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SANDEEP ARORAGURGAONTRANSCRIPT
A PROJECT REPORT
ON
“Comparative Evaluation Strategies in Mergers and Acquisitions”
PROJECT GUIDE
SUBMITTED BY:SANDEEP ARORA
NARSEE MONJEE INSTITUTE OF MANAGEMENT STUDIES
MUMBAI
Abstract
1
Business Organizations while going for corporate restructuring in the form
of Mergers or Acquisitions do test the water from various perspectives. This
is where arises the importance of conducting an exercise for evaluating
strategies for the project and then a comparison has to be made so that the
interest of the stakeholders of both the entity is not disturbed.
To do the evaluation method of valuing a firm and the impact of merger in
the organization, primary data and analytical discussion was obtained from
KPMG and Mr. Anindo Dutta (C.A). Further analysis of recent mergers was
done to arrive at the conclusion. This thesis is an attempt made to find out
the optimum evaluative strategies used by companies in mergers and
acquisition, which commences from valuing the firm to evaluating the
merged entity.
To do the evaluation the capital budgeting decision has to be done by very
carefully estimating the projected free cash flows. For doing so, one has to
have an in-depth knowledge to forecast the market the merged entity is
entering into. Once this is done then comes the mode of paying the acquired
firm. The optimum strategy for paying the acquired firm will depend upon
the nature of acquisition.
2
Once the payment mode is determined then an evaluation is to be done to
find out whether the brand, the organization culture strategically fits each
other. Then once all these evaluations are done then only the M&A deal
should be finalized, for which, a team has to be formed with representative
comprising from both the corporation.
In Indian Inc M&A activity has grown to unprecedented level and will grow
even further. Companies will merge with each other in and particularly - the
textile, FMCG, IT & BPO sector in India have witnessed maximum business
restructuring for the year 2006. However, with more than half of these deals
fails to deliver their expected results, and so comparison of evaluation
strategies in M&A is central to merger and acquisition decision making.
3
Acknowledgement
I take this opportunity to express my deep sense of gratitude to my thesis
guide Professor Ramakrishna for his valuable guidance, keen interest and
helpful criticism during the course of study.
I express my sincere thanks to Project Guide Ms. Rashmi Sundriyal, for
providing all necessary help during the project work.
SHARMA
4
Table of Contents
Introduction & Literature Review
Mergers and Acquisition: An overview
Background of the Problem
Benefits and Scope of the Research
Problem Context
The Corporate perspective
Case Study
Valuing Synergy
Evaluation Strategies in M&A
Tata Tea ties the knot with Tetley
Recommendation
Recommendation
Conclusion
Implication
5
Bibliography
Appendixes
Synopsis
Thesis Response Sheet
Questionnaires
6
Mergers and Acquisition: An overview
Merger is an inevitable phenomenon of the nature, which is very promptly
reflected in the formation of the universe itself. Even the human race started
with a merger of two cells only and since human civilization started we find
lot many examples where kings, came out from the kingdom and dreamed
about merging other territories to gain strength and power.
Business world has also been not an exceptional from this phenomenon.
Every day we find news from different sectors of industries about mergers
and acquisitions taking place to enhance synergy or to achieve specific
financial goal either in the form of cost saving and economies of scale. At
the same time, it is obvious that there is an increase in access to capital or
believes that undervalued company can be turned around.
However, with more than half of the deals fails to deliver their expected
results, a comparison of evaluation strategies in M&A is central to merger
and acquisition decision making. Each deal is so unique in terms of size,
industry focus, or geographical orientation and the evaluation strategies that
7
there cannot be only one-evaluation strategies, which is uniformly
applicable.
One must see that the deal must deliver the long-term growth and sustained
profitability. Emphasis should be on how the two companies fit together in a
practical or financial sense, and not on whether they could truly combine to
make a whole that was greater than the sum of its parts.
As the world becomes a truly global market place, more and more overseas
mergers take place and India is not an exceptional too. Globalization,
privatization and relaxation of controls have triggered unprecedented
upsurge in cross border M&A by Indian companies. However, the process of
restructuring of Indian industry did not commence immediately after
liberalization. It was the industrial slow down since 1996 to 1998, which
squeezed the profit margins of Indian corporate entities and forced them to
restructure their operations to achieve grater competitiveness
India has acquired 120 foreign companies between 2001-02 for consolidated
amount of $1.6 billion followed by 305 in 2003 worth $4.4 billion, 316
8
overseas acquisitions worth $9.3 billion in 2004 and in 2005 the number has
gone up to 355 acquisitions worth around $11 billion.
The continuing popularity of mergers and acquisitions is probably a
reflection of the wide spread belief that acquisitions provide an easy route to
achieve growth. And when it comes to mergers, unlike traditional organic
growth, it enables companies to radically alter the dynamics of business by
achieving growth, cost savings and competitive advantage.
While conducting a comparison exercise of evaluation strategies in M&A
the following issues should duly be considered:
• Identification of the sources of the firm’s current and future competitive
strengths.
• How sustainable and unique the identified strengths are?
• Will the competitor replicate the strategy followed?
