Module 1 & 2 Notes

Mergers, Acquisition & Corporate Restructuring 20MBAFM404
MERGERS, ACQUISITIONS & CORPORATE RESTRUCTURING
Semester: IV Course Code: 20MBAFM404 Teaching Hours / week (L:T:P): 3-0-0
Credits : 03 CIE Marks: 40 SEE Marks: 60 Exam Hours:03
Course Objectives:
1. To understand various concepts and terminologies used in mergers and acquisition.
2. To explain and critically evaluate M&A with its different classifications,
strategies, theories, synergy etc.
3. To apply and analyse financial evaluation and accounting aspects of M&A.
UNIT 1: Introduction of M & A Meaning-types of mergers–Merger Motives Theories of

Mergers-Mergers and industry life cycle, Reasons for failures of M & A-synergy-types of
synergy–value creation in M&A-SWOT analysis BCG matrix. (Theory).
MERGERS AND ACQUISITIONS (M&A): MEANING
Mergers and acquisitions (M&A)

are defined as consolidation of
companies. Differentiating the two
terms, Mergers is the combination
of two companies to form one,
while Acquisitions is one company
taken over by the other. M&A is one
of the major aspects of corporate
finance world. The reasoning behind
M&A generally given is that two
separate companies together create
more value compared to being on an
individual stand. With the objective
of wealth maximization, companies
keep evaluating different opportunities through the route of merger or acquisition. The phrase
mergers and acquisitions refers to the aspect of corporate strategy, corporate finance and
management dealing with the buying, selling and combining of different companies that can
aid, finance, or help a growing company in a given industry grow rapidly without having to
create another business entity. A merger refers to the process whereby at least two companies
combine to form one single company. Business firms make use of mergers and acquisitions for
consolidation of markets as well as for gaining a competitive edge in the industry.
Rajimol KP, Assistant Professor, MBA Dept 1

OBJECTIVES OF M & A
1. To create a more cost-efficient operation

2. To expand a firm’s geographic coverage
3. To extend a firm’s business into new product categories or international markets
4. To gain quick access to new technologies or competitive capabilities
5. To invent a new industry and lead the convergence of industries whose boundaries are
blurred by changing technologies and new market opportunities
M&A’s are considered as important change agents and are a critical component of any business
strategy. The known fact is that with business evolving, only the most innovative and nimble
can survive. That is why, it is an important strategic call for a business to opt for any
arrangements of M&A. Once through the process, on a lighter note M&A is like an arranged
marriage, partners will take time to understand, mingle, but will end up giving positive results
most of the times.
REASONS FOR MERGERS AND ACQUISITIONS
• Financial synergy for lower cost of capital
• Improving company’s performance and accelerate growth
• Economies of scale
• Diversification for higher growth products or markets

• To increase market share and positioning giving broader market access
• Strategic realignment and technological change
• Tax considerations
• Undervalued target
• Diversification of risk
MERGER MOTIVES
a) Strategic Motives
 Expansion and growth  Dealing with entry of MNC’s  Economies of scale  Synergy 
Market penetration  Market leadership  Backward/ Forward Integration  New product
entry  New market entry  Surplus resources  Minimize size  Risk reduction  Balancing
product cycle  Growth and diversification strategy  Re-fashioning
b) Financial Motives
 Deployment of surplus funds  Fund raising capacity  Market capitalization  Tax

planning  Creation of shareholders value  Tax benefits  Revival of sick units  Asset
stripping(Selling assets for profit as it is not productive for the company)  Undervaluation of
target company  Increasing EPS

c) Organizational Motives
 Superior management  Ego satisfaction  Retention of managerial talent  Removal of

inefficient management
CATEGORIES OF MERGERS
A merger is said to occur when two or more companies combine into one company. Mergers
may take any one of the following forms. It can be in the following transactions.
1. Amalgamation: Ordinarily amalgamation means merger. Amalgamation is used when

two or more companies’ carries on similar business go into liquidation and a new
company is formed to take over their business. Ex: the merger of Brooke Bond India
Ltd., with Lipton India Ltd., resulted in the formation of a new company Brooke Bond
Lipton India Ltd.
2. Absorption : Absorption is a combination of 2 or more companies into an existing co.
All company’s except one lose their identity in a merger through absorption. Ex:
Absorption of Tata Fertilizer Ltd (TFL) by Tata Chemicals LTd (TCL) TCL an
acquiring co (buyer); survived after merger while TFL an acquired co ( a seller) ceased
to exist. TFL transferred its assets, liabilities and shares to TCL under the scheme of
merger.
3. Combinations/ Consolidation: Consolidation: two or more companies combine to
form a new company. In this form of merger all companies are legally dissolved, and a
new entity is created. In a consolidation, the acquired company transfers its assets,
liabilities and shares to the new company for cash or exchange of share. Ex : Merger or
amalgamation of Hindustan Computers Ltd, Hindustan Instruments Ltd, Indian

software co Ltd and Indian Reprographics ltd in 1986 to an entirely new co, called HCL
ltd.
4. Acquisitions: Acquisition means acquiring the ownership in the company. When 2
companies become one , but with the name and control of the acquirer, and the control
goes automatically into the hands of the acquirer. A classic example in this context is
the acquisition of TOMCO by HLL.
5. Takeover: A takeover generally involves the acquisition of a certain stake in the equity
capital of a company which enables the acquirer to exercise control over the affairs of
the company. Takeover implies acquisition of controlling interest in a company by
another company. It doesn’t lead to the dissolution of the company whose shares are
being / have been acquired. It simply means a change of controlling interest in a
company through the acquisition of its shares by another group. Ex: HINDALCO took
over INDAL by acquiring a 54% stake in INDAL from its overseas parent, Alcan.
However, INDAL was merged into HINDALCO.
6. Demergers: Demerger or split or division of a company is opposite of mergers and
amalgamations. Ex: Hero Honda demerged from Honda and became Hero.
TYPES OF MERGER
1. Horizontal Mergers
2. Vertical Mergers
3. Conglomerate Mergers
4. Concentric Mergers
5. Circular Combination

Horizontal Merger
This involves two firms

operating in the same kind of
business activity. Both
acquiring and the target
company belong to same
industry. Main purpose is to
obtain economies of scale in
production by eliminating
duplication of facilities and
operations. This is a
combination of two or more
firms in similar type of
production, distribution or area
of business.
Motives:
1. Elimination or reduction in competition

2. Putting an end to price cutting
3. Economies of scale in production
4. Research and development
5. Better control over Marketing and management.
6. Increase market power

