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Jivjot Singh WHAT IS M&A? TYPES OF MERGERS Difference between m&a Public Announcement
Doing the deal
Closing the Deal Mergers and acquisitions is an aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other child entity or using a joint venture. Horizontal Merger
Conglomerate Merger Merger is considered to be a process when two or more companies come together to expand their business operations. In such a case the deal gets finalized on friendly terms and both the companies share equal profits in the newly created entity PROCESS OF M&A Mergers & Acquisitions When one company takes over the other and rules all its business operations, it is known as acquisitions. In this process of restructuring, one company overpowers the other company and the decision is mainly taken during downturns in economy or during declining profit margins. 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 Co-generic Merger 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. This is just a unification of businesses from different verticals under one flagship enterprise or firm. 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. Horizontal 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. Vertical Merger DEMERGER Demerger is a form of corporate restructuring in which the entity's business operations are segregated into one or more components.It is the converse of a merger or acquisition. Types of Demergers Sell Offs
Equity Carve Outs
Tracking Stock PURPOSE OF M&A Procurement of supplies
Revamping production facilities
Market expansion and strategy
Own developmental plans
Desired level of integration ADVANTAGES OF M&A Enhanced Performance and Cost Efficiency
Maintain the Competitive Edge
Strengthens the business network by improving market reach Related concepts Amalgamation Amalgamation is an arrangement where two or more companies consolidate their business to form a new firm, or become a subsidiary of any one of the company. For practical purposes, the terms amalgamation and merger are used interchangeably Intro To Organizations State Bank Of India SBI is one of India’s top banks with the largest branch network and asset base.
In 1921, the three presidency banks(Calcutta, Bombay and Madras) were merged to form the Imperial Bank of India.
SBI came into being as a successor to the it on Jul 1, 1955, with the passing of the SBI Act by Parliament.
SBI (Subsidiary Banks) Act was passed in 1959, enabling SBI to take over eight former State-associated banks as its subsidiaries.
The GoI through RBI is the principal shareholder of SBI, holding 59.7% of the equity capital. State Bank of Indore SB Indore, an associate of SBI, has strong presence in MP State Bank of Indore (SB Indore) was founded by the Maharaja of the former Indore state as Bank of Indore Ltd.
In 1960, it became an associate bank of SBI and acquired its present name.
SB Indore acquired the business of Bank of Dewas Ltd in 1962 and Dewas Senior Bank Ltd in 1965.
SB Indore was merged into SBI in 2010. State Bank Of Patiala State Bank of Patiala (SB Patiala) was founded in 1917 as Patiala State Bank by Bhupinder Singh, Maharaja of the princely state of Patiala of undivided India.
After India’s independence, the bank was made a wholly owned subsidiary of the government of Punjab.
In 1948, the bank was reorganised and brought under the control of the RBI. Its name was also changed to Bank of Patiala.
On Apr 1, 1960, SB Patiala was accorded the status of an associate bank of the State Bank Group and acquired its present name. Analysis Of Data The aggregate value for all the realizable assets is reduced by the aggregate value of all liabilities (including contingent liabilities not provided for in the accounts) to arrive at the Net Worth of the concern. The net worth represents the aggregate value available for distribution amongst all shareholders and is indicative of the assets backing available for shareholders fund. Net Assets Value
Method Profit Earning Capacity
Method Market Price Net Asset Value This Method is only applicable when the concerned companies are listed in a known stock exchanges when either of the concerned companies is unlisted this method is not applicable. Market Price This method considers the earning potential of the business as a measure of its value.
The estimation of earnings potential is generally made having regard to the trend of earnings in recent years with suitable adjustment for extra –ordinary items.
The estimated earnings are capitalized at the rate reflecting the expectations of the return for risk and enterprise, which in the valuer’s perception is reasonable for the concern.
This method is generally more appropriate for a Going Concern since it is based on an estimate of the continuing strength of earning from an on going business.
This method gives an indication as to how much should be invested in order to earn a particular amount of profit. Price Earning Capacity CASE B/W SBIN & SBI STATE BANK OF INDORE AS ON MARCH 2009 PROFIT EARNING CAPACITY METHOD
A Total Shares 17500000
Average of past years = 2443169500
Capitalisation Rate (in %) = 8
B Capitalisation (Average/Capitalisation rate) = 30539618750
Yield Per share(B/A) 1745.121071 FAIR VALUE FAIR VALUE = -10949.38198 STATE BANK OF INDIA AS ON MARCH 2009 PROFIT EARNING CAPACITY METHOD A Total Shares 634880000 Average of past years=68935825000
Capitalisation Rate(in %)= 8
B Capitalisation (Average/ Capitalisation rate )= 861697812500
Yield Per share (B/A) 1357.260919 FAIR VALUE FAIR VALUE = -3633.47734 CASE B/W SBOP & SBI STATE BANK OF Patiala AS ON MARCH 2012 FAIR VALUE FAIR VALUE = - 111.3127542 STATE BANK OF INDIA AS ON MARCH 2012 PROFIT EARNING CAPACITY METHOD
A Total Shares 671040000 FAIR VALUE FAIR VALUE = - 3553.114708 PROFIT EARNING CAPACITY METHOD
A Total Shares = 294750000
Average of past years =6745460500
Capitalisation Rate(in %)= 8
B Capitalisation(Average/Capitalisation rate)=84318256250
Yield Per share(B/A)= 286.0670271 Average of past years =100435025000.00
Capitalisation Rate(in %)= 8
B Capitalisation(average/ Capitalisation rate) = 1255437812500.00
Yield Per share(B/A) 1870.883722 SWAP RATIOS Earnings per share is not the only determining factor for calculating worthiness of the firm.
Contingent Liability take a major role in evaluation of firms. Conclusion