• Will the strategy create shareholder value?
• Various components of corporate governance such as the independence of
the board of directors, the activism of large shareholders.
9
However, to make a merger fully successful one cannot ignore the human
and cultural issues as M&A result in meeting of two autonomous corporate
cultures. When companies are acquired or combined, people almost
immediately start to focus on differences in the companies. Employees
initially perceive the other company’s culture as ‘external influence’ and
frequently reject it. Especially this applies in an acquisition where the
acquiring company see themselves as the winners, and the acquired
company, the losers.
In addition to this when a merger takes place, company employees become
concerned about job security and rumors start flying. Combining two
companies can create interpersonal conflict, role confusion, uncertainty
about change and worry of redundancy.
Another aspect that should duly be considered is that in order to grow and
expand companies must go for M&A in businesses that they understand
well.
Leading corporate houses have undertaken restructuring exercises and M&A
is one of the most effective methods of corporate restructuring. Hence,
M&A has become an integral part of the long-term business strategy of
10
corporate enterprises. Even Indian financial services industry has
recognized the need for corporate restructuring and many
banks in the country are moving in this direction.
However, there is always an argument against convergence,
suggesting that increasing competition, the arrival of the
global companies means in future a handful of global
institutions will dominate. Some felt that the Indian
corporate would become polarized, with global giants at one-
end and niche players at another.[Refer to: M & As in Banking
Industry: A tool for Competitiveness by S.P.R. Vittal]
M&A: A conceptual discussion
Business combination or business restructuring can take in the forms of
mergers, acquisitions, amalgamation and takeovers and all have played an
important role in the external growth of a number of leading countries in the
world.
11
There is a great deal of confusion and disagreement regarding the exact
meanings of all these terminologies mentioned above. In fact, some of them
are used interchangeably. Although the term Merger and Acquisition are
often uttered synonymously, but the terms merger and acquisition mean
slightly different things. Again all these terms has a separate legal definition.
An acquisition occurs, when one company takes over another and palpably
emerges as the new owner; the purchase is called an acquisition. From legal
point of view, the target company ceases to exist and the buyer's stock
continues to be traded.
A merger occurs when two or more companies combine into one company
or one or more companies may merge with an existing company. Merger or
amalgamation may take two forms: 1) Merger through absorption
2) Merger through consolidation
1) Merger through absorption
Absorption can be defined as the process of combining two or more
companies into an existing company where all the companies except one
lose their identity. For example absorption of Tata Fertilizers Ltd by Tata
Chemicals Ltd.
12
2) Merger through consolidation
On the contrary consolidation is a combination of two or more companies
into a new company and in this form of merger, all companies are legally
dissolved to form a new entity. In a consolidation, the acquired company
transfers its assets, liabilities and shares to the acquiring company.
Mergers can be again broadly classified in the following way:
Horizontal merger: This is a combination of two or more firms in similar
type of production or merging of firms in the same stage of industry or same
area of business is known as horizontal merger.
Vertical merger: Combination of two or more firms involved in different
stages of production or distribution, in order to reduce the cost of
production, is known as vertical merger.
Conglomerate merger: This is a combination of firms engaged in unrelated
lines of business activity. Example ITC with Tribeni Tissues.
13
However whatever be the form of merger it’s undertaken with the following
motives or in order to achieve the following benefits:
1) Limit competition
2) Utilize under-utilized market power
3) To grow and enhance profitability in the industry
4) To achieve economies of scale
5) Establish a transnational bridgehead without excessive start- up costs.
14
Background of the Problem
In today’s world of intense global competition all corporate behemoths
resort to M&A with an attempt to attain surges in inorganic growth. But
there are enormous reasons of why such M&A fails to add value or to
achieve the desired synergy. Some of them are penned down below:
Improper valuation: The key to a successful M&A is when the right price
and not a penny more are paid, but in most of the cases companies end up in
paying more. While the share holders of the acquired company, particularly
if they receive cash, do well but the continuing shareholders end up with the
obnoxious burden of overpriced assets which with definite conviction dilute
their future earnings. Such being the milieu what becomes important is
proper valuation of the business and specially intangible assets.
Boasting overstated synergies: There is no doubt that an acquisition can
create synergy but many times companies with uncontrollable palpitations
end up in over stating this so called synergy. This occurs mainly due to over
15
estimating the rate of cost reduction and over valuing the net working
capital. Overestimating such synergies leads to a failure of the merger.
Cultural clash: Lack of proper communication acts as a disaster in case of
overseas mergers where many cultural differences exist. Moreover, cultural
differences do result in failure of plans implementation and thereby paves
the way for the failure of the merger.
Poor Business Fit: When the product or services does not fit naturally into
the acquirer’s marketing, sales, distribution system and not to be left out the
demographical requirements of the product or services of the merged entity,
then it may creep in delays in efficient integration.
Over Leverage: Cash acquisitions frequently result in the acquirer assuming
too much debt. Future interest costs consume a great portion of the acquired
company’s earnings. An even most serious problem results when the
acquirer reports to cheap short-term financing options and then has difficulty
refunding on a long-term basis.