Vertical Merger
This occurs between firms in different

stages of production and operation. Expands
the espousing backward integration to
assimilate sources of supply and forward
integration towards market outlets. Vertical
merger occurs when a firm acquires firms
‘Upstream’ from it or firms ‘downstream’
from it. In case of an ‘Upstream’ merger it
extends to the firms supplying raw materials
and to those firms that sell eventually to the
consumer in the event of a ‘down-stream’
merger. When co combines with the
supplier of materials it is called backward
merger and when it combines with the
customer it is known forward merger.
EX: Vertical Forward Integration – Buying a customer Indian Rayon’s acquisition of Madura
Garments along with brand rights
Vertical Backward Integration – Buying a supplier. IBM’s acquisition of Daksh

Merits:
1. Low buying cost of materials

2. Lower distribution costs
3. Assured supplies and market
4. Increasing or creating barriers to entry for potential competitors
5. Control over product specification
6. Technological Economies
Conglomerate Merger
This occurs between companies engaged into two unrelated industries. Conglomerate merger
represents a merger of firms engaged in unrelated lines of business. Rationale for such merger
is Diversification of risk
3 Types of Conglomerate mergers:
a) Product-extension mergers: It broaden the product lines of firms. These are mergers
between firms in related business activities and may also be called concentric mergers. These
mergers broaden the product lines. Product Extension: New product in Present territory P&G
acquires Gillette to expand its product offering in the household sector and smooth out
fluctuations in earning.
b)Geographic market-extension merger: It involves two firms whose operations have been
conducted in non-overlapping geographic areas. Ex: Pizza Hut a fast food chain restaurant
centred in USA, sought to wow Indian customers by opening their restaurant in all most all
major urban centres of India.
c) Pure conglomerate mergers: It involves unrelated business activities. These would not
qualify as either product-extension or market extension. New product New territories Indian
Rayon’s acquisition of PSI Data Systems. Mohta Steels with Vardhaman Spinning Mills Ltd.
Concentric Merger:
A concentric merger, often called a congeneric merger, is the merging of firms that operate in
the same industry but do not have a mutual relationship (such as a buyer-seller relationship). A
congeneric merger is a type of merger where two companies are in the same or related
industries or markets but do not offer the same products. In a congeneric merger, the companies
may share similar distribution channels, providing synergies for the merger. The acquiring
company and the target company may have overlapping technology or production systems,

making for easy integration of the two entities. The acquirer may see the target as an
opportunity to expand their product line or gain new market share.
A merger in which there is carry –over in specific management functions (ex: mktg) or
complementarily in relative strengths among specific management functions rather than carry-
over/complementarities in only generic management functions (eg: planning).
Therefore, if the activities of the segments brought together are so related that there is carryover
of specific management functions (manufacturing, finance, mktg, personnel, & so on) or
complementarily in relative strengths among these specific management functions, the merger
should be termed concentric rather than conglomerate.
Ex: if one co., has competence in research, manufacturing., or mktg that can be applied to the
production problems of another co., that lacks that particular competence, a merger will provide
the opportunity to lower cost function. Firms seeking to diversify from advanced technology
industries may be strong on research but weaker on production, and mktg., capabilities firms
in industries with less advanced technology.
Circular Combination
A circular merger is a transaction to combine companies that operate within the same general
market but offer a different product mix. This happens among companies producing distinct
products to share common research and distribution facilities to obtain economies by
elimination of cost on duplication and promoting market enlargement. Acquiring company has
the benefit in form of economies of resource sharing and diversification When the firms
belonging to the different industries and producing altogether different products combine
together under the banner of central agency, it is referred as mixed or circular mergers. Ex:
Merger of Sony (camera provider for mobiles)Ericson(cell phone producer) Circular Merger
involves bringing together of products or services that are unrelated but marketed through the
same channels, allowing shared dealerships. Ex: McLeod Russell (a tea company) with
Eveready Industries (batteries).
THEORIES OF MERGER
I. Efficiency theories

A. Differential managerial efficiency
B. Inefficient management
C. Operating synergy
D. Pure diversification
E. Strategic realignment to changing environments
F. Undervaluation
II. Information and signalling
III. Agency problems and managerialism
IV. Free cash flow hypothesis
v. Market power
VI. Taxes
VII. Redistribution.
1. Differential Efficiency
The differential efficiency explanation can be formulated more vigorously and may be called
a managerial synergy hypothesis. If a firm has an efficient management team whose capacity
is in excess of its current managerial input demand, the firm may be able to utilize the extra
managerial resources by acquiring a firm that is inefficiently managed due to shortage of such
resources.
This theory suggests that if a strong company merges with a company whose efficiency is low,
after the merger the efficient company makes the merged firm as efficient as it is.
For example, if the management of firm A is more efficient than the management of firm B
and if after firm A acquires firm B, the efficiency of firm B is brought up to the level of
efficiency of firm A, efficiency is increased by merger. The level of efficiency in the economy
would be raised by such mergers.
2. Inefficient Management

This theory suggests that the managers of acquiring firm will be replaced by the acquirer to
make the new management work more efficiently. Inefficient management is simply not
performing up to its potential. Another control group might be able to manage the assets of this
area of activity more effectively. Inefficient management theory could be a basis even for
mergers between firms with unrelated businesses. Several observations can be made on the
theory
i) The theory assumes that owners of acquired firms are unable to replace their own
managers, and thus it is necessary to invoke costly mergers to replace inefficient
managers.
ii) If the replacement of incompetent managers were the sole motive for mergers, it
should be sufficient to operate the acquired firm as a subsidiary rather than to merge
it into the acquirer.
iii) One clear prediction made by the theory is that the managers of the acquiring firm
will be replaced after the merger. Empirical evidence suggests that this is not the
case at least in conglomerate mergers. Based on his dissertation study of 28
conglomerate firms, Lynch (1971, USA) concludes that these firms tried to acquire
companies with capable managements that could be retained.
3. Synergy
Synergy refers to the type of reaction that occur when two

substances or factors combine to produce a greater effect
together than that with the sum of the two operating
independently could account for. It refers to the phenomenon
2+2=5. This theory advocates there will be good synergy factor
if merged companies can manage economies of scale.
Financial Synergy:
The impact of a corporate merger or acquisition on the

costs of capital to the acquiring or the combined firm
refers to financial synergy. Financial synergy occurs as
a result of the lower costs of internal financing versus
external financing. A combination of firms with

