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Merger and acquisition

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Merger And Acquisition

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Merger and acquisition

  1. 1. Presented By :- Bhawan Singh Aditya Prakash Global Marketing
  2. 2. Merger & Acquisition
  3. 3. What is Merger A merger refers to a combination of two or more companies, usually of not greatly disparate size, into one company. A merger involves the mutual decision of two companies to combine and become one entity; it can be seen as a decision made by two "equals". Merger refers to a situation when two or more existing firms combine together and form a new entity. Merger is a marriage between two companies of roughly same size. It is thus a combination of two or more companies in which one company survives and its own name and the other ceases to exist as a legal entity Hindustan Computers Ltd + Hindustan Instruments Ltd + Indian Software Co. Ltd + Indian Reprographic Ltd = Hindustan Computers Ltd(HCL) Company A Company B Company C
  4. 4. TYPES OF MERGER Horizontal Merger  Vertical Merger Conglomeration Market-extension Merger Product-extension Merger
  5. 5. Horizontal Merger:- It refers to the merger of two companies who are direct competitors of one another. They serve the same market and sell the same product. Example:- The formation of Brook Bond Lipton India Ltd. through the merger of Lipton India and Brook Bond. The merger of Bank of Mathura with ICICI (Industrial Credit and Investment Corporation of India) Bank  The merger of BSES (Bombay Suburban Electric Supply) Ltd. with Orissa Power Supply Company  The merger of ACC (erstwhile Associated Cement Companies Ltd.) with Damodar Cement.
  6. 6. Vertical Merger This type of merger involves a customer and a company or a supplier and a company merging. Imagine a bat company merging with a wood production company. This would be an example of the supplier merging with the producer and is the essence of vertical mergers. Example :- Pixar & Disney
  7. 7. Conglomeration It refers to the merger of companies, which do not either sell any related products or cater to any related markets. Here the two companies entering the merger process do not possess any common business ties. Example :- Tata-Sky L&T and Voltas Ltd.
  8. 8. Product-extension Merger Product extension merger takes place between two business organizations that deal in products that are related to each other and operate in the same market. The product extension merger allows the merging companies to group together their products and get access to a bigger set of consumers. This ensures that they earn higher profits. Product extension merger is concerned the two merging companies are operating in same markets. Example :- Mobilink Telecom Inc. by Broadcom
  9. 9. Market-extension Merger:- Market extension merger takes place between two companies that deal in the same products but in separate markets. The main purpose of the market extension merger is to make sure that the merging companies can get access to a bigger market and that ensures a bigger client base. Market extension merger the two merging companies are operating in the separate market Example:- Eagle Bancshares Inc by the RBC Centura. With the help of this acquisition RBC has got a chance to deal in the financial market of Atlanta , which is among the leading upcoming financial markets in the USA. This move would allow RBC to diversify its base of operations.
  10. 10. MERGER WHY & WHY NOT WHY IS IMPORTANT PROBLEM WITH MERGER  Increase Market Share  Economies of scale  Clash of corporate  Profit for Research and cultures development.  Increased business.  Employees may be forward losses or resistant to change unclaimed depreciation.  Reduction of competition.
  11. 11. Acquisition:- It may be defined as an act of acquiring effective control over assest or management of a company by another company without any combination of businesses or companies. A substantial acquisition occurs when an acquiring firm acquires substantial quantity of shares or voting rights of the target company. It also known as a takeover or a buyout It is the buying of one company by another. In acquisition two companies are combine together to form a new company altogether. Example—-Godrej Consumer Care bought Keyline Brands- Dabur acquired Balsara. Company X Company Y Company X
  12. 12. TAKEOVERS :- A corporate action where an acquiring company makes a bid for an acquire. If the target company is publically traded, the acquiring company will make an offer for the outstanding shares. Types Of Takeovers Friendly Takeover:- Also commonly referred to as ‘negotiated takeover’, a friendly takeover involves an acquisition of the target company through negotiations between the existing promoters and prospective investors. This kind of takeover is resorted to further some common objectives of both the parties. Hostile Takeover :- A hostile takeover can happen by way of any of the following actions: if the board rejects the offer, but the bidder continues to pursue it or the bidder makes the offer without informing the board before hand. Example- HP taking over COMPAQ.
  13. 13. Top Five Merger
  14. 14.  January 30, 2007  Largest Indian take-over  After the deal TATA’S became the 5th largest STEEL co.  100 % stake in CORUS paying Rs 428/- per share Tata Steel-Corus: $12.2 billion
  15. 15.  TELECOM sector  11th February 2007  2nd largest takeover deal  67 % stake holding in hutch Vodafone-Hutchison Essar: $11.1 billion
  16. 16. Pharmaceuticals sector June 2008 Acquisition deal largest-ever deal in the Indian Pharma industry Daiichi Sankyo acquired the majority stake of more than 50 % in Ranbaxy for Rs 15,000 crore 15th biggest drugmaker Ranbaxy-Daiichi Sankyo: $4.5 b
  17. 17.  March 2008 (just a year after acquiring Corus)  Automobile sector  Acquisition deal  Gave tuff competition to M&M after signing the deal with ford Tata Motors-Jaguar Land Rover: $2.3 billion
  18. 18.  March 2009  Merger deal  Amalgamation of its subsidiary Reliance Petroleum with the parent company Reliance industries ltd.  Rs 8,500 crore  RIL-RPL merger swap ratio was at 16:1 RIL-RPL merger: $1.68 billion
  19. 19. In India Largest Merger and Acquisition Hindalco-Novelis ( $6 billion ) ONGC-Imperial Energy ( $2.8 billion ) NTT DoCoMo-Tata Tele ( $2.7 billion ) HDFC Bank-Centurion Bank of Punjab ( $2.4 billion ) Suzlon-RePower ( $1.7 billion )