16
Boardroom Split: When mergers are structured with 50/50 Board
representation or with substantial representation from the target, due
attention should be given to determine the compatibility of the directors
following the merger. For example when global IT services giant Electronic
Data Systems Corporation(EDSC) acquired Bangalore based Mphasis BFL
Ltd on June 23, 2006 Jerry Rao continued to remain chief executive at
Mphasis because of his expertise in management and understanding the
business.
Some of the problems are aforementioned but the list is endless. Such being
the milieu before M&A these problems should be duly addressed. But this
study ‘Comparative Evaluation Strategies in Mergers and Acquisitions’ will
be addressing the first two problems that is finding out a proper valuation
model for the firm to be acquired on the one hand and on the other hand it
will also focus on to find out a proper model for valuing synergy.
Objective of the Research
The present Research is planned to study the measures that can be discerned
as could probably engineer a success in M&A and identify the ingredients
17
that are required to be followed to better a deal as it can be done or
negotiated. For this the objectives are as follows:
(1) To compare the processes like valuation of the firm and synergy
valuation
(2) To find out an adequate strategy for paying the acquired firm so that
there is no over leverage problem in the future.
(3) To determine an optimum evaluation strategy in M&A.
18
Benefits and Scope of the Research
With India waking up into a new millennium, M&A have become essential
for inorganic growth. This is palpable in textile industry which in the May
and June of 2006, witnessed lots of overseas acquisitions; like Malwa
Industries acquiring mill major Tintolavanderie from Italy and Raymond’s
acquired Portugal based Regency Textiles Portugesa Limittada. As stated in
‘The Temerity of Textiles’ of Business& Economy, 16th June, 2006- the new
mantra for Indian textile majors to go global is cross border acquisitions .
Agrees, Ajai Sahai, Director General, Federation of Indian Export (FIEO),
“More and more overseas acquisition will continue in the acquisition”
In such a milieu, the present Research becomes extremely important, as the
primary focus of the study is to evaluate strategies in Merger & Acquisition
and finding out an optimum mix of making payment to the acquired firm.
Even analyst feels that the M&A route is an ideal way for corporate
restructuring. Starting from small independent organizations to global
behemoths all is trying this option of growth.
19
The reason can be anything but one core reason is M&A means
improvement in capital structure, which enables to take new and diversified
activities. However, a major bottleneck to improve the capital structure is
poor payment made to the acquired company during the pre-merger. In other
words, it weakens the financial position of the company. To avoid this
problem often companies acquire a major stake earlier and later do the
complete acquisition. Like for example International Marketing & Sales
Group Plc (IMSG) acquired major stakes in India’s Candid Marketing and
the remaining they are going to acquire by 2010.
The following cases will be analyzed with respect to arrive fruitful
conclusions:
Takeover by Tata Tea of Tetley: It has been more than a decade of Tata Tea-
Tetley Group engagement and the matrimony is now brewing sizzling hot
opportunities for both of them. Tata Tea’s UK based collaborator Tetley
Group is the innovator of the concept of ‘tea bag’ and by value and volume
among the top 20 grocery brands in UK. In mid 2000, Tata Tea bought UK
based Tetley for 271pound.
20
Hypothetical case study: With the help of Charter Accountant and KPMG a
hypothetical case study has been developed which covers almost all the
problems associated to valuation in today’s corporate world.
Problem Context
21
The Corporate Perspective
On June 23, 2006 global IT giant Electronic Data Systems Corporation
acquired 83 million shares of Bangalore based Mphasis BFL Ltd for Rs
1,748 crore.
‘Indian haute couture bigwigs are going shopping; the new ‘mantra’ for
Indian textile majors to go global is through cross-border acquisitions;’
‘The Temerity of Textiles’, Business& Economy, 16th June, 2006. Malwa
Industries acquired mill major Tintolavanderie from Italy and Third
Dimension for a total consideration of about $11 million on May 2006. On
the same league, Gujarat Heavy Chemicals acquired Dan River Raymond on
May 27, 2006 and Raymond’s acquired Portugal based Regency Textiles
Portugesa Limittada.
Apart from these over seas acquisitions by Indian Inc, the year 2000
witnessed the largest ever-overseas acquisition by an Indian company, as
22
Tata Tea acquired the Tetley group for 271million pounds. However, during the
past decade lots of global behemoth has also acquired companies from the
homely milieu. Like, in 2001, Frito-Lay India took over Uncle Chipps from
Amrit Banaspati group for an undisclosed price. As per the acquisition
agreement, Frito-Lay, along with the Uncle Chipps brand also acquired a
few unused assets from Amrit Banaspati.
With so many M&A happening, what becomes important is valuation of the
target company and the estimated synergy in post merger. When it comes to
valuation of the acquired company often problem arises in valuing the Swap
ratio. Now the question arises what is a swap ratio.