different cash flow positions and investment opportunities may produce a financial synergy
and achieve lower cost of capital. A firm in a declining industry will provide large cash flows
since there are few attractive investment opportunities. A growth industry has more investment
opportunities than cash with which to finance them.
Operating Synergy:
This theory assumes that economies of scale do

exist in the industry and that prior to the merger;
the firms are operating at levels of activity that fall
short of achieving the potentials for economies of
scale. Ex: one firm might be strong in cash but
weak in marketing while another has strong
marketing department without the R&D capability. Merging the two firms would result in
operating synergy. One problem in merging is- how to combine and coordinate the good parts
of the organization and eliminate what is not required? Vertical integration is one area in which
operating economies may be achieved. Combining firms at different t stages of an industry may
achieve more efficient coordination of the different levels.
4. Pure Diversification
Diversification of firm has different folds. First, in

contrast to the position of shareholders who can diversify
across firms in the capital market, employees of the firm
have only a limited opportunity to diversify their labour
sources. Diversification of the firm can provide managers
and other employees with job security and opportunities
for promotion and, other things being equal, results in lower labour costs.
Second, in the modern theory of the firm, information on employees is accumulated within the
firm over time. If the firm is diversified, teams can be transferred from unprofitable business
activities to growing and profitable activities. Diversification may ensure smooth and efficient
transition of the firm’s activities and the continuity of the teams and the organization.

Third, firms have reputational capital which customers, suppliers and employees utilize in
establishing their relationships with the firm. Diversification can help preserve the firm’s
reputational capital which will cease to exist if the firm is liquidated.
Fourth, diversification can increase corporate debt capacity and decrease the present value of
future tax liability. These effects are a result of the decrease in cash flow variability due to the
merger.
5. Strategic Realignment to Changing Environments
Strategic planning is concerned with the firm’s environments and constituencies, not just
operating decisions. The strategic planning approach to mergers implies either the possibilities
of economies of scale or tapping an unused capacity in the firm's present managerial
capabilities.
The speed of adjustment through merger would be quicker than internal development. There
may be opportunities to realize synergies in managerial capabilities. On the other hand, a
competitive market for acquisitions implies that the net present value from merger and
acquisition investments is likely to be small. However, if these investments exploit synergy
opportunities and can be used as a base for still additional investments with positive net present
values, the strategy may succeed.
6. Undervaluation
Some studies attribute merger motives to the undervaluation of target companies. One cause of
undervaluation may be that management is not operating the company up to its potential.
Second possibility is that the acquirers have inside information. How they acquired this special
information may vary with circumstances, but if the bidders possess information which the
general market does not have, they may place a higher value on the shares than currently
prevails in the market. Another aspect of the under-valuation theory is the difference between
the market value of assets and their replacement costs.
7. Information & signalling
It attempts to explain why target shares seem to be permanently revalued ---- in a tender offer
whether or not it is successful. The information hypothesis says that the tender offer sends a

signal to the market that the target shares are undervalued or alternatively the offer signals
information to target mgt., which inspires them to implement a more efficient strategy on their
own.
8. Agency problems and managerialism
It may result from a conflict of the interest b/w managers & shareholders or b/w shareholders
& debt holders. A number of organization& market mechanisms serve to discipline self-serving
managers & takeovers are viewed as the discipline of last resort.
Managerialism: Managers want to increase the size of the company through mergers so as to
increase their power and pay packages
SYNERGY
A synergy is any effect that increases the value of a
merged firm above the combined value of the two
separate firms. Synergies may arise in M&A
transactions for several reasons, such as cost savings due
to operational efficiencies or revenue upside due to more
productive use of assets. Synergy is the concept that the
combined value and performance of two companies will
be greater than the sum of the separate individual parts.
Synergy is a term that is most commonly used in the
context of mergers and acquisitions (M&A). Synergy, or the potential financial benefit
achieved through the combining of companies, is often a driving force behind a merger.
Synergy is the concept that the value and performance of two companies combined will be
greater than the sum of the separate individual parts.
If two companies can merge to create greater efficiency or scale, the result is what is sometimes
referred to as a synergy merge. The expected synergy achieved through a merger can be
attributed to various factors, such as increased revenues, combined talent, and technology, or
cost reduction.
Types of Synergies
1. Operating synergy

Operating synergy or operating economies may be involved in horizontal and vertical mergers.
For horizontal mergers the source of operating economies must represent a form of economies
of scale. The economies, in turn, may reflect indivisibilities and better utilization of capacity
after the merger. Another area in which operating economies may be achieved is vertical
integration. Combining firms at different stages of an industry may achieve more efficient
coordination of the different levels. Costs of communication, and various forms of bargaining
and opportunistic behaviour can be avoided by vertical integration.
2. Financial synergy
The motive of the merger is to capture investment opportunities available in the acquired
firm’s industry by lowering the costs of capital of the combined firm through the merger and
also utilizing lower-cost internal funds of the acquiring firm. The opportunity for utilizing the
cash flows of the acquiring firm will be enhanced if the cash flow of the acquired firm is low.
The decrease in bankruptcy probability may decrease the expected value of bankruptcy costs
and increase the expected value of tax savings from interest payments for premerger debts, and
thus increase the value of the combined firm by lowering its cost of capital. Internal funds do
not involve transaction costs of the flotation process and may have differential tax advantages
over external funds. The acquiring firms may supply lower-cost internal funds to the combined
firm. Further, the acquired firms will typically have low free cash flows because high expected
demand growth in their industries requires greater investments. The low free cash flows of the
acquired firms provide synergistic opportunities in financing. Economies of scale in floatation
and transaction costs of securities are another potential source of financial synergy.
3. Managerial synergy
Now imagine a production process employing four factor inputs ---- generic managerial
capabilities, industry-specific managerial capabilities, firm-specific nonmanagerial human
capital and capital investment. The firm-specific non-managerial human capital can only be
supplied by a long-term learning effort or by merging with existing firms in the same industry.
The industry-specific managerial resources can be obtained by internal learning or by merging
with a firm in the same or related industries. Suppose that a firm, call It B has ‘excess capacity’
in industry specific resources and that another firm in a related industry, call it T experiences
‘shortages’ in these resources. The acquisition of T by B will make the firms realize more

balanced factor proportions between industry-specific and firm-specific resources by

