Trends in Merger and Acquisition

1. Mergers & Acquisitions
• Group:
• Chandha Parajuli Neupane(14521)
• Poojal Dahal Neupane(14522)
• Dinesh Shrestha(14528)
• Jipin Nakarmi(14520)
• Krishna Hari Pandey(14523)
• Sanjish Wagle(14537)
• Suresh Kawan(14513)
• Ujjwal Maghaiya(14516)
• Madhu Sudan Dahal(14505)
• Narayan Desar(14508)
• Nakendra Dhami(14509)

2. 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.
Merger

3. Acquisition
•When one company takes over another and clearly
established itself as the new owner, the purchase is
called an acquisition.
•Acquisition is generally considered negative in nature

4. M&A Process

5. Trends of Merger and Acquisition
in International Market

6. Motives for Mergers &acquisitions
 Economies of large scale business
large-scale business organization enjoys
both internal and external economies.
 Elimination of competition
It eliminates severe, intense and wasteful
expenditure by different competing organizations.
 Desire to enjoy monopoly power
M&A leads to monopolistic control in the market.
 Adoption of modern technology
corporate organization requires large resources
 Lack of technical and managerial talent
Industrialization, scarcity of entrepreneurial,
managerial and technical talent
Economies of
large scale
business
Elimination of
competition
Desire to enjoy
monopoly
power
Adoption of
modern
technology
Lack of technical
and managerial
talent

7. Benefits of Mergers and Acquisitions
• Greater Value Generation.
Mergers and acquisitions generally succeed in generating cost efficiency through the
implementation of economies of scale. It is expected that the shareholder value of a firm after
mergers or acquisitions.
• Gaining Cost Efficiency.
When two companies come together by merger or acquisition, the joint company benefits
in terms of cost efficiency. As the two firms form a new and bigger company, the production is
done on a much larger scale.
• Increase in market share - An increase in market share is one of the plausible benefits of
mergers and acquisitions.
• Gain higher competitiveness - The new firm is usually
more cost-efficient and competitive as compared to its
financially weak parent organization.

8. Problems of Merger and Acquisitions
• Integration difficulties
• Large or extraordinary debt
• Managers overly focused on acquisitions
• Overly Diversified

9. Impact of Mergers and Acquisitions
• Employees:
Mergers and acquisitions impact the employees or the workers the most. It is a well known fact that
whenever there is a merger or an acquisition, there are bound to be lay offs.
• Impact of mergers and acquisitions on top level management
Impact of mergers and acquisitions on top level management may actually involve a "clash of the egos".
There might be variations in the cultures of the two organizations.
• Shareholders of the acquired firm:
The shareholders of the acquired company benefit the most. The reason being, it is seen in majority of
the cases that the acquiring company usually pays a little excess than it what should. Unless a man lives
in a house he has recently bought, he will not be able to know its drawbacks.
• Shareholders of the acquiring firm: hey are most affected. If we measure the benefits enjoyed by the
shareholders of the acquired company in degrees, the degree to which they were benefited, by the
same degree, these shareholders are harmed

10. Strategies of Merger and Acquisition
• Then there is an important need to assess the market by deciding the
growth factors through future market opportunities, recent trends,
and customer's feedback.
• The integration process should be taken in line with consent of the
management from both the companies venturing into the merger.
• Restructuring plans and future parameters should be decided with
exchange of information and knowledge from both ends.

11. Top M&A DEALS In global Market

12. 1. Tata Steel-Corus: $12.2 billion
• 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

13. 2. Vodafone-Hutchison Essar:
$11.1 billion
• TELECOM sector
• 11th February 2007
• 2nd largest takeover
deal
• 67 % stake holding in
hutch
Image: The then CEO of Vodafone
Arun Sarin visits Hutchison
Telecommunications head office in
Mumbai.

14. 3. Tata Motors-Jaguar Land
Rover: $2.3 billion
• March 2008 (just a year
after acquiring Corus)
• Automobile sector
• Acquisition deal
• Gave tuff competition to
M&M after signing the
deal with ford

15. 4. ONGC-Imperial Energy:$2.8billion
• January 2009
• Acquisition deal
• Imperial energy is a
biggest chinese co.
• ONGC paid 880 per
share to the shareholders
of imperial energy
• ONGC wanted to tap the
siberian marketImage: Imperial Oil
CEO Bruce March.

