Motives and Benefits of Mergers

1. Mergers
Motives, Benefits and Outcomes

2. Business Combination - Motives and benefits
1. Functional
2. Strategic
3. Psychological
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3. A. Functional Motives
Functional motives result in synergies and efficiencies resulting in growth,
expansion and profit or wealth maximization of the shareholders which can
be classified as
1) Financial benefits
2) Operational synergies
3) Managerial efficiency
4) Resources advantage
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4. A. Functional Motives
1) Financial Benefits
• Tax Benefits : OBC acquiring GTB and Tata Steel acquired Corus
• Cash Rich : Satyam and Mytas
• Zero debt firms : Soft ware
• Low debt value : Essel Group in IVRCL
• Cost cutting : India Cements + Raasi Cements
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5. A. Functional Motives
2) Operational Synergies
• Operations and Capacity : IBP and IOC
• Technology : Essar Steel and Algoma
• Resources: Tata Steel and Corus, Hindalco and Nevelis
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6. A. Functional Motives
3) Managerial Efficiency
• Virgin Mega Stores (UK) MBO into Zavvi in 2007
• Virgin Comics (UK) MBO into Liquid Comics in 2008
• Virgin Radio (UK) MBO into Absolute Radio in 2008
• International Harvester (USA) MBO into Navistar in 1993
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7. A. Functional Motives
4) Resources Advantage
• Sterlite Industries acquired BALCO and Hindustan Zinc
• Vedanta acquired Sterlite
• Sesagoa and Mingoa
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8. B. STRATEGIC REASONS
1) Business Expansion / Growth / Scale up
1. ICICI Bank acquired SCICI, ITC Classic Finance, Anagram Finance, Bank of
Madura, ICICI, Standard Chartered Grindlays Bank, Sangli Bank and Bank of
Rajasthan.
2. Ranbaxy’s acquisition of Merck’s generic in 2014
3.Hindustan Lever and Brooke Bond Lipton India in 1996
4.HDFC Bank acquiring Times Bank and Centurion Bank of Punjab
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9. B. STRATEGIC REASONS
2) Enter New Markets / Overseas Market
1.Tata Steel acquiring Corus
2.Tata Tea and Tetley
3.Coca Cola acquired Parle food to enter Indian Market
4. Tata Tele + DoCoMo
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10. B. STRATEGIC REASONS
3) Diversification
• Mahindra + Satyam
• L&T and Voltas
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11. C. PSYCHOLOGICAL REASONS
• Leadership: SBI and its Associates, Indian Airlines
and Air India
• Megalomania : Laxmi Niwas Mittal
• Hubris spirit : Competitive Auctions / Bid Offer
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12. Motives and benefits of a Merger
A. Functional
1. Financial
2. Operational
3. Managerial
4. Resources
B. Strategic
1. Business Expansion / Growth :
2. Enter New Markets
3. Diversification
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C. Psychological
1. Megalomania
2. Hubris spirit

13. Outcomes of Business Combination
• Change in stock price
• Change in Ownership
• Change in Management
• Change in Product/s
• Financial Structure
• Change in culture
• Organizational Structure
• Job Structure
• Company Name
• Brand image
• Logo
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14. Any Questions….
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15. Thank You
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