transferring the excess capacity of B in the industry-specific capabilities to T’s operation.
Reasons for failures of M & A
Despite the highest degree of strategy and planning and investments of hundreds of crores, the
majority of the mergers and acquisitions cannot create a value and fail miserably. There could
be several reasons behind the failure of mergers and acquisitions. Many companies look
mergers and acquisitions as the solution to their problems. But before going for merger and
acquisition, they do not introspect themselves. Before an organization can go for mergers and
acquisitions, it needs to consider a lot. Both the parties, viz. buyer and seller need to do proper
research and analysis before going for mergers and acquisitions.
Reasons Behind the Failure Of M&A Deals
1) Mislead value for investment – The investment on the assets may look good on papers, but
practically they may not be the revenue generating areas after the closure of the deal.
2) Lack of clarity in the integration process – Post-merger, the disintegration of factors like
key employees, processes, important projects, policies, etc. lead to failure in the execution
process.
3) Mismatch in the culture – If the M&A deal fails to devise a strong strategy focused on the
difference in the cultural aspects of two companies, a low productivity in employees of both
the companies is observed.
4) Poor communication – If the purpose behind the deal is unclear or is not communicated to
the employees, a lack of synergy in teams is marked and expectations from the deal are not
met.
5) External factors – External factors such as economic collapse and other environmental
factors affect the performance of the deal.
6) Negotiation errors – The company overpays the acquisition fees, which leads to financial
losses and failures in future.

INDUSTRY LIFECYCLE PHASE AND M&A
M&A activity can vary depending on the acquirer and/or target’s phase in the industry
lifecycle.
Pioneering Phase: start-up founders may opt to “cash out” of their promising ventures by
selling to larger companies that are seeking growth opportunities. Horizontal and conglomerate
mergers.
Accelerating Growth Phase: highly profitable and fast-growing companies in new industries
may sell themselves to more established companies in order to access capital for business
expansion. Horizontal and conglomerate mergers.
Mature Growth Phase: larger companies with slowing growth rates may look for targets with
value potential or targets that can facilitate economies of scale. Horizontal and vertical mergers.
Industry Maturity Phase: an acquiring company is now growing around the same pace as that
of the economy; it will look for targets that can increase economies of scale or invest in small
growing concerns that provide return opportunities for shareholders. Horizontal mergers.

Decline Phase: overall industry is shrinking; an acquirer may look for synergies, to buy
profitability of younger firms, or to simply survive. Horizontal, conglomerate, and/or vertical
mergers.
INDUSTRY LIFE CYCLE ANALYSIS
Industry life cycle analysis is part of fundamental analysis of a company involving the
examination of the stage an industry is in at a given point in time. An analyst will determine
where a company sits in the cycle and use this information to project future financial
performance and estimate forward valuations.
Though not necessarily the case, the life cycle of a particular industry will follow the general
economic cycle. Moreover, an industry life cycle may lead or lag an economic cycle and can
vary from an economic cycle's phases in terms of expansion or contraction percentages or
duration of peak and trough stages. During an expansion phase in open and competitive
markets, an industry will experience revenue and profit growth, drawing in more competitors
to meet the growing demand for that industry's goods or services. The peak occurs when growth
drops to zero; demand in the cycle has been met and prevailing economic conditions do not
encourage additional purchases. Industry profits flatten out.
The contraction phase of the life cycle begins at some point after the peak arrives, characterized
by falling profits as current period sales are lower relative to prior period sales (when demand
was on the rise). The contraction phase could be concomitant with a recession in the economy
or merely a reflection that short-term demand in the industry has been exhausted. During the
contraction phase, the industry undergoes production capacity adjustments, whereby marginal
players get shaken out and stronger companies lower their production volumes. Industry profits
decrease.
This adjustment process, combined with a firming of the economy observed in employment
and personal income numbers and the consumer confidence index, lead to the trough phase of
the industry life cycle. At this stage, lower levels of industry demand are matched by the output
capacity. As the economy gathers strength, the industry life cycle begins again with the
expansion phase. As mentioned at the outset, an industry life cycle is typically tied to the
economic cycle. The entertainment and leisure industry is an example of such an industry. The
technology industry, on the other hand, has exhibited life cycle movements at variance with

the economic cycle. For instance, industry profits have boomed even in times of no economic
growth.
Stage of Industry Types of Mergers

Life Cycle
Introduction Newly created firms may sell to outside larger firms in a mature or
Stage declining industry, thereby enabling larger firms to enter into new
growth industry. These results n related or conglomerate mergers.
The smaller firms may wish to sell because they want to convert
personal income to capital gain and because they do not want to
place large investment in the hands of managers, who do not have
long record of success. Horizontal mergers may take place between
smaller firms in order to pool management & capital resources.
Growth & Mergers during the exploitation stage are similar to mergers during
Exploitation Introductory stage. The major reasons for such mergers are reinforced
Stage by the more visible indications of prospective growth and profit and by
the larger capital requirements of a higher growth rate.
Maturity To achieve Economies of scale in research, production and marketing in

Stage order to match low cost & price performance of other firms Domestic
.Foreign). Some acquisitions of smaller firms by larger takes place for
the purpose of rounding out the management skills of the smaller firms
and providing them with broader financial base.
Decline Horizontal mergers are undertaken to ensure survival, Vertical mergers
Stage for increasing efficiency and profit margins. Concentric mergers
involving firms in related industries provide opportunities for synergy
and carry over. Conglomerate mergers with growth industries to utilize
the accumulating cash position of mature firms in declining industries
whose internal flow of funds exceeds the investment requirements of
their traditional lines of businesses.
VALUE CREATION IN M&A
The key idea in any M&A transaction is to create value through a potentially synergetic
activity. The understanding of the motives of various stakeholders is instrumental in the
analysis of the potential creation of value. Mergers and acquisitions represent two of a nearly
limitless variety of ways in which firms can combine resources to accomplish an objective;
they are a part of the corporate and business strategy of a firm and are used strategically by
firms in order to survive and to grow. In light of the importance of M&As as a primary means
for business firms to achieve growth, many empirical studies have tried to determine the
conditions for successful M&A transactions.