16. 5. RIL-RPL merger: $1.68 billion
• 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
Image: Reliance Industries'
chairman Mukesh Ambani.

17. MERGER BETWEEN AIR INDIA AND
INDIAN AIRLINES
• The government of India on 1 march 2007
approved the merger of Air India and Indian
airlines.
• Consequent to the above a new company
called National Aviation Company of India
limited was incorporated under the
companies act 1956 on 30 march 2007 with its
registered office at New Delhi.

18. MERGER & ACQUISITION(2010-11) :

19. • Cross border M&A rose significantly in East Asian
Countries (Indonesia, Korea, Malaysia and Thailand)
during the East Asian crisis period.
• Cross border merger can encourage longer-term reforms
like operational restructuring and reallocation of assets
in firms along with improving efficiency, competitiveness
and corporate governance (UNCTAD)
• The need of M&A has significantly increased along with
the rise of globalization.

20. Cross-Border Mergers and Acquisitions (Purchases),
1991–2009 (billion US$) Source UNCTAD 2010
1991–96 1997–99 2000–05 2006 2007 2008 2009
World 76.6 406.0 409.2 625.3 1022.7 706.5 249.7
Developed
Economies
65.3 376.1 347.3 497.3 841.7 568.0 160.8
Developing
Economies
7.8 12.6 37.7 114.9 144.8 105.8 74.0
Asia 4.7 9.3 27.6 70.8 94.5 94.4 67.3
East Asia 2.4 7.1 12.9 21.2 0.7 39.9 35.9
Southeast
Asia
2.1 2.6 9.6 7.5 25.9 18.9 4.3
South Asia
INDIA
0.1 0.0 1.1 6.7 29.1 13.5 0.3

21. Top 10 acquisitions made by Indian companies
worldwide:
Acquirer Target Company Country targeted Deal value ($ ml) Industry
Tata Steel Corus Group plc UK 12,000 Steel
Hindalco Novelis Canada 5,982 Steel
Videocon
Daewoo
Electronics Corp.
Korea 729 Electronics
Dr. Reddy’s Labs Betapharm Germany 597 Pharmaceutical
Suzlon Energy Hansen Group Belgium 565 Energy
HPCL
Kenya Petroleum
Refinery Ltd.
Kenya 500 Oil and Gas
Ranbaxy Labs Terapia SA Romania 324 Pharmaceutical
Tata Steel Natsteel Singapore 293 Steel
Videocon Thomson SA France 290 Electronics
VSNL Teleglobe Canada 239 Telecom

22. The Future of Mergers and Acquisition
• Although a number of factors influence M&A, the market
is the primary force that drives them.
• The late 1990s saw an unprecedented influx in mergers.
In 1999, companies filed about three times the number
received in 1995 and the total dollar value $11 trillion of
mergers was ten times the amount since 1992. http://legal-
dictionary.thefreedictionary.com/Mergers+and+Acquisitions
• Mergers rise during a booming economy and decrease as
the companies forced to downsize during recession.

23. Trends of MA in Nepal

24. Causes of M&A in Nepal
• Lack of confidence in domestic institutions
– compete with global players who could potentially begin
their operations here owing to WTO arrangements.
– Regulatory Requirement
• compulsive of sorts as the NRB has asked the BFIs belonging to the same
business house to integrate without any “ifs and buts’’
– those who fear the complete meltdown
• to consolidate resources, introduce corporate best practices and reduce
expenses
• Issues of liquidity crisis, unstable investment climate
• M&As establish an ideal solution
• For improving productivity
• economic conditions, capacity utilization
• achieving cost effectiveness of enterprises