“Swap ratio is the ratio of the share exchange rate of one of the merging
company with the share exchange rate of the other company,” replies
Professor A.Sandeep, IIPM. If company A and company B is merging, then
Swap ratio would be:
Swap ratio = Exchange Rate of Company A / Exchange Rate of Company B
23
Through different case studies and discussions, an attempt has been made to
evaluate the various strategies used for valuing the target firm and synergy,
which are discussed in later chapters.
24
Case Study
MITTAL FOOD Ltd & MAHANAGAR
RESTAURANT Ltd.
Based on information gathered from KPMG and going through the recent
business new the hypothetical case study on Mergers and Acquisitions has
been developed. I took the help of my project guide (Professor
Ramakrishna) and C.A Mr. Anindo Dutta to make the valuations as practical
as possible. Some of the valuation strategies that has been incorporated, is
extract from my M.Com classes of Dr. Malayendu Shah H.O.D of finance,
Calcutta University
25
The assumptions, which are the keystone of the case study, are enumerated
below:
It is assumed that the existing undertakings are operating at a level
below optimum but when they combine their resources and efforts,
they can reduce the cost of production including selling and
administrative expenses. It will take 4-5 years to achieve this synergy.
Both the companies do not have any Preference Share Capital.
All the shares are fully paid up and authorized share capital of Mittal
Food ltd. is of 157497 shares of rupees 10 each and of Mahanagar
Restaurant Ltd is of 25000 shares of Rs 10 each.
Depreciation is calculated on Diminishing Balance Method.
There is no interest to be paid by Mahanagar Restaurant Ltd after
merger on debt capital, as the loan taken from Mittal Food ltd would
be adjusted.
26
The earnings of both the firm for the year 2005 has been taken for
calculating the E.P.S after merger.
Both the companies are listed companies.
Financial year for both the companies closes at 31st December.
Point to be noted: The prevailing tax rate for each year has changed
Mittal Food ltd. (M.F.L) was established in 1995 to manufacture steel
generally used for producing home appliances and machines. The company
invested Rs.4 lacks in a small concern called Mahanagar Restaurant Ltd
(M.R.L). During the past 5 years, M.F.L‘s sales have grown at an average of
about 10%\year, which is below the industry benchmark, and P.A.T have
grown at about 8%. The fluctuating profit of the company has caused its P.E
ratio to be much low.
To reduce its earning instability M.F.L is now planning to acquire 51%
ownership in M.R.L, which has a poor management, and to make it, its
27
subsidiary. Currently M.F.L‘s share is selling for Rs. 75 in the market. The
synergies for acquiring M.R.L are enumerated below:
1. The target company belonged to the related business so it will help in
vertical merger and penetrate in newer area.
2. It has generated a stalwart goodwill among the consumer and is time
honoured as a good Quick Service Restaurant (Q.S.R).
3 It had 50 outlets in Delhi and Mumbai. The revenue generated
from these outlets will help in maintaining a stable PE ratio.
MRL is known for its quality of products and services including. It has a
strong logistic throughout its 50 outlets spread across the capital and
Mumbai. The company is planning to make its maiden entry in Kolkata.
Due to poor management and lack of innovative dishes, the company’s
performance was bogged down with the entry of new kids in the block. The
company could not pay heed to product innovation due to the high cost of
raw material and processed items required for such Endeavour.
MRL’s sales have grown at an average of 6% per year. The company’s
earning has been low due to decline in sales and the average market price
of company’ s shares in recent times has been lower than its book value.
28
The board of MRL thinks that when they took a loan from MRL, it helped
them to deal with their financial inadequacy and now if they join with
M.F.L, they can get raw material and process ingredients at lower costs
from the humungous product portfolio of MFL. Moreover, MFL’s supply
chain will enable easy availability of the products in all the outlets.
The current price of MRL’s share is Rs. 28 only. MFL thinks that if they
could acquire MRL, they could turn around the company and increase its
share value in the market. However, M.R.L favoured merger with M.F.L
instead of becoming a subsidiary. According to shareholders of M.R.L, if
one company is made a subsidiary of other the idea behind the synergy
would fall and there will not be any unified command as it tantamount to be
dominated by the parent company.
But M.F.L wanted to acquire M.R.L and claimed to grow their sales by 8%
within 3-4 yrs but as M.R.L has so low growth rate in sales, MFL will be
paying them for each share an amount much lower than their current market
price. MRL agreed to that but their condition was to get raw materials at a
much more lower costs which will help to reduce cost of goods sold at least
29
64% of sales. MFL anticipates that to support sales growth of 8% of M.R.L,
they have to bear a capex equal to 5% of sales for the first 5 yrs.
Now the million-dollar question arises whether both the companies will
have an increased E.P.S in the post merger milieu and what price M.F.L
should pay to M.R.L if they merge with each other. From M.R.L’s point of
view, a vertical integration of upstream suppliers like Reliance
Petrochemicals ltd. with Reliance Industries ltd in the year 1992 will help
the company to achieve the desired result of synergy and reduce the cost of
production.
The financial statement (in a summarized form) issued by both the
companies for the year ended 31st December 2005 are given below.