Value Creation in Horizontal merger
A horizontal merger is one that takes place between two companies that are essentially
operating in the same market. Their products may or may not be identical. The horizontal
merger takes place between business competition who are manufacturing, selling and
distributing the similar type of service for profit. Horizontal merger results in reduction of
competitors in the same industry. This, type of merger enables to derive the benefit of
economies of scale & elimination of competition. But it leads to increase in monopolistic
tendency in the market. A Horizontal merger can enhance the value of the combines firm
through the following:
➢ Revenue enhancement
➢ Reducing the cost
➢ Economies of Scale
➢ Generating new resources
➢ Elimination of competition
For example, merger of Tata Oil Mills Company Ltd. with Hindustan Lever Ltd. is a horizontal
merger. Both the companies have similar products.
Value Creation in Vertical Merger
A vertical merger is one in which the company expands backwards by merging with a company
supplying raw material or expands forward in the direction of the ultimate consumer. Thus, in
a vertical merger, there is a merging of companies engaged at different stages of the production
cycle within the same industry. The vertical merger will bring the firms together who are
involved in different stages of production, process or operation. A vertical merger allows for
smooth flow of production, reduced inventory, and reduction in operating cost, increase in
economies of scale, elimination of bottlenecks etc. A Vertical merger can enhance the value of
the combines firm through the following:
➢ Revenue Enhancement
➢ New Growth opportunities
➢ Increased Market Power
➢ Cost efficiency
➢ Technological Economies

For example, the merger of Reliance Petrochemicals Limited with reliance industry limited is
an example of vertical merger with backward linkage as far as RIL is concerned.
Value Creation in Conglomerate Merger
In a conglomerate merger, the concerned companies are in totally unrelated lines of business.
This type of merger involves the integration of companies entirely involve in a different set of
activities, products or services. The merging companies are neither competitors nor
complementary to each other. This form of merger is resorted to increase economic power,
profitability , diversification of activities. A conglomerate merger can enhance the value of the
combines firm through the following:
 Stability of income & profits

 Diversification
 Effective utilisation of resources
 Improve market growth
 Economies of Scale
For example, Mohta Steel Industries Limited merged with Vardhaman spinning mills Ltd. •
Conglomerate mergers are expected to bring about stability of income & profits, since the two
units belong to different industries.
SWOT ANALYSIS
A SWOT analysis is an incredibly simple, yet powerful tool to help you develop your business
strategy, whether you’re building a start-up or guiding an existing company.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
Strengths and weaknesses are internal to your company—things that you have some control
over and can change. Examples include who is on your team, your patents and intellectual
property, and your location.
Opportunities and threats are external things that are going on outside your company, in the
larger market. You can take advantage of opportunities and protect against threats, but you
can’t change them. Examples include competitors, prices of raw materials, and customer
shopping trends.
A SWOT analysis organizes your top strengths, weaknesses, opportunities, and threats into an
organized list and is usually presented in a simple two-by-two grid.
SWOT ANALYSIS IN M&A
Often M&A turns sour and do not achieve the benefits

that are anticipated. Hence before the first steps
towards M&A, an analysis should be done to support
the mergers and acquisition.
A SWOT analysis is very useful in understanding

whether the mergers and acquisition would be in the
company's best interest.
Strengths
Increased Market share: A merger or acquisition enables a company to enter into market that
it didnot have any significant presence in or any presence at all.
Access to better technology: The target company would get better access to technology and
on being merged, the acquiring company will get benefit from this.
Increased profits: Entering into new market and expanding product range and customer base
results in increased profits and economies of scale.
Competitive advantage: Mergers has the potential to help the companies multiply their
strengths using their core competencies.

Weaknesses
Style of Management: If the management is autocratic and highly centralised growth may be
stifled.
Aggressive trade unionism: Often trade unions in their quest to protect the interest of the
employees may harm the merged entities by not permitting technological improvements,
growth plans and other initiatives.
Absences of skilled manpower: Mergers require not only re-aligning the work culture but also
the skills manpower to carry out the plans more effectively.
Increasing cost: When the companies merge, there could be a situation where two people do
the same jobs and therefore cost may increase.
Opportunities
Opportunities are those conditions which are favourable and help the company to attain the
objectives. This includes ability to increase market share, expansion and possibility to raise
money.
Threats
Threats include anything that can negatively affect your business from the outside. It's vital to
anticipate threats and to take action against them before you become a victim of them and your
growth stalls. These are unfriendly legal framework, changes in technology, changes in
customer taste and preference.
BCG Matrix
The Boston Consulting group’s product portfolio matrix (BCG matrix) is designed to help with
long-term strategic planning, to help a business consider growth opportunities by reviewing its
portfolio of products to decide where to invest, to discontinue or develop products. It's also
known as the Growth/Share Matrix.

BCG matrix (or growth-share matrix) is a corporate planning tool, which is used to portray
firm’s brand portfolio or SBUs on a quadrant along relative market share axis (horizontal axis)
and speed of market growth (vertical axis) axis.
Growth-share matrix is a business tool, which uses relative market share and industry growth
rate factors to evaluate the potential of business brand portfolio and suggest further investment
strategies.
Ask from Experts!
BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic
position of the business brand portfolio and its potential. It classifies business portfolio into
four categories based on industry attractiveness (growth rate of that industry) and competitive
position (relative market share). These two dimensions reveal likely profitability of the
business portfolio in terms of cash needed to support that unit and cash generated by it. The
general purpose of the analysis is to help understand, which brands the firm should invest in
and which ones should be divested.
Relative market share. One of the dimensions used to evaluate business portfolio is relative
market share. Higher corporate’s market share results in higher cash returns. This is because a
firm that produces more, benefits from higher economies of scale and experience curve, which
results in higher profits. Nonetheless, it is worth to note that some firms may experience the
same benefits with lower production outputs and lower market share.

Market growth rate. High market growth rate means higher earnings and sometimes profits
but it also consumes lots of cash, which is used as investment to stimulate further growth.
Therefore, business units that operate in rapid growth industries are cash users and are worth
investing in only when they are expected to grow or maintain market share in the future.
Dogs. Dogs hold low market share compared to competitors and operate in a slowly growing
market. In general, they are not worth investing in because they generate low or negative cash
returns. But this is not always the truth. Some dogs may be profitable for long period of time,
they may provide synergies for other brands or SBUs or simple act as a defense to counter
competitors moves. Therefore, it is always important to perform deeper analysis of each brand
or SBU to make sure they are not worth investing in or have to be divested.
Strategic choices: Retrenchment, divestiture, liquidation
Cash cows. Cash cows are the most profitable brands and should be “milked” to provide as
much cash as possible. The cash gained from “cows” should be invested into stars to support
their further growth. According to growth-share matrix, corporates should not invest into cash
cows to induce growth but only to support them so they can maintain their current market share.
Again, this is not always the truth. Cash cows are usually large corporations or SBUs that are
capable of innovating new products or processes, which may become new stars. If there would
be no support for cash cows, they would not be capable of such innovations.