25. M&A in Nepal
• The first formal Merger
– Eastern Electricity Corporation with Nepal Electricity
Authority
– Land Reform Saving corporation and Cooperative
Development Bank (now the ADB/N)
• Merger of dish/home TV
• Standard Chartered Bank acquired Grindlays Bank
from the ANZ Group
• Butwal Power Company acquired Khimti and
Bhotekoshi Hydropower companies
• Teliasonera acquired Spice Nepal to form Ncell

26. Mergers Process in Nepalspecial decision of merger
through the General
Meeting of shareholders
Sign a Memorandum of
Understanding (MoU) for
merger
Letter of Intent
NRB conducts interaction,
provide consultation
If
BFI
agre
es
No Merger
Go for
Merger
No Yes

27. NIC-ASIA, Successful Merger
• Reason- Regulatory Pressure
• BOA
– facing problem in their lending portfolio and growth
• NIC
– facing problem in quality growth
• Strategy of this merger
– Gaining strength in size, capital, IT platform, trained human
resources
– Blending benefits of strong retail business of BoA and strong
corporate business of NIC
– Robust IT platform
– HR integration through continuous counseling and orientation

28. Prabhu-Kist, Successful Acquistion
• Prabhu Development Bank, a good and strong development
bank in terms of its capital and market penetration
acquired Kist Bank Limited, a “A” Class Commercial Bank in
Nepal for the license of a “A” Class Bank
• Prabhu Bank also acquired Nepal Development Bank, a
liquidated bank because this bank was a foreign joint
Venture
• In a period of less than 3 years, a development bank turned
out to be a “A” class commercial bank with a foreign JV,
strong customer base, huge market penetration, strong
financial backup and a good workforce venture

29. • Standard Chartered took Grindlays from ANZ
group.
• Teliasonera acquired Spice Nepal to form Ncell
• Merger of dish/home TV

30. • The more recent merger in financial sector
includes the merger between Laxmi Bank Ltd
and HISEF Finance.
• The merger between Narayani Finance Ltd and
National Finance Ltd to form Narayani
National Finance.
• The merger between Nepal Bangladesh Bank
and Nepal Sri Lanka Merchant Finance.
• The initiation among Himchuli, Birgunj finance
etc.

31. • Regarding bank mergers the move is from a
regime of large number of small banks to
small number of large banks.

32. Challenges in Transition
• Brand Name
• Composition in BOD and Shareholders
• Structure of New Management Team
• Employee Management
• Ownership Division
• Banking Software

33. Legal and Regulatory Approaches
• Article 177 of the Company Act 2063
– provisioned for the amalgamation of company
• Articles 68 and 69 of Bank and Financial
Institutions Act 2063 Nepal Rastra bank
enacted merger bylaw in 2011
– provisions for amalgamations among bank and
financial institutions
• The monetary and fiscal policies of 2067/68
also initiated and encouraged for mergers and
acquisitions

34. Legal and Tax Perspective
• The first one is the Companies Act 2063, Section 177, which
highlights the impediments posed against the growth of M&As in
Nepal
• The BAFI Act 2063 – Chapter 10 restricts cross holdings of
companies
• The Insurance Act 2049 and the Silent Proposed Act
• Competition, Promotion, and Market Protection Act, 2063 prevents
a company from creating a monopoly in the market which an M&A
could most likely produce
• Securities Act 2063 and Labor Act 2048 are other Acts
• Section 36 to 401, Section 47, and Section 57 of the Income Tax Act
2058 which outlines the applicability of taxes on the gains or losses
derived as a result of the disposal of assets and liabilities.

35. What is Wrong
• For effective implementation of the policy there is a need of
coordination among various regulatory authorities in Nepal.
• Due to the liberal licensing policy adopted by NRB, there was a
tremendous surge in the number of BFIs from 2004 to 2009.
• It is believed that the joint efficiency of the two companies is
much better than the single firms. It goes by the equation 2+2=5
which might not hold true.
• Case of high payment more than the worth. Each merger is
different and each valuation is different. Therefore, a good
financial valuator’s presence is valuable during this process.
Certain areas need to be covered and analyzed closely before
coming into decision like share market, how the public image is,
capital strength, market power and numbers of customers if
possible.

36. • small market and small size firms
– M&A has not strategic alternative for growth and
diversification in non-financial enterprises