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MERGERS AND ACQUISITIONS

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Priya Jain

on 12 April 2015

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Transcript of MERGERS AND ACQUISITIONS

Mergers
Why Mergers and Acquisitions ?
Types of Mergers & Acquisitions
Horizontal Merger
This kind of merger exists between two companies who compete in the same industry segment. The two companies combine their operations and gains strength in terms of improved performance, increased capital, and enhanced profits. This kind substantially reduces the number of competitors in the segment and gives a higher edge over competition.
Lakshay Goyal

Priya Jain

Kanika Kansal

Shreya Aggarwal
MERGERS AND ACQUISITIONS
Acquisitions
A corporate action in which a company buys most of the target company's ownership stakes in order to assume control of the target firm.
The combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for surrender of their stock
Vertical Merger
Vertical merger is a kind in which two or more companies in the same industry but in different fields combine together in business. In this form, the companies in merger decide to combine all the operations and productions under one shelter. It is like encompassing all the requirements and products of a single industry segment.
Co-Generic Merger
Co-generic merger is a kind in which two or more companies in association are some way or the other related to the production processes, business markets, or basic required technologies. It includes the extension of the product line or acquiring components that are all the way required in the daily operations
Conglomerate Merger
Conglomerate merger is a kind of venture in which two or more companies belonging to different industrial sectors combine their operations. All the merged companies are no way related to their kind of business and product line rather their operations overlap that of each other.
Accelerating a company's growth
Entering in new products/markets
Enhancing profitability
Economies of scale
Operating economies
Synergies
Diversifying the risks of the company
Financial synergy and benefits for the firm
By eliminating financial constraints
By enhancing debt capacity
By lowering the financial costs
Financing
M&A deals
Stock
Bond
Cash
Purchasing corporation buys a certain amount of assets or stocks from the target company by paying a certain amount of cash.
The purchasing company issues new stocks to buy the stocks or assets of the target company.
Impact of Mergers and Acquisitions
Differences
Lafarge and Holcim
The purchasing company issues new corporate bonds to buy the stocks or assets of the target company.
Background
LafargeHolcim is the name of the company that would be formed from the merger of cement companies Holcim (Switzerland based) and Lafarge (Paris based). The deal has been seen as Merger of Equals and Merged company is to base in Switzerland. Lafarge Chief Executive Officer Bruno Lafont will lead the new company, while Holcim's Wolfgang Reitzle will be chairman.
Reason and Impact
. With a combined market value exceeding $55 billion, the merger is the second largest announced in 2014 worldwide. They have Best-in-class professional teams and ability to develop the entire value chain and are shifting towards ecofriendly plants. All in all, through savings in procurement, operation, finance, marketing and innovation deployed on larger scale, LafargeHolcim is expected to make synergy benefit of $ 1.7 Bn annually.
Arcelor and Mittal
Background
Sun Pharma and Ranbaxy
ArcelorMittal is a multinational steel manufacturing corporation headquartered in Luxembourg. ArcelorMittal was created by the takeover of Western European steel maker Arcelor (by Indian-owned multinational steel maker Mittal Steel in 2006, at a cost of €40.37 per share, approximately $33 billion total. Mittal Steel launched a hostile takeover bid and The resulting merged business was named ArcelorMittal.
Type of merger
Horizontal Merger
Facts
ArcelorMittal is the world's largest steel producer, with an annual crude steel production of 93.6 million tones as of 2012. The resulting firm produced approximately 10% of the world's steel, It is ranked 91st in the 2013 Fortune Global 500 ranking of the world's biggest corporations.
Nokia and Microsoft
Microsoft took over Nokia's Devices and Services business, which includes both SmartDevices and Mobile DevicesDesign teams, supply chain, accessories, employees, developer relations and most of Nokia's manufacturing plants and testing facilities. for an estimated $ 7.2 billion.
Background
Type
Vertical Integration
Impact
Microsoft can now work on both firmware and hardware from day one, theoretically making the process of developing, manufacturing and distributing a new phone or tablet much more efficient. This deal has enabled Microsoft to not only remain a software giant but also make tremendous progress in hardware also.
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Thank
you
Facebook and WhatsApp
Tata and Jaguar Land Rover
Facebook will pay $4 billion in cash and $12 billion worth of Facebook stock, with an additional $3 billion in restricted stock units granted to WhatsApp employees and its founders, which would vest over the next four years and raise the cost of the deal to $19 billion.
Deal
Type
Co-generic merger
Impact
WhatsApp lets people share messages in a way that’s familiar to first-time feature phone and smartphone users — something Facebook can’t boast. Facebook’s product portfolio is becoming vast, full of competing services and apps
Background
Sun Pharma acquired the entire 63.4% share of Ranbaxy making the conglomerate world’s fifth largest specialty generic pharma company for $ 4 bn. Shareholders of Ranbaxy, will receive 0.8 share of Sun Pharmaceutical for each share of Ranbaxy. The combination of Sun Pharma and Ranbaxy creates the fifth-largest specialty generics company in the world and the largest pharmaceutical company in India. Ranbaxy will be merged with Sun Pharma by means of a share swap in which Sun Pharma is the surviving company and Ranbaxy is the company to be absorbed.
Deal
2.3 million $
Type
Horizontal Merger
Reason and Impact
Sun Pharma become India’s largest drug maker, the transaction also means a significant relief for Japan’s Daiichi-Sankyo, which has been struggling with Ranbaxy’s manufacturing and quality-related issues in the US. Ranbaxy and Sun Pharma will have operations in 65 countries, 47 manufacturing facilities across
five continents, and a significant platform ofspecialty and generic products marketed globally, including 629
generic drug applications. Their combined revenue is estimated at $4.2 billion.

Reasons
Long term strategic commitment to automobile sector
Increased business diversity
Offers a range of luxury vehicles to broaden the portfolio
Benefits from component sourcing, design services and low cost engineering
Mergers
Acquisitions
Flipkart and Myntra
Deal
2000 Crore
Reasons
This acquisition was to help the flipkart in creating an entity with annual sales of rs1.5 billion and also to help it in competing with its offline competitors like future group, aditya birla and reliance and its online competiotors like amazon. The deal was influenced by Tiger Global and Accel Partners. Since myntra was mainly dealing in fashion e-tailing, it can also help the flipkart in becoming one of the best player in fashion e-tailing.
The case when two companies (often of same size) decide to move forward as a single new company instead of operating business separately.
The case when one company takes over another and establishes itself as the new owner of the business.
In cases where two companies are merged the stocks of both the firms are surrendered and fresh stocks are then issued.
When a company is acquired, the stock from the acquiring party is transferred in the name of the acquirer.
When two companies merge, it is on the basis of mutual agreement and consent
In case of an acquisition, the takeover act could be either friendly or hostile.
Big Buy History
Twitter and Zipdial
Deal
$ 30 Million
Reasons
The main reasons for this acquisition was to enable twitter to reach out to users with feature phones or errstic mobile data connectivity bringing on demand alerts when users make missed calls, hence to help twitter in bridging the gap between offline and online world.
Companies' Background
Employees
lay-offs
Management
clash of egos
variations in culture
Shareholders of acquiring firm
Shareholders of acquired firm
ZipDial offers services like missed calls for user verification, alerts and other use cases
Twitter is a free social networking microblogging service that allows registered members to broadcast short posts called tweets. Twitter members can broadcast tweets and follow other users' tweets by using multiple platforms and devices.
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