30
Mittal Foods LtdSummarized P/L statement for the last five years (Rs in 000)
Year 2001 2002 2003 2004 2005
Net Sales 5470 6150 6642 7529 8056
Cost of good sold 3900 4500 5467 5480 5975
Depreciation 110 155 139 125 143
Selling & Admin 671 788 970 1003 1020 Expenses
Total expenses 4681 5443 6576 6608 7138
EBIT 789 707 66 921 918
Interest 132 152 160 191 284
EBT 657 555 94 730 634
Tax 353 292 - 368 226
PAT 304 263 - 362 408
Per share data
Year 2001 2002 2003 2004 2005
EPS (Rs) 1.93 1.67 1.81 2.3 2.59
Book Value (Rs) 25.28 26.00 26.41 26.75 27.55
Market Value (Rs) 54.34 61.25 57.5 71.25 75.00
31
Z
Summarized Balance SheetAs on 31st December 2005
Liabilities (Rs. In thousand)
Sources of Funds
Shareholders Fund
Paid up capital (1, 57, 497 shares Of Rs. 10 each) 1575 Reserve and surplus 3155 4730
Borrowed Funds
Secured 1203 Unsecured 967 2170
Current Liabilities 1860
8760
Assets
Gross Block 4748
Less depreciation 143
Net Block 4605
Investment
Loan to MSUL 400 Other Deposit 29 5034
Current Assets 3726
8760
32
Mahanagar Restaurant’s Ltd
Summarized P/L statement for the last five years (Rs in 000)
Year 2001 2002 2003 2004 2005
Net Sales 1442 1490 1580 1721 1823
Cost of good sold 995 1055 1150 1244 1323
Depreciation 37 40 45 45 85
Selling & Admin 260 275 280 292 302 Expenses
Total expenses 1292 1370 1475 1581 1710
EBIT 150 120 105 140 113
Interest 19 20 20 30 35
EBT 131 100 85 110 78
Tax 45 34 25 35 27
PAT 86 66 60 75 51
Per share data
Year 2001 2002 2003 2004 2005
EPS (Rs) 3.44 2.64 2.40 3.00 2.12
Book Value (Rs) 23.76 25.00 26.28 27.65 30.00
Market Value (Rs) 30.84 44.04 42.25 25.48 28.0
33
Summarized Balance SheetAs on 31st December 2005
Liabilities (Rs. In thousand)
Sources of Funds
Shareholders Fund
Paid up capital (25000 shares Of Rs. 10 each) 250 Reserve and surplus 320 570
Borrowed Funds
Loan from MSL 400
Current Liabilities 178
1148
Assets
Gross Block 457
Less depreciation 85
Net Block 372
Investment 23
Current Assets 753
1148
34
Now M.F.L is trying to find out the value of M.R.L in order to determine whether it’s
worth to merge with M.R.L. For this we will use the D.C.F approach to determine the
value of M.R.L. and try to find out the valuation of synergy.
D.C.F approach
On the onset of this method, we estimate the free flow by projection of sales. As stated
earlier M.S.U.L in the last 5 years has grown at an average rate of 6% but M.S.L claims,
they can increase the sales to 8%. As conspicuous from the Q1 Result, 2006 of the home
grown FMCG giant, Dabur India Ltd, it took 1 year to achieve the desired sales growth
from acquired brands Odonil, Odomos, Odopic and Sanifresh from the stable of Balsara.
Therefore, we assume M.R.L’s sales would remain at 6% for 1st 2 years, 7% on the 3rd
year (2008) and thereafter 8%. So the sales will be Rs 1932, Rs 2048, Rs 2191, Rs2366,
and Rs 2555 respectively for the year 2006, 2007, 2008, 2009, and 2010.
