contribution of mergers and takeovers in indian economy

8/11/2019 Contribution of Mergers and Takeovers in Indian Economy

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SUBMITTED TO:

Dr. Ranjan Upadhyay

FMS (WISDOM)

SUBMITTED BY:

Aakansha Agarwal(7132)

Arti Surtaniya(7155)

Jyoti Yadav(7193)

MBA 3rdsem


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INTRODUCTION OF MERGER

TYPES OF MERGER

STRATEGIC PLANNING

ACQUISITIONS & TAKEOVERSMERGER & ACQUISITION DEALS

CONTRIBUTION OF MERGER &

TAKEOVER

FIVE STAGES OF MERGER

MERGERS IN INDIA

ADVANTAGES

DISADVANTAGES

CONCLUSION


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whereby at least two companies combine to

form one single company .

one corporation survives and the merged

corporations go out of business.A subsidiary mergeris a merger of two

companies where the target company becomes

a subsidiary or part of a subsidiary of the

parent company.+ =

X Y+ = XExample

X Y Z

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Horizontal Mergers

- between competing companies

Vertical Mergers

- Between buyer-seller relation-ship

companies

Conglomerate Mergers-Neither competitors nor buyer-seller

relationship

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It is a management tool period.

To help any organization do a better job.

To ensure that members of the organization

are working toward the same goals.

To assess and adjust the organization'sdirection in response to a changing

environment.

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An act of acquiring effective control by one

company over assets or management of another

company.

Two or more companies may remain independent. Separate legal entities.

When an acquisition is 'forced' or 'unwilling', it is

called a takeover.

When managements of acquiring and targetcompanies mutually agree for the takeover, it is

called acquisition or friendly takeover.

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USD 12.1 billionTata Steel buys Corus Plc

USD 6 billionHindalco acquired Novelis Inc.

USD 730 million

Videocon Industries acquired

Daewoo Electronics CorporationLimited

USD 11 billionVodafone buys Hutch

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Merger and Acquisitions have evolved in

five stages .

They are triggered by economic factors.The macroeconomic environment, which

includes the growth in GDP, interest rates

and monetary policies play a key role in

designing the process of mergers oracquisitions.

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First Wave Mergers.

Second Wave Mergers.

Third Wave Mergers.

Fourth Wave Mergers.

Fifth Wave Mergers.

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The first wave mergers commenced from 1897 to1904.

During this phase merged companies enjoyedmonopoly over their lines of production.

The first wave mergers were mostly horizontalmergers.

End Of 1st Wave Merger

The 1st phase ended in failure since they could notachieve the desired efficiency.

The failure was fuelled by the slowdown of theeconomy.

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The second wave mergers took place from

1916 to 1929.

It focused on the mergers between

oligopolies, rather than monopolies . Technological developments provided the

necessary infrastructure.

They were mainly horizontal or conglomerate

in nature. End Of 2nd Wave Mergers

They ended with the stock market crash in

1929 and the great depression.

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The mergers that took place during thisperiod (1965-69) were mainly conglomeratemergers.

Mergers were inspired by high stock prices &interest rates.

End Of The 3rd Wave Merger

The 3rd wave merger ended with the plan tosplit conglomerates in 1968.

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The 4th wave merger started from 1981 and

ended by 1989.

Mergers took place between the oil and gasindustries, pharmaceutical industries,

banking and airline industries.

They ended with anti takeover laws,

Financial Institutions Reform and the GulfWar.

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The 5th Wave Merger (1992-2000) was

inspired by globalization, stock market boom

and deregulation. It took place mainly in the banking and

telecommunications industries.

The 5th Wave Merger ended with the burst

in the stock market bubble.

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From 1991 to date, mergers are not regulated

from a competition perspective.

The Asian Development Outlook 2005mentions the impact of M&As in India.

It indicates for exampleCoca Cola re-

entered the Indian market in 1993 byacquiring Parle.

Pepsi gained a major market presence by

acquiring Duke in 1988.

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HLL has succeeded in enhancing its marketshare through a process of Mergers

/Acquisitions

Product 1992-93 1997-98

Ice Cream 0.00 74.06Sauces,ketchups,jams 0.00 63.54Dental hygiene product 11.20 41.56

Soaps 19.66 26.01Synthetic detergents 33.12 46.72Vanaspati 0.85 13.90

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Revival in deal activity in the country.

More than double the transactions in first five

months as compared to same period last year.

Jan May 10 Jan May 09

No of deals 439 179

Value of deals USD 30 bn USD 8 bn

Rebound linked to recovery of Indian and globaleconomy.

Active sectors Telecom, Pharma, Cement, FMCG.

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Expansion and growthTax Benefits

Financial Synergy

Creating value to stakeholders

Risk reduction

Balancing product cycle

Gain in market share

Increasing EPSGaining cost efficiency

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Costs of mergers and takeovers

Legal expenses

Short-term opportunity cost

Intangible costsPotentially lowered industry innovation

Decline in equity pricing and investment

value

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Two companies are more valuable,

profitable than individual companies.

The shareholder value is also over and above

that of the sum of the two companies.

M&As continue to be an important tool

behind growth of a company.

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The list of past and anticipated mergers covers every

size and variety of business.

The basic reason is:

To achieve economies of scale,

Widen their reach,

Acquire strategic skills, andGain competitive advantage.

Therefore, it is right time for business houses and

corporate to watch the Indian market, and grab the

opportunity.

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contribution of mergers and takeovers in indian economy

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