 2009 FY 2006 FY 2009
Revenue (US$ MM)
1,200
935
985 CAGR : 52%
800 648
596
415 575 CAGR : 44%
400 280 410 CAGR : 66%
191 339
233
0 89
FY 2006 FY 2007 FY 2008 FY 2009
Revenue BT Non-BT
► Leadership in the Telecom vertical with industry leading growth
► Strong Non-BT franchise
► Landmark engagements: Barcelona, Andes, US Tier-1 Telecom leader
47

48. April 2009: Mahindra Satyam Opportunity
► Rationale for the acquisition
• Diversification into multiple verticals like BFSI, Manufacturing and Retail
• Ability to offer a wide range of service offerings like Enterprise Services and
Engineering Services to current and future customers
• De-risked business model with balanced exposure across geographies
• Utilize Mahindra Satyam‟s pool of highly experienced, well trained professional
employees
• Scale benefits due to substantially larger size of the business
► Stated strategy to merge the two companies.
48

49. Mahindra Satyam’s Journey
April 2009 FY 2010 FY 2011 FY2012
Acquisition Stabilization Investment Growth
► Customer ► Customer & ► Core rebuilt ► Focus on
attrition Associate with profitable growth
confidence investments in and top quartile
► Key reinforced industry operating
employee • Core metrics
attrition ► New deals & delivery
extensions platforms ► Special initiatives
► Mismatch and focus on emerging
between • Embargo lifted capabilities technologies
costs and
revenue • New logos • Vertical ► Complete
added expertise & integration
► Lawsuits and skills
investigations • Existing client • Go-to-market
extensions ► Core extended by
and solution
• Investments in integration
► Progress on
regulatory and shared
services Back office and legal
legal issues integration
► Cash flow • Launch of
stabilised alternative
delivery
models
► Right
leadership put
in place
49

50. 50

51. Tech Mahindra and Mahindra Satyam:
Full Suite of Offerings
Industry focused Solutions
Service Lines & Industry Verticals
Enterprise Business Solutions
Application Development and
Management Services
Infrastructure Management
Services
Integrated Engineering Solutions Consulting & Enterprise Solutions
Business Process Outsourcing
Enterprise Mobility, Cloud and
Security Solutions
51

52. Tech Mahindra and Mahindra Satyam: Combined Strategy
Leverage
Growth
Enhance Acquire
Strategy
Innovate
Leverage :-
Existing Clients
Existing Offerings
Merger Synergies
M Cube (M3)
Lost Customers
Acquire :-
Inorganic
New Logos
Innovate:-
Customer Innovation
Delivery Excellence
Platform
Enhance:-
Joint Offerings
Solution Sets
Alliance & Partnerships
52

53. Tech Mahindra and Mahindra Satyam: Foundations for Growth
1. End-to-End Manufacturing
Manufacturing heritage enhances value proposition (Art-to-Part)
100+ Manufacturing Accounts
25 F500 Relationships in Manufacturing
Automotive,
Aerospace,
Chemicals &
Consumer
Electronics
2. Strong Telecom Capabilities
Specialist focus on Telecom; Market Leader
Synergies evident in other verticals through enterprise mobility, CRM & billing
solutions
~130 Active Customers
Globally 15 major Greenfield rollouts and 8 Transformations
Wireline,
Wireless,
Cable, Satellite
3. Enterprise Services Expertise
Strong credentials across SAP & Oracle
CoE Focus
Vertical Solution Templates
IP Based Solutions Deep expertise in BI & Analytics
IP Solution Platform: iDecisions Investments in Cloud offerings
53

54. 4. Vertical BPO that leverages Enterprise Expertise
Telecom
Retail
Manufacturing
Financial Services
Healthcare & Life Sciences
Public Services
Goal: Driving Growth and Profitability
Revenue Growth
Account mining
Wider portfolio of service offerings to Telecom clients
Focus on growth verticals
Focus on emerging markets
Operating Metrics
Benefiting from cost synergies
Multi-lever approach for volume-led margin improvement
Right-sizing the talent pyramid
Leveraging scale for better utilization
54

55. Co-Innovation
Continue dominance in mature practices
Accelerate new service offerings
GTM with alliances
New offerings / markets along with customers
Tech Mahindra and Mahindra Satyam: Significant Cross-Pollination of
Offerings
Telecom Manufacturing
BFSI
Cloud Services
Technology and Media
Enterprise Mobility
Retail, T&L
Security Solutions Healthcare & Life Science
Managed Services
BPO Enterprise Solutions
Shared Services Shared Infrastructure
55