Availability of raw materials at cheaper costs and due to the operating efficiencies (as
observed in case of Reliance Industries ltd with Reliance Polypropylenes ltd). The cost
of goods sold (COGS) will be reduced to 64%. Lets assume it will take sometime for
M.S.U.L to reduce this cost. So COGS can be assumed to be 66% in 2006, 2007 and
65% for 2008 and thereafter 64%. Regarding selling and admin expenses generally it has
been seen it reduces in the 1st 2 years but due to inability of the merged organization to
cope up with the increase in the volume of sales it increases and then it falls
35
dramatically. Depreciation can be estimated keeping in mind the anticipated capex in
each year (which is 5% of the sales) and average annual depreciation rate. As stated
earlier depreciation will be calculated by diminishing balance method at 11%. Thus
depreciation from 2006 to 2009 is
DEP06 = 0.11 (372+CAPEX06)
= 0.11(372+0.05*1932)
=0.11(372+97)
=52
DEP07=0.11(469-52+0.05*2048)
=0.11(417+102)
=57
DEP08=0.11(519-57+0.05*2191)
=0.11(462+110)
=63
DEP09=0.11(572-63+0.05*2366)
=0.11(509+118)
=69
36
DEP10=0.11(627-69+0.05*2555)
=0.11(558+128)
=75
The 2 nd step is to estimate the cost of capital. Since we are determining
MRL’s value, the discount rate should be MRL’s average cost of capital. For the year
2005, the outstanding debt of the company is 4 lacks and interest paid @ 8.75%/ annum
is Rs 35 thousand. We assume higher marginal rate of interest, say 15% on the after tax
basis. The cost of debt would be 0.15(1-0.35) = 0.0975= 9.75%, where 35% is the tax
rate including VAT and Service Tax of 12.5% applicable from 31.04.06. If we assume
that the company has been paying about 80% of its earning and retaining 20%, there fore
prevailing cost of equity
80% of 2.12(Ke) = ______________ =0.0605 or 6.05% 28
The average return on equity (PAT/NETWORTH)= (53000/570000) = 9% Thus the
company’s growth rate = 0.20*0.09=0.018 or 1.8%
Therefore MRL’s future Ke = 6.05+1.8 = 7.85%
MSUL’s W.A.C.C: Amount (RS in 000) Weight Cost W
37
Eighted cost
Equity 570 0.587 0.0785 0.046 Debt 400 0.413 0.0975 0.041
970 1.000 0.087
9% (approx)
Increase in N.W.C:
Present W.C = 753000-178000 = 575000Percentage of W.C to sales = 575000/1823000 = 32%
Year 2005 2006 2007 2008 2009 2010 (Rs. In thousand)
W.C 575 618 655 701 757 818 Increase In N.W.C 43 37 46 56 61
Mahanagar Steel Utensils
38
Estimation of Cash Flows for next five years
Particulars 2005 2006 2007 2008 2009 2010
Net Sales 1823 1932 2048 2191 2366 2555
COGS 1323 1275 1351 1424 1514 1635
Selling & Admin Exp 302 302 302 328 355 332
Depreciation 85 52 57 63 69 75
Total Exp 1710 1629 1710 1815 1938 2042
PBT 113 303 338 376 428 513
Tax @ 35% 106 118 132 150 180
PAT 197 220 508 278 333
Add Depreciation 52 57 63 69 75
Funds From Operation 249 277 571 347 408
Less Increase in N.W.C( 32% of net sales) 43 37 46 56 61
Cash from operation 206 240 525 291 347
Less Capex 97 102 110 118 128
Net Cash flow to M.S.L 109 138 415 173 219
P.V.F @ 9% 0.92 0.84 0.77 0.71 0.65
Present Value 100 116 320 122 142
Total Value of MRL= 100 +116+ 320+122+142= Rs 8, 00,000
Present value of M.R.L is Rs. 8, 00,000.00Value of M.R.L’s shares Rs. M.R.L’s value 8, 00,000.00 Less debt 4, 00,000.00
Therefore value of MRL’s shares 4, 00,000.00
Value per share = Rs. (4, 00,000.00/25000) = Rs.16
39
The maximum price per share M.F.L is prepared to pay for M.R.L’s share is Rs.16,
which is below the current market price Rs.28. But MFL’s market price per share is Rs
75 so there is a possibility that market value of MRL will also increase.
Now the question arises, how should M.S.L finance acquisition of M.S.U.L?
It can be done in two ways either in cash offer or exchange of shares.
Cash offer: a cash offer is a straightforward means of financing a merger. It does not
cause any dilatation in E.P.S and the ownership of the existing shareholders of the
acquiring company MSL will have to pay Rs.4, 00,000.00 for acquiring M.S.U.L.
Share exchange: A share exchange offers will result into the sharing of ownership of the
acquiring company M.F.L between its existing shareholders (Existing shareholders of
M.R.L’s). The earnings and benefits would also be shared between these two groups of
shareholders. The precise extent of net benefits that accrue to each group depends on
exchange ratio. Like in case of Reliance de-merger owner of 40shares, got 40 Shares of
Reliance Energy Ventures Ltd and the existing share holders did not have to
compromise.
To pay Rs.4, 00,000 as its current market price per shares Rs.75, the company must
exchange 5333 shares and hence post merger, M.F.L would have 1,62,830(1,57,497 +
5333)shares. In the combined firm, M.R.L’s shareholders would hold 3.3% of shares.
M.S.L would be offering 5333 shares for 25,000 out standing shares of M.R.L, which
means 0.21 shares of M.F.L for one share of M.R.L. The book value of M.F L’s and
MRL’s share in 2005 is respectively Rs.27.55 and Rs.30. So from the book value point of
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view, M.F.L could offer 0.92 (27.55/30) shares for each outstanding share of M.R.L
without diluting present book value so M.F.L wont have a problem if they offer 0.21 of
its shares to M.R.L.
Impact on E.P.S: Let’s now find out if E.P.S be diluted if it exchanged 5333 shares to
M.S.U.L? As assumed earlier we take the earnings of both the firms for the year 2005 for
computing E.P.S after merger.