Strategic choices: Product development, diversification, divestiture, retrenchment
Stars. Stars operate in high growth industries and maintain high market share. Stars are both
cash generators and cash users. They are the primary units in which the company should invest
its money, because stars are expected to become cash cows and generate positive cash flows.
Yet, not all stars become cash flows. This is especially true in rapidly changing industries,
where new innovative products can soon be outcompeted by new technological advancements,
so a star instead of becoming a cash cow, becomes a dog.
Strategic choices: Vertical integration, horizontal integration, market penetration, market

development, product development
Question marks. Question marks are the brands that require much closer consideration. They
hold low market share in fast growing markets consuming large amount of cash and incurring
losses. It has potential to gain market share and become a star, which would later become cash
cow. Question marks do not always succeed and even after large amount of investments they
struggle to gain market share and eventually become dogs. Therefore, they require very close
consideration to decide if they are worth investing in or not.
Strategic choices: Market penetration, market development, product development, divestiture
BCG Matrix: Advantages and disadvantages
Benefits of the matrix:
1. Easy to perform;
2. Helps to understand the strategic positions of business portfolio;
3. It’s a good starting point for furthermore thorough analysis.
4. Growth-share analysis has been heavily criticized for its oversimplification and lack of
useful application.
Following are the main limitations of the analysis:
1. Business can only be classified to four quadrants. It can be confusing to classify an

SBU that falls right in the middle.
2. It does not define what ‘market’ is. Businesses can be classified as cash cows, while
they are actually dogs, or vice versa.
3. Does not include other external factors that may change the situation completely.
4. Market share and industry growth are not the only factors of profitability. Besides, high
market share does not necessarily mean high profits.
5. It denies that synergies between different units exist. Dogs can be as important as cash
cows to businesses if it helps to achieve competitive advantage for the rest of the
company.

Unit: 2 Merger Process Procedure for effecting M & A-Five-stage model–Due diligence–
Types, process and challenges of due diligence-HR aspects of M & A–Tips for successful
mergers-Process of merger integration. (Theory).
MERGER PROCESS
Merger and acquisition process are the most challenging and most critical one when it comes
to corporate restructuring. One wrong decision or one wrong move can actually reverse the
effects in an unimaginable manner. It should certainly be followed in a way that a company
can gain maximum benefits with the deal.
Steps in Merger or Merger Process
1. Screening and investigation of merger proposal
2. Negotiation stage
3. Approval of proposal by Board of Directors
4. Approval of shareholders
5. Approval of creditors/financial institutions/banks
6. Tribunal’s approval
7. Approval of central government
8. Integration stage
1. Screening and investigation of merger proposal
When there is an intention of acquisition or merger, the primary step is that of screening. The
motives and the needs are to be adjudged against three strategic criteria i.e. business fit,
management and financial strength. If the proposal is viable after thorough analysis from all
angles, then the matter will be carried further.
2. Negotiation stage
In this stage the bargain is made in order to secure the highest price by the seller and the
acquirer keen to limit the price of the bid. The seller needs to decide the minimum price
acceptable and the buyer needs to decide the maximum he is prepared to pay. After the
consideration is decided then the payment terms and exchange ratio of shares between the

companies will be decided. The exchange ratio is an important factor in the process of
amalgamation.
3. Approval of proposal by Board of Directors
Deciding upon the consideration of the deal and terms of payments, then the proposal will be
put for the Board of Director’s approval.
4. Approval of shareholders
As per the provisions of the Companies Act 1956, the shareholders of both seller and acquirer
companies hold meeting under the directions of the National Company Law Tribunal and they
consider the scheme of amalgamation. A separate meeting for both preference and equity
shareholders is convened for this purpose.
5. Approval of creditors/financial institutions/banks
Approvals from the constituents for the scheme of merger and acquisition are required to be
sought for as per the respective agreement with each of them and their interest is considered in
drawing up the scheme of merger.
6. Tribunal’s approval
The tribunal shall issue orders for winding up of the amalgamating company without
dissolution on receipt of the reports from the Official Liquidator and the Regional Director that
the affairs of the amalgamating company have not been conducted in a manner prejudicial to
the interest of its members or to public interest.
7. Approval of central government
It is required to obtain declaration of the Central Government on the recommendation made

by the Specified Authority under section 72 A of the Income Tax Act, if applicable.
8. Integration stage
The structural and cultural aspects of the two organization, will lead to successful merger and
ensure that expected benefits of the merger are realized

THE FIVE STAGE MODEL
The M&A process can be divided into five stages:
1. Corporate Strategy Development
2. Organizing for acquisitions
3. Deal structuring and negotiation
4. Post-acquisition integration and
5. Post-acquisition Audit and organizational learning.
Stage 1
Corporate Strategy Development
Corporate strategy is concerned with ways of optimizing the portfolios of businesses that a
firm currently owns and with how this portfolio can be changed to serve the interests of the
corporation’s stakeholders. M&A is one such activity which achieves the objectives of both
corporate and business strategies.
Corporate strategies are based on various models like industry structure driven, competition
among strategic groups, competence or resource based competition, etc. firms make
acquisitions to gain market power, gain economies of scale and scope or internalize vertically
linked operations to save on cost of dealing with markets, this adding further cost savings.
Stage 2
Organizing for Acquisition
A precondition for a successful acquisition is that the firm organizes itself for effective
acquisition making. An understanding of the acquisition decision process is important, since it
has a bearing on the quality of the acquisition decision and its value creation logic.

A framework is developed for effective organization of the M&A function. The aim of this
framework is to develop the acquisition function as an important organizational capability and
as a core competence of the firm.
At this stage the firm lays down the criteria for potential targets of acquisitions consistent with
the strategic objectives and value creation logic of the firm’s corporate strategy and business
model.
Stage 3
Deal Structuring and Negotiating
This stage consists of
• Valuing target companies, taking into account how the acquirer plans to leverage its
own assets with those of the targets.
• Choice of advisors to the deal such as investment bankers, lawyers etc.
• Performing due diligence
• Determining the range of negotiation parameters
• Negotiating the positions of senior management of both the firms in the post-merger
firm
• Developing the appropriate bid and defence strategies and tactics within the parameters
set by relevant regulatory regime, etc.
Stage 4
Post-Acquisition Integration
This is a very important stage, the objectives of which is to put in place a merged organization
that can deliver the strategic and value expectations that drove the merger in the first place.
Integration has the characteristics of a change management programme but here three types of
change may be involved:
• Change of the target firm