56. Pro Forma Combined Metrics
1400
1200
1000
800
Tech Mahindra
600
Mahindra Satyam
400
200
0
LTM Revenue LTM EBITDA
80,000
70,000
60,000
50,000
40,000 Mahindra Satyam
30,000 Tech Mahindra
20,000
10,000
0
Headcount
Pro Forma Shareholding Structure :-
Shareholding
Particulars Swap Ratio 2:17
%
Promoters shareholding 49.5
Mahindra & Mahindra Ltd 26.3
British Telecommunication Plc 12.8
TML Benefit Trust 10.4
Tech M Public Shareholding 16.1
MSAT Public Shareholding 34.4
Total 100%
56

57. Key details of the Mergers:-
► Merger ratio of 2 shares of Tech Mahindra (face value of Rs. 10 each), for every 17
shares of Mahindra Satyam (face value of Rs. 2 each) is approved by both the boards
► 204 mn shares of Mahindra Satyam held by Venturbay to be transferred to a trust, to be
held as treasury stock.
► Rest of the shareholding held in Mahindra Satyam to be cancelled
► Tech Mahindra to issue 10.34 crore shares to Mahindra Satyam shareholders
► Increase in equity base to Rs 230.8 crore
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58. Process / Approvals
► Board of directors
► Stock exchanges (BSE, NSE)
► Competition Commission of India
► Shareholders and creditors of TechM and Transferor Companies
► Majority in number and 75% in value of the shareholders / creditors – present in
the respective meetings
► Regulatory authorities
► Registrar of Companies (Maharashtra and AP)
► Regional Director (West and South)
► Official Liquidator (Maharashtra and AP)
►Bombay High Court, Andhra Pradesh High Court and other regulatory authorities
Key Advisors
► Joint valuation advisors
• Ernst & Young
• KPMG
► Independent fairness opinion bankers
• Tech Mahindra: Morgan Stanley
• Mahindra Satyam: J.P. Morgan
► Advisors
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59. • Enam
• Barclays
► Legal Advisors
• AZB & Partners
GROWTH PROSPECTS
The merger will reduce Tech Mahindra's exposure to the telecom sector to 47% by adding
other verticals such as manufacturing, media, entertainment, and retail. In addition, the
share of BT, its biggest client will reduce to 17% of revenue from over 35%.
The company will integrate its solutions with the various offerings of Satyam. For example,
it plans to mine more than 20 of its own accounts by offering services provided by Satyam
such as enterprise applications and shared corporate services.
Employee rationalisation will be another benefit of the merger. The combined entity will
have over 75,000 employees with a focus on appointment of a significant number of
freshers.
Tech Mahindra is also seeing renewed traction in its core telecom service offerings in
regions including Australia, New Zealand, and Asia.
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60. Statstics
Ultimate Outcome :-
The combined entity will be 5th largest firm in IT Sector
Post-merger, the combined entity will become the country's fifth largest IT company, after
TCS, Infosys, Cognizant and Wipro.
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61. Satyam investors gain
Notably, by valuing the Satyam stock at about Rs 76, Tech Mahindra is paying 31 per cent
more for the business today, than it did when it bought a controlling stake from the
government in April 2009.
Investors in the Satyam stock who did not tender their shares to the open offer made by
Tech Mahindra way back in June 2009 today have reason to feel good about their decision.
Though the stock is down from its highs of 2009, the merger price of Rs 76 is a good 31 per
cent above the open offer price of Rs 58 that the Mahindra group offered during the initial
open offer. Selling the Satyam stock and investing in the Sensex basket instead, would
have given investors a gain of only 14 per cent.
Revenue Contribution & Shareholding Post Mergers
Revenue contribution
Sharholding:
post merger
Telecom: 47% Mahindra & Mahindra: 26.3%
Manufacturing: 17% BT : 12.8%
Technology, media &
Trust: 10.4% (treasury share)
entertainment: 10%
Mahindra Satyam public
BFSI: 11%
Shareholders: 34.4%
Tech Mahindra public
Retail: 5%
shareholders: 16.1%
Others: 7%
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62. Conclusion
As the much talked about and closely watched merger between Tech Mahindra and
Mahindra Saytam comes into effect from this fiscal 2012-13, the so-called “marriage made
in heaven” is likely to change the dynamics of Indian IT sector. Satyam Mahindra's strength
and expertise lies in IT services and enterprise solutions, while Tech Mahindra brings a
strong experience and competency in the telecom sector. With both firms complimenting
each other, post merger this joint entity will have a significant mileage in the enterprise
business and telecom domain.
Tech Mahindra and Mahindra Satyam's merger - ''marriage made in heaven''
The merger of the two companies brings in immense strategic advantage to both. The
capabilities and competencies brought together are highly synergetic and will thereby
enhance the value to the customer.
A strong presence in enterprise business solutions along with the domain expertise in
telecom offers a unique positioning to gain traction in the emerging opportunities of cloud
computing and mobility.
For instance, Satyam had started enterprise practice back in 1996, later on added BI and
Dataware Housing practice in 2000. However, following the scam in 2009, Satyam's
business saw some erosion in terms of customers and people but with Mahindra Group
taking in-charge of the beleaguered firm, it managed to protect its created assets and
architects.
Enterprise solution business – a key for Mahindra Satyam's revenue
“We are a challenging player in the market and we continue to see growth in the enterprise
space. Our enterprise business contributes close to 44 per cent of the revenue which also
include the revenues from extended enterprise offerings such as content management,
shared corporate services,” says Sriram Papani, Mahindra Satyam's senior vice president.
62