Mittal Foods Ltd: - Impact of mergers on E.P.S
Rs (in thousand)
M.F.L’s PAT before merger (P.A.Ta) 408
M.R.L’s PAT if merged with M.S.L (Pat) 53
PAT of the combined firms offer merger
(PATa+PATb= P.A.Tab) 461
M.F.L’s E.P.S before merger (E.P.Sa) Rs.2.59
Maximum no of M.F.L’s shares maintaining E.P.S of Rs.2.59
That is (4, 61,000/2.59) = 1, 77,992
M.F.L’s outstanding shares before merger = 1, 57,497
Maximum number of shares to be exchanged without diluting E.P.S
= (1, 77,992-1, 57,497)
= 20,495
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Therefore M.F.L could exchange (20,495/25,000) = 0.81 of its shares for one share of
M.R.L with out diluting its E.P.S after merger. Since, it is exchanging 0.21 shares. Its
E.P.S after merger would be as shown below: -
P.A.Tab = 4, 61,000
Total no of shares after merger = 1, 62,830
Therefore E.P.Sab = (4, 61,000/1, 62,830)
= Rs.2.83Merger of M.F.L with M.R.L: - Impact on P.A.T
M.F.L M.R.L M.F.L (Before merger) (After merger)
PAT (Rs in 000) 408 53 461
No. Of Shares 1, 57,497 25,000 1, 62,830
EPS (Rs) 2.59 2.12 2.83
Mkt value 75 28.10 75
Total Mkt Capitalization(Rs in lack) 118.12 4 122.12
1, 57,497* Rs.75 = 1, 18, 12,275+4, 00,000 = (1, 22, 12,275/1, 62,830) = Rs.75
Impact on P/E ratio: The P/E ratio of combined firm would decline from MFL P/E ratio as P/E ratio of MFL = (75/2.59) = 28.9And combined firm would be = (75/2.83) = 26.5But, M.R.L will have an increase in P/E ratio As its P/E ratio = (28.1/2.12) = 13.25
42
VALUING SYNERGY
Synergy is the magical force that allows for enhanced cost efficiencies of the new
business, which can take in the form of revenue enhancement and cost savings.
The form of synergy is enlisted below:
Staff reductions – To some extent merger reduces labor.
Economies of scale - Whether it is purchasing a small stationery or acquiring a
brand, Economies of scale can be achieved any way. Economies of scale help to
reduce cost of production.
Acquiring new technology – Synergies might occur by acquiring new technology.
Improved market reaches and market share- Often Companies to penetrate in
newer areas acquire a local company. And synergy can be achieved by the benefits
of the marketing and distribution of local company.
There ought to be economies of scale in the combined firm, but in many cases,
one and one add does not equal to two. Not necessarily every merger will result in
synergy. First of all there has to be a cultural fit between the two merging
organization and then only synergy can be achieved. But to have a synergy in long
run what requires is that the product or service delivered by the organization might
43
fit the organization product portfolio. Agrees, Samarjit Singh, MD of Candid
Marketing, “See acquisition has to be strategically fit both in terms of brand and
culture. HLL’s acquisition of Modern foods fitted the brand but there was no
cultural fit between the two organizations.” According to 4Ps- Business and
Marketing’s article, ‘Not Just anybody, please…’ unable to sustain losses HLL is
putting up Modern Food for sale.
Now the million dollar question arises how to value synergy? Synergy tantamount
to Net Economic Value (NEV) which arises from the extra value generated by the
combined firm.
If we consider the example of the two firms mentioned in our earlier chapter,
then :
Lets’ say Value of the combined firm is represented by V12,
Value of MFL = V1
Value of MRL = V2
EV= V12 – ( V1 + V2)
Let’s assume acquiring price is paid in cash
Cost of merger= Cash paid - V2
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NEV= EV – Cost of merger
Evaluation Strategies in M&A
This discussion is based on the primary data collected after meeting with Mr.
Anand Vermani, Associate Vice President of KPMG India Private Ltd. K.P.M.G is
a Switzerland based conglomerate, which mainly acts as financial consultant and
evaluates the financial benefits of mergers.
Q) What should be the core issue before finalizing a merger deal?
Ans) Look there is no such hard and first rule that should be given core
importance in a M&A deal. But I feel where Indian corporate misses out big
time is avoiding the taxation part. The preliminary and one of the main things,
which should be taken into account while evaluating the merger deal, is
taxation. Sometimes, if the taxation deals, especially when Indian companies
go for global acquisitions, the taxation norms should be given the core
importance. If filing the tax procedure or the host country has a step motherly
attitude then there is no point to continue with the merger.
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Q) How does one evaluate the long run benefits provided by the merger deal?
Ans) We mainly follow 4 methodologies to determine whether to merge or what
benefit the project is going to provide in the long run. These are:
1. D.C.F –discounted cash flow
2. CoCos – comparatively company analysis
3. COTRANS – company transaction
4. NAV –net asset value
D.C.F –in M & A, the acquiring firm is buying business of the target firm, rather
than a specific asset. The acquiring firm should appraise merger as a capital
budgeting decision, following the D.C.F approach. It should try to evaluate the
estimated sales and any other source of revenue generation for at least 5 years if
the business is not too much capital intensive.
The main drawback of this method is that, it is very intrinsic and although it
focuses in the future value but doesn’t take into Consideration the market values.
In simple words, D.C.F emphasizes more on time value of money. To counter this
drawback what I suggest is resorting to DCF with probability distribution can give
46
accurate result. There are three or four important variables whose probability
distribution will change the entire valuation of merger so to be on safe side, it’s
better to use W.A.C.C of the acquiring company as the P.V F.