• Change of the acquiring firm

• Change in the attitude and behaviour of both to accommodate co-existence or fusion

of the two firms.
Stage 5
Post-Acquisition Audit & Organization Learning
The importance of organizational learning to the success of future acquisitions needs much
greater recognition, given the high failure rate of acquisitions.
Post merger audit by internal auditors can be acquisition specific as well as being part of an
annual audit. Internal auditors have a significant role in ensuring organizational learning and
its dissemination.
DUE DILIGENCE
Due diligence is nothing but a detailed evaluation. Once a proposal has passed through initial
screening, it is subjected to a detailed evaluation or due diligence process. Due diligence is the
investigation or exercise of care that a reasonable business or person is expected to take before
entering into an agreement or contract with another party, or an act with a certain standard of
care. It can be a legal obligation, but the term will more commonly apply to voluntary
investigations. Due diligence is completed before a deal closes. (DD) is an
extensive process undertaken by an acquiring firm in order to thoroughly and completely assess
the target company's business, assets, capabilities, and financial performance.
Types of Due diligence
They are three components of Due Diligence:-
• Financial Due Diligence

• Legal Due Diligence
• Strategic Due Diligence
Financial Due Diligence

Financial evaluation is the most important part of the due diligence. It is needed to determine
the earnings and cash flows, areas of risk, the maximum price payable to the target company
and the best way to finance the merger. A merger is said to be at a premium when the offer
price is higher than the target firm’s pre-merger market value. The acquiring firm may pay the
premium if it thinks that it can increase the target firm’s profits after merger by improving its
operations and due to synergy.
Legal Due Diligence
Any M&A activity needs a lot of structuring such that they are within the tax and legal
framework. Any merger to happen successfully, has to be structured in such a way that they
are tax efficient, compliant with SEBI, FDI, Capital Market and Government rules and
regulations.
Strategic Due Diligence
It tests the strategic rationale behind a proposed transaction with two broad questions:
1. Is the deal commercially attractive?
2. Are we capable of realizing the targeted value?
The first question testing the commercial attractiveness of the deal involves validating both the
target company’s financial projections and identified synergies using an external lens.
Regarding the second question, a company must make a hard-internal examination of whether
the targeted value of the deal can be realized by the management team of the combined
enterprise and, if so, whether the projected time frame is realistic.
PROCESS OF DUE DILIGENCE
Due diligence is a process of research and analysis that is initiated before an acquisition,
investment, business partnership or bank loan, in order to determine the value of the subject of
the due diligence or whether there are any major issues involved.
Due diligence is a process of : Analysing various aspects to estimate an entities commercial

potential, Assessing the financial viability of the entity in terms of its assets and liabilities at a

comprehensive level, Examining the operations and verifying the material facts related to the
entity in reference to a proposed transaction
1. Define corporate objectives

The due diligence process needs to align with the regulatory, strategic, reputational and
financial risks which the entity may face. This involves introspective questions revolving
around what you need to gain from this investigation.
2. Gather key information
Information of the entity needs to be gathered on a number of bases such as political

connections, board members, incorporation documents, key shareholders, etc. It also collects
the information regarding the target company's business, assets, capabilities, and financial
performance.
3. Conduct a risk assessment

There has to be the preparation of the risk assessment. The assessment must consider points
such as high level of government involvement, country risk and financial risks arising due to
deficiencies in internal factors. Risk management is looking at the target company holistically
and forecasting risks that may be associated with the transaction.
4. Validate the information collected

After completing the risk assessment step, the next step in the due diligence process is to verify
and validate all the information that has been procured. the buyer examines the information
collected to ensure proper business practices as well as legal and environmental compliances.
This is the major part of due diligence process. Overall, the buyer gains a better understanding
of the firm as a whole and can better appraise long term value.
5. Record the process (Due Diligence Report)

One should maintain a record through the due diligence process. The record should include all
relevant assessments and documents. This record will later enable an entity to calculate the
return on investments.

Areas of Focus in a Due Diligence Report
• Viability: Accessing the viability of the target company can be done through a
thorough study of the company’s business and financial plans.
• Monetary Aspect: Key financial data and a ratio analysis would be necessary to
understand the complete picture
• Environment: No business operates in isolation. Hence, it is necessary to look into the

macro environment and its impact on the target company.
• Personnel: A very important factor to consider is the capability and credibility of the
people who are operating the company.
• Existing & Potential Liabilities: Any kind of pending litigations and regulatory issues
should be taken into account.
• Technology: A very important factor to consider is the assessment of the technology

available with the company. Such an assessment is necessary as it helps decide future
actions.
• Effect of synergy: Creation of synergy between the target company and the existing
company serves as a tool for decision making.
Challenges of Due Diligence
➢ The due diligence gives a superficial understanding of the target company to the
acquiring company. As a result of which the businesses may not always succeed.
➢ The workforce, the competencies and the work culture remain a mystery to the
acquiring company which are quintessential to a smooth running.
➢ Due diligence is a process which is judgement driven and this can pose a risk.
➢ The process is not often smooth due to one major hurdle which is the availability of
information.
➢ The target company is in a constant fear that the existing customers may leave due to
the impending sale and these customers would not want any contact with them.
➢ The confidential nature of transactions also serves as an impediment.

MERGER INTEGRATION
Post-merger integration or PMI is a complex process of combining and rearranging

businesses to materialize potential efficiencies and synergies that usually motivate mergers and
acquisitions. The PMI is a critical aspect of mergers; it involves combining the original socio-
technical systems of the merging organizations into one newly combined system.
The goal of post-merger integration is to plan and execute the integration of two businesses.
Within each business, there is an organization and there are many processes, which are to be
aligned and/or integrated.
OBJECTIVES OF THE MERGER INTEGRATION
 Maximize likelihood of integration success: each merger integration tries to reach

successful completion meaning that there is no failure of the integration.
 Continue target operations: in most cases, it is important to not interrupt the target
operations with merger integration activities.
 Fit integration type: there are different ways to integrate two companies, which are
determined in the integration strategy.
 Fulfill synergy objectives: every merger has synergy expectations and objectives.
Merger integration is targeted at creating such synergies.
MERGER INTEGRATION PROCESS
M&A integration or Post-merger integration (PMI) is the process of bringing two or more
companies together with the aim of maximizing synergies to ensure that the deal lives up to its
predicted value. Mergers and acquisitions-well conceived and properly executed-can deliver
greater value .

Factors considered in Merger Integration
The following points are the key points to consider when determining strategy for the
combined entity.
1. The integration strategy must be in place before the acquisition is finalized.

2. Review each of the business unit for potential cost cutting/ synergies or potential
assets disposals.
3. Consider the effects on the workforce and determine how many; if any
redundancies are likely and what the cost will be.
4. Risk diversification may well lower the cost of capital and therefore increase
the value of the entity.
5. The entity’s cost of capital should be revalued.

