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    Mergers & Aqcusition

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    Deepa
    Mergers and acquisitions often fail to create value for shareholders. Foreign banks were prevented from acquiring stakes in Indian banks in 2006, which helped local banks avoid collapse during the global financial crisis. Cultural differences between merging companies can also lead to failures, as seen when Quaker Oats acquired Snapple. Overpaying for targets due to bullish stock markets can destroy shareholder wealth, as demonstrated by Tata Steel's acquisition of Corus Steel. Most mergers and acquisitions end up disappointing shareholders, with 40-80% destroying value.

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    Mergers & Aqcusition

    Uploaded by

    Deepa
    149 views34 pages
    Mergers and acquisitions often fail to create value for shareholders. Foreign banks were prevented from acquiring stakes in Indian banks in 2006, which helped local banks avoid collapse during the global financial crisis. Cultural differences between merging companies can also lead to failures, as seen when Quaker Oats acquired Snapple. Overpaying for targets due to bullish stock markets can destroy shareholder wealth, as demonstrated by Tata Steel's acquisition of Corus Steel. Most mergers and acquisitions end up disappointing shareholders, with 40-80% destroying value.

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    M & A is a Survival Technique not a Growth Strategy

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    Mergers and acquisitions often fail to create value for shareholders. Foreign banks were prevented from acquiring stakes in Indian banks in 2006, which helped local banks avoid collapse during the global financial crisis. Cultural differences between merging companies can also lead to failures, as seen when Quaker Oats acquired Snapple. Overpaying for targets due to bullish stock markets can destroy shareholder wealth, as demonstrated by Tata Steel's acquisition of Corus Steel. Most mergers and acquisitions end up disappointing shareholders, with 40-80% destroying value.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX or read online from Scribd
    Download as pptx
    149 views34 pages

    Mergers & Aqcusition

    Uploaded by

    Deepa
    Mergers and acquisitions often fail to create value for shareholders. Foreign banks were prevented from acquiring stakes in Indian banks in 2006, which helped local banks avoid collapse during the global financial crisis. Cultural differences between merging companies can also lead to failures, as seen when Quaker Oats acquired Snapple. Overpaying for targets due to bullish stock markets can destroy shareholder wealth, as demonstrated by Tata Steel's acquisition of Corus Steel. Most mergers and acquisitions end up disappointing shareholders, with 40-80% destroying value.

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    Attribution Non-Commercial (BY-NC)
    Download as PPTX or read online from Scribd
    Download as pptx
    of 34

    MERGERS & AQCUSITION

    In 2006
     Left Parties and Opposition together Prevented
    Congress to Pass Banking ,Insurance and
    Pension fund reforms in Parliament.

     As a result companies like AIG, CitiGroup,
    Merrill lynch, Lehman Brothers, Bear Sterns,
    Bank of America, Wachovia, RBS and many
    others were restrained to acquire stakes in
    Indian banks and Insurance Companies.

    Foreign banks had been allowed to
    take over 74 %
    • If foreign banks had been allowed to take over 74 per
    cent interest in Indian banks, our banks would have
    collapsed.
    •
    • If pension funds had been privatized, crores of
    employees would have been ruined.
    •
    • Similarly, if the insurance cap had gone up to 49 per
    cent, the collapse of American Insurance Group
    (AIG) would have made Tata-AIG far more
    vulnerable.


    Bank Collapse
    NOW, WE WILL ANALYSIS THE VARIOUS
    REASONS WHY MERGERS AND ACQUISITION
    FAILS BIG TIME.
    Bullish Stock Market

    Leads to Over Valuation


    TATA & CORUS
    5th largest steel producer in the
    •

    world
    TATA & CORUS

    •A premium of 68.7% on Corus’s share price of 360.5 pence


    •The deal size implies a multiple of 7-9 times that of EBITDA
    •Tata Steel’s share price declined by 11.35%.
    HIN
    DA
    LC
    O
    &
    NO
    VE
    LIS The deal involved
    •
    transaction of $5,982
    million
    Quaker Oats
    & Snapple Beverage Co
    Cultural Difference
     In the year 1994, Quaker Oats purchased Snapple
    Beverage Co. for a total cost of $1.7 billion
    DIFFERENCE IN WORKING
    CULTURE
    “us versus them"

    U T
    D O
    O L
    S
    DAIMLER & CHRYSLER
    WORTH $37 billion
    •
    IN 2007

    deal wort h only 21.5%


    $7.4 billion
    total acquisition value!
    A
    R 100
    •


    Cmillion  L. N. Mittal became……..

    ELtonne
    Osteel
    R
    MI
    TT
    AL
    But does that mean it has
    added value to Mittal Steel’s
    stakeholders’ wealth?
    ARCELOR MITTAL
     net income in billion dollars

    $2.9 billion

    $2.3 billion
    ARCELOR MITTAL
     Earnings per Share
    ARCELOR MITTAL
     P/E Ratio

     Vodafone paid a smashing $190 billion
    for Germany’s Mannesmann.

     Biggest operator in the whole of
    Europe.
    Vod •

    afon
    e-
    man
    nes
    man
    n
     World’s fourth
    largest company
    overnight.
     Combined entity
    was valued at
    $365billion.

    $365billion
     OnJuly 24, 2008
    • $203.6 billion, a fall of 53%!
    •

    • Vodafone has become the


    • biggest loss making company
    • ever in the history of mankind!
    • The loss: $86 billion!
    •
    Citi stock prices have
    tumbled by 25%!
     $140 billion merger
    TI
    M
    E
    W
    A
    R Richard Parsons oversaw the brilliant
    N supernova of a merger between
    Time and AOL.
    ER
    Time-Warner
     The companies had a combined value
    of $247 billion at the time of the deal.


     Today, the combined entity is worth a
    mind numbingly low $58 billion.
    Alcatel-Lucent
     At the time of the merger of Alcatel and
    Lucent, the entity had a share price of
    $15.4 (March 31, 2006).

     July 24, 2008, the price is $6.09

     Patricia Russo, CEO Alcatel-Lucent, has a
    history of destroying shareholder
    wealth.

    Skype & ebay
    eBay - Skype
    CEO Meg Whitman,

    who ensured eBay
    bought Skype.
     Also ensured eBay’s
    price fell from
    close to
    •$40 Sep 9, 2005

    • $25 Jul 24, 2008



    MURDERS & AQCUSITION
    value on the stock market
    deteriorates
     Studies reveal that approximately 40% to 80% of
    mergers and acquisitions prove to be
    disappointing. The reason is that their value on
    the stock market deteriorates afterwards.

    Erode shareholders wealth
     According to J. Thunuguntla, Head
    (Equity) at NexGen Capital,
     “Around 70-80% M&As still erode
    shareholders wealth .

    Thank you

    Questions please????
    •

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