acquisition, takeovers

7/29/2019 Acquisition, Takeovers

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Acquisition, Takeovers

With Contemporary

Cases


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CONTENTS

Introduction

Acquisitions Takeovers

Comparison

Spectrum


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INTRODUCTION

Corporate Restructuring

Acquisition

Mergers

Purchase of a unit or plant

Takeovers

Divestitures

Sell offs

Demergers

Equity Carve outs

Other Forms

Going private

Leveraged Buy outs

Privatization


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ACQUISITION

Definition :

An acquisition is the purchase of one company by

another company. Consolidation is when two companiescombine together to form a new company altogether. Anacquisition may be private or public, depending onwhether the acquiree or merging company is or isn't

listed in public markets.


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TAKEOVER

Definition :

A corporate action where an acquiring companymakes a bid for an acquiree. If the targetcompany is publicly traded, the acquiringcompany will make an offer for the outstanding

shares.


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TYPES OF TAKEOVERS

Friendly Takeovers

The acquisition of a target company that iswilling to be taken over.

Hostile Takeovers

A takeover in which the target has no desire tobe acquired and actively rebuffs the acquirer andrefuses to provide any confidential information.


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COMPARISONAcquisition Takeovers

It is Friendly.

Acquisition is broader term.

Here acquisition of assets andliabilities is involved.

Involves acquisition of entire

stake in the equity capital ofthe company.

It is Hostile.

Takeover is a subset ofAcquisition

Based on the outstandingstake in the market.

Involves acquisition of certain

stake in the equity capital ofthe company.


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Problems inAchieving Success

Integration

difficulties

Inadequateevaluation of target

Too muchdiversification

Large or

extraordinary debt

Inability toachieve synergy

Managers overlyfocused on acquisitions

Too large

Increased

market power

Overcomeentry barriers

Lower risk

compared to developingnew products

Cost of new

product development

Increased speedto market

Increaseddiversification

Avoid excessivecompetition

Acquisitions

Reasons forAcquisitions


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TATA STEEL ACQUIRES CORUS- A

CASE STUDY


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An Introduction

TATA Steel was formed in 1907 and started itsoperation in 1912

Corus was formed on 6th Oct 1999 by merging oftwo companies Koninklijke Hoogovensand British Steel

Corus is four times bigger than Tata but in theyear 2006 the operating profit for Tata was$840 million, whereas in case of Corus it was$860 million


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Continued

The deal, which creates the world's fifth-largeststeelmaker, is India's largest ever foreign

takeover Corus was involved in a number of deals before

TATA ie 14 deals In 2005, when the deal was started the price per

share was 455 pence. But during the time ofacquisition held in 2007, the price per share was608 pence, which is 33.6% higher than the firstoffer.


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The Deal

Corus had been facing financial fluctuations since 1996-2005

The acquisition process started in 2005 and ended on 2ndApr 2007 at $12 billion

As stated by Tata, the initial motive behind the completionof the deal was not Corus revenue size, but rather itsmarket value

January 31, 2007 : Britain's Takeover Panel announces in

an e-mailed statement that after an auction Tata Steel hadagreed to offer Corus investors 608 pence per share in cash

April 2, 2007 : Tata Steel manages to win the acquisition toCSN and has the full voting support form Corusshareholders


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Post Acquisition TATA Tata Steel has formed a seven-member integration

committee to spearhead its union with Corus group

Head of the company- Ratan Tata along with 3members from both TATA Steel and Corus each

The day after the acquisition was officiallyannounced, Tata Steels share fell by 10.7 percent on

the Bombay stock market Tata has managed to acquire a British steel makerthat has been a symbol of Britains industrial powerand at the same time its dominion over India hasbeen perceived as quite ironic


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BenefitsTo Tata Steel: Tata Steel will leapfrog from the fifty-sixth largest steel

producer in the world to the fifth position.

The company will have better geographical mix. Tata steel willhave access to 40 countries across the globe, transforming itinto a major global player from a domestic player.It will also achieve access to high-developed markets andpremium customer base.

There will be a transfer, from Europe to India, of technology,and expertise, research and development capabilities in theautomotive, packaging and construction sectors, increasedprocurement knowledge and in effect, a better bargainingpower.


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