Finance

1
STATEGIC FIT IN
MERGERS AND
ACQUISITIONS
AN IMPERATIVE
INTRODUCTION
Mergers and acquisitions (M&A) and corporate
restructuring are a big part of the
corporate finance world. Every day, Wall Street
investment bankers arrange M&A transactions,
which bring separate companies together to
form larger ones.
Corporate mergers and acquisition is defined as The process of
buying, selling & integrating different corporate with the desire of
expansion & accelerated growth opportunity.
1+1=3
One plus One Three, this equation is the special alchemy of an
Acquisition.
3
DEFINATION
Basically, when two companies
become one. This decision is
usually mutual between both
firms.
MERGERS
A combination of two or
more businesses into one
business.
4
A corporate action in which a

company buys most, if not all,
of the target companys
ownership stakes in order to
assume control of the target
firm.
ACQUISITIONS
ACQUIRE MEANS TO BUY
OR TO PURCHASE
5
Types of Corporate Mergers

Vertical
Horizontal
Varieties
Conglomeration
Product-extension
Market extension
Types of Corporate Acquisition

Friendly
Hostile
Depending upon
Acquire or merging is or isnt listed in public markets.
How the communication is done and received by the target.
HISTORY
Most of the mergers and acquisitions are an outcome of
the favorable economic factors like the macroeconomic
setting, escalation in the GDP, higher interest rates and
fiscal policies. These factors not only trigger the M & A
process but also play an active role in laying the mergers
and acquisition strategies between bidding and target
firms.
The concept of merger and acquisition in India was not popular until the year 1988.
The key factor contributing to fewer companies involved in the merger is the regulatory and
prohibitory provisions of MRTP Act, 1969. (Monopolies and Restrictive Trade Practices
Act,1969)
The year 1988 witnessed one of the oldest business acquisitions or company mergers in
India.
As for now the scenario has completely changed with increasing competition and
globalization of business. It is believed that at present India has now emerged as one of the
7
top countries entering into merger and acquisitions.
Ten biggest Mergers and Acquisitions deals in

India
Case study
1. Tata Steel -Corus Group
Hutch / Essar Vodafone
Hindalco Industries - Canada
based firm Novelis Inc
4. Indian pharma industry - Daiichi
Sankyo
5. ESSO- ONG
6. DoCoMo-Tata Tele
7. India's financial industry HDFC Bank and Centurion Bank
of Punjab.
8. Tata Motors - Jaguar and Land
Rover brands from Ford Motor
9. Adyta Birla Group Columbian
Chemicals
10. Vedanta Cairn Deal
2.
3.
The Vedanta Cairn acquisition

December 2011 finally saw the
completion of the much talked
about Vedanta Cairn deal that was
in the pipeline for more than 16
months. Touted to be the biggest deal
for Indian energy sector, Vedanta
acquired Cairn India for a neat 8.6
billion dollars. Although the Home
Ministry cleared the deal, it has
highlighted areas of concern with 64
legal proceedings against Vedanta.
Distinction between Mergers and Acquisitions

Merger
Acquisition
The case when two companies (often of same size) decide
The case when one company takes over another and
to move forward as a single new company instead of
establishes itself as the new owner of the business.
operating business separately.

The stocks of both the companies are surrendered, while
The buyer company swallows the business of the target
new stocks are issued afresh.
company, which ceases to exist.
For example, Glaxo Wellcome and SmithKline Beehcam
Dr. Reddy's Labs acquired Betapharm through an
ceased to exist and merged to become a new company,
agreement amounting $597 million.
known as Glaxo SmithKline.

Merging of two organizations in to one.
Buying one organization by another.
It is the mutual decision.
It can be friendly takeover or hostile takeover.
Merger is expensive than acquisition (higher legal cost).
Acquisition is less expensive than merger.
Through merger shareholders can increase their net worth.
Buyers cannot raise their enough capital.
It is time consuming and the company has to maintain so
It is faster and easier transaction.
much legal issues.

Dilution of ownership occurs in merger.
The acquirer does not experience the dilution of

ownership.
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MERGERS AND ACQUISITIONS

TAKEOVER
Mergers, acquisitions and takeovers have been
a part of the business world for centuries.
TERMINOLOGY
Merger is an economic tool that is employed
for elevating the long-standing success which is
achieved by developing their functional
competence.
Acquisitions can be either friendly or
intimidating and takes place between the
bidding and the targeted firm. Reverse
acquisition take place when the target company
is bigger than the firm which offered the
takeover proposal. During the process the
bidder has the right to buy the share of the
targeted firm.
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12
Steps of Mergers and Acquisition Process

Preliminary
Assessment or
Business Valuation
Stage of
Integration
Structured
Marketing
Phase of Proposal
Exit Plan
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REVERS MERGER
A reverse merger is when a private company becomes a public company by
purchasing control of the public company. The shareholders of the private company
usually receive large amounts of ownership in the public company and control of its
board of directors (B of D).
Advantages
The ability for a private company to
become public for a lower cost and in
less time than with an initial public
offering (IPO). When a company plans
to go public through an IPO, the
process can take a year or more to
complete. This can cost the company
money and time. With a reverse
merger, a private company can go
public in as little as 30 days.
Disadvantages
Reverse stock splits are very
common with reverse
mergers and can significantly
reduce the number of shares
owned by stockholders.
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Merger and Acquisition Strategies

The merger and
acquisition strategies may
differ from company to
company and also depend
a lot on the policy of the
respective organization.
However, merger and
acquisition strategies have
got some distinct process,
based on which, the
strategies are devised.
15
BIBLIOGRAPHY
WWW.GOOGLE.COM
WWW.HATIMGLAZING.COM
WWW.WIKIPEDIA.COM
WWW.INVESTOPEDIA.COM
WWW.YAHOO.COM
WWW.SCRIBD.COM
BUSINESS.MAPSOFINDIA.COM
WWW.SLIDESHARE.NET
WWW.STRATEGIC FIT IN MERGERS AND
ACQUISITIONS-AN IMPERATIVE.PPT
WWW.INVESTOPEDIA.COM
16
THANKING
YOU
17

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1

A corporate action in which a

Types of Corporate Mergers

Types of Corporate Acquisition

Ten biggest Mergers and Acquisitions deals in

The Vedanta Cairn acquisition

Distinction between Mergers and Acquisitions

The case when two companies (often of same size) decide

The case when one company takes over another and

to move forward as a single new company instead of

establishes itself as the new owner of the business.

operating business separately.

The buyer company swallows the business of the target

new stocks are issued afresh.

company, which ceases to exist.

For example, Glaxo Wellcome and SmithKline Beehcam

Dr. Reddy's Labs acquired Betapharm through an

ceased to exist and merged to become a new company,

agreement amounting $597 million.

known as Glaxo SmithKline.

Buying one organization by another.

It is the mutual decision.

It can be friendly takeover or hostile takeover.

Merger is expensive than acquisition (higher legal cost).

Acquisition is less expensive than merger.

Through merger shareholders can increase their net worth.

Buyers cannot raise their enough capital.

It is time consuming and the company has to maintain so

It is faster and easier transaction.

much legal issues.

The acquirer does not experience the dilution of

MERGERS AND ACQUISITIONS

Steps of Mergers and Acquisition Process

Merger and Acquisition Strategies

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