6. Make a positive effort to communicate the post-acquisition intentions within the

entity to prevent demotivation and avoid adverse post acquisition effects on
staff morale.
7. There may be economies of scale to identify and evaluate.
HUMAN RESOURCE MANAGEMENT ISSUES DURING INTEGRATION
1. Changing the Board of Directors
Board of Directors may have to be revamped to align directorial

expertise with the emerging needs of the post-merger business. The new board should be
change leaders so that they can carry out the change process dictated by the merger. It
could be inspirational for the rest of the organization. This is particularly so where the
merging partners had experienced performance problems, which triggered the merger.
2. The senior job to be done
In all integration types, there will be rival claims for senior executive
positions such as the chairman, CEO, heads of divisions, heads of functions such as
R&D etc, if both merging firms had these positions prior to the merger. The choice of
merger will be jeopardized.
3. Key people retention
A merger is also a time when firm’s competitors attempt to capitalize of the

uncertainty and lure away the “stars” as happened in many investment banks undergoing
mergers. For retention of star employees special bonuses and stock options were given.
All probably already wealthy, may be tempted to stay not with offers of more wealth but
with positions of power and prestige that reflect their merit.

4. Aligning performance measurement and reward systems
Where the merger firms have different approaches to measuring and

rewarding performance, attempts to align the evaluation and incentive systems may evoke
hostile responses from the staff adversely affected by between two firms and altering the
balance to introduce more pay-to- performance sensitivity may endanger resentment and
resistance. However, changing the performance evaluation and reward systems may be a
necessary element in evolving a new culture because of their power to motivate staff and
influence their behaviour.
5. Managing conflicting expectations
Mergers are characterized by exceptional ambiguity. The expectation of

outside stakeholders and the stock market analyst may differ from those of internal
stakeholders such as top management and employees. Expectations may also differ as to
the time scale for delivery of merger benefits and this divergence generates additional
pressure on integration process. Realistic mapping of expected benefits and integration
timetable is as important in managing these pressures as credible communication strategies
to keep the external stakeholders on board.
6. Headcount Reduction/ Job security
Process in which the number of employees at a specific organization are reduced due
to a change in circumstances. When two or more organizations come together, culture clash is
inevitable. Rarely do two organizations have the same culture. As these groups get to know
each other there will inevitably be conflict and perceived or real losses on both sides.
Employees may fear losing their jobs or losing opportunities that they formerly had. This fear
can negatively impact productivity and may even result in employees leaving the company to
seek jobs elsewhere. It is important for organizations and their managers and HR staff to
recognize this and to provide opportunities for employees to get to know each other, to openly
address concerns, and to work together toward the creation of a new culture that will merge the
best of both worlds.

7. Cultural Shock
Culture clash can hurt employee and bring down the value of mergers and acquisition. In a
culture clash, the companies’ fundamental ways of working are so different and so easily
misinterpreted that people feel frustrated and anxious, leading to demoralization and
defections. In most M&A cases, a very valuable (if not the most valuable) part of the deal is
the employees themselves. Their knowledge and skills are an asset that the organization feels
it can benefit from. So, when the leaders involved aren’t doing everything they can to preserve
those employees, they risk losing a lot of the value they expected to gain from the deal.

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Mergers, Acquisition & Corporate Restructuring 20MBAFM404

MERGERS, ACQUISITIONS & CORPORATE RESTRUCTURING

Semester: IV Course Code: 20MBAFM404 Teaching Hours / week (L:T:P): 3-0-0

Credits : 03 CIE Marks: 40 SEE Marks: 60 Exam Hours:03

UNIT 1: Introduction of M & A Meaning-types of mergers–Merger Motives Theories of

MERGERS AND ACQUISITIONS (M&A): MEANING

Mergers and acquisitions (M&A)

Rajimol KP, Assistant Professor, MBA Dept 1

1. To create a more cost-efficient operation

REASONS FOR MERGERS AND ACQUISITIONS

• Financial synergy for lower cost of capital

• Improving company’s performance and accelerate growth

• Diversification for higher growth products or markets

Rajimol KP, Assistant Professor, MBA Dept 2

• To increase market share and positioning giving broader market access

• Strategic realignment and technological change

 Deployment of surplus funds  Fund raising capacity  Market capitalization  Tax

Rajimol KP, Assistant Professor, MBA Dept 3

 Superior management  Ego satisfaction  Retention of managerial talent  Removal of

1. Amalgamation: Ordinarily amalgamation means merger. Amalgamation is used when

Rajimol KP, Assistant Professor, MBA Dept 4

Rajimol KP, Assistant Professor, MBA Dept 5

This involves two firms

1. Elimination or reduction in competition

Rajimol KP, Assistant Professor, MBA Dept 6

This occurs between firms in different

Vertical Backward Integration – Buying a supplier. IBM’s acquisition of Daksh

Rajimol KP, Assistant Professor, MBA Dept 7

1. Low buying cost of materials

3 Types of Conglomerate mergers:

Rajimol KP, Assistant Professor, MBA Dept 9

Rajimol KP, Assistant Professor, MBA Dept 10

A. Differential managerial efficiency

E. Strategic realignment to changing environments

II. Information and signalling

III. Agency problems and managerialism

IV. Free cash flow hypothesis

Rajimol KP, Assistant Professor, MBA Dept 11

Synergy refers to the type of reaction that occur when two

The impact of a corporate merger or acquisition on the

Rajimol KP, Assistant Professor, MBA Dept 12

This theory assumes that economies of scale do

Diversification of firm has different folds. First, in

Rajimol KP, Assistant Professor, MBA Dept 13

5. Strategic Realignment to Changing Environments

7. Information & signalling

Rajimol KP, Assistant Professor, MBA Dept 14

8. Agency problems and managerialism

Rajimol KP, Assistant Professor, MBA Dept 15

Rajimol KP, Assistant Professor, MBA Dept 16

balanced factor proportions between industry-specific and firm-specific resources by

Reasons for failures of M & A

Reasons Behind the Failure Of M&A Deals

Rajimol KP, Assistant Professor, MBA Dept 17

INDUSTRY LIFECYCLE PHASE AND M&A

Rajimol KP, Assistant Professor, MBA Dept 18

INDUSTRY LIFE CYCLE ANALYSIS

Rajimol KP, Assistant Professor, MBA Dept 19

Stage of Industry Types of Mergers

Maturity To achieve Economies of scale in research, production and marketing in