63. Tech Mahindra has around 120-130 customers, which are largely serviced by core telecom
solutions. However these customers also need enterprise solutions such as ERP, BI and
others that are either provided internally or by some other vendors. “We see a great
opportunity to explore this channel and start providing enterprise offerings also to these
existing customers as we have deep relationships with Tech Mahindra. So that's a big
growth opportunity for non-linear growth.” “In last 12-18 months, we have put in some
specific solutions and already are seeing somegreat success in terms of penetrating into
Tech Mahindra's customer base,” Papani explains. Mahindra Satyam has been servicing
some 40 odd Tech Mahindra's customers since 2009, of which it won 20 during last 15
months' period. Most are global customers spread across geographies – Europe, UK,
Middle East, Africa, Australia, North America and few are Indian.
Going forward, what strategies will Mahindra Satyam adopt in the post merger
scenario?
“Firstly, how can we explore or leverage Tech Mahindra's channel strength and convert into
revenue stream. Our second strategy is to go back to our old existing customers to expand
our valid share, expand our strength and mining those accounts,” Papani points out.
Further, “Given the current economic conditions, it does not give you a great opportunity in
terms of mining; however, we are able to see, at least build traction and prepare the
ground. So eventually when IT spending starts going up, I think we will be ready in terms of
establishing confidence in wining those accounts,” Papani adds.
Mahindra Satyam's map to re-growth with Tech Mahindra under the merger
Mahindra Satyam has around 300 customers, who can be offered telecom solutions such
as enterprise mobility and cloud services. This is where Tech Mahindra's strength and
competency in telecom domain can be leveraged by Mahindra Satyam's customers.
However, stressing on the enterprise business solutions' significance, Papani informs that
Mahindra's Satyam added 62 new logos during FY12, large proportion of them are on the
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64. enterprise business. “Of the large number of new logos the company won, if we are able
convert even 20 per cent of logos into accounts, it gives a huge opportunity for us,” Papani
says. For Mahindra Satyam manufacturing, technology infrastructure, media and BFSI are
core business verticals, while telecom remains key vertical for Tech Mahindra. But post the
merger, telecom will become the top focussed sector followed by manufacturing, BFSI,
retail and healthcare.
Mahindra Satyam and Tech Mahindra to be a giant tech firm
The merger will create 75,000 plus workforce, over 350 active clients and approximate
revenues of $2.4 billion via new offshore services. The management expects a balanced
revenue with a diversified global footprint and contributions -- 42 per cent share from
Americas, 35 per cent from Europe and 23 per cent from the Emerging markets. According
to Papani, company was successful in bringing back 20 old customers during the past four
quarters, who had moved out after the scam surfaced. Also employees' confidence is very
positive and good now after the merger.
64

65. Bilbliogragphy:-
www.techmahindra.com
www.mahindrasatyam.com
www.rediff.com/companies
economictimes.indiatimes.com
money.sulekha.com
www.indiainfoline.com
www.wikipedia.com
www.google.com
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