CoCos – here the companies on which comparison is done, should ideally be a
listed company, the comparison starts from revenue generated by the companies
which are planning to merge, then we determine E.B.D.I.T(Earnings before debt,
interest and taxes) because it helps in eliminating error as it differentiates between
cash entry and book entry (as for example depreciation).
After that, it takes into consideration the enterprise value or E.V, which are
summation of market capital and the book value of debt or in other words
summation of fixed assets and working capital.
Once the E.V, the EBDIT are determined, the next step is to calculate the
multiples (the ratios). Three broad multiples used for valuation are:
1. E.V/SALES
2. E.V/EBDIT
3. MARKET CAPITAL /SHARE = P.E
i. PAT/SHARE
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To select the companies for comparison the companies are short listed
according to which are close representative of each other in terms of size, market
capitalization and product portfolio. The identical representative is chosen the ones
which has similar experience, subjective analysis, and risk of business the
companies are dealing with e.t.c. One of the main drawbacks of CoCos is that it
doesn’t takes into account the transaction premium so the next method of
valuation is used.
Co Transaction – or company transaction emphasizes on the amount involved
for acquiring the company. This is termed as cost of merger. The control premium
from 49% to 51% will create a strong variation in the cost of merger as for
example Maruti Udyog Ltd, when the company sold its 57% ownership to Suzuki
in 2003,
Suzuki has to pay a huge amount as compared to the amount being paid if it had
acquired less than 50%.
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Q)In Indian Inc what are the main areas which have witness maximum M&A
activity and is expected to witness more in the coming future?
Ans) Well it’s the FMCG sector and even the IT and BPO sector. In our country,
during the last decade due to globalization and liberalization lots of I.T and B.P.O
sectors are emerging. They resort to mergers to derive the benefit off shore
sourcing. This is mainly the reason lots of overseas acquisition is taking place
recently, as for example IOC with French farms and outbound investments are
taking place. Apart from this, another strong motivating factor for M&A is risk
diversification and in this regard the banking sector has witnessed lots of
horizontal mergers like GTB with OBC.
Q) What should a manager focus first before finalizing a M&A deal?
Ans) The one and only motive of the manager should be is to see that shareholders
interest is not hampered at any cost, rather a M&A deal should be concerned only
about maximizing shareholders wealth. I mean this from a managers perspective.
Q) What factors motivates companies to go for M&A?
Ans) Well, the motivational factor depends on the size of the company and where
they want to grow. Like whether they want to grow in their own line or merge
with other related sector like in case of vertical mergers. As for example, FMCG
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companies resort to mergers to penetrate in newer areas. Like in 2004 Wipro
entered in the food segment of FMCG after acquiring the Glucovita brand from
HLL.
Even when companies want to go abroad they resort to overseas acquisitions. Like
I.O.C with Maurel and Prom, Essar group in Bangladesh power and steel.
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Tata Tea ties the knot with Tetley
This case is analyzed, to determine how an acquisition can help to achieve the
synergy. It has been more than a decade of Tata Tea-Tetley Group engagement
and the matrimony is now brewing sizzling hot opportunities for both of them. The
second largest seller of packet tea in India, Tata tea was incorporated in 1983 and
today has 54 estates scattered in Assam, West Bengal, Tamil Nadu and Kerala.
Tata Tea’s UK based collaborator Tetley Group is the innovator of the concept of
‘tea bag’ and by value and volume among the top 20 grocery brands in UK.
Way back, in 1993 tea exports was reduced and the resultant surplus had no way
other than the domestic market, which was studded with regional brands and the
premium segment was dominated by Rs 2000 million Taj Mahal brand, from the
stable of Hindustan Lever. Such being the milieu, Tata Tea formed a joint venture
with Tetley Group and Tetley division was transferred to the venture in 1994.
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The year 2000 witnessed the largest ever-overseas acquisition by an Indian
company, as Tata Tea acquired the Tetley group for 271million pounds. This is a
watershed event for both the companies as this deal reflects the coming together of
a company with very strong on tea production side and the other one very strong
on the marketing side.
The next logical step was the merger of the two entities and last year Tata Tea Ltd
merged the wholly owned subsidiary Tata Tetley Limited with itself. This was part
of the strategy of strengthening the Tata Tea portfolio.
The Tetley Group has been a ‘cash cow’ for Tata Tea and this is palpable in the
recent acquisition of Jemca by Tata Tea, which is being funded by none other than
buddy Tetley group.
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RECOMMENDATION
Corporate M&A takes place to enhance synergy by maximizing shareholders
wealth. However, often it results in a dent financial goal. After going through the
case study and recent acquisitions like Tata Tea, the recommendations are stated
below. But the case was developed based on information derived from KPMG so
financial evaluation was possible only for that case. For evaluating other
strategies of M&A, it was resorted to recent M&A.
Evaluating financial data
The economic gains from the merger of M.F.L would come from the higher sales
growth and improved profitability due to the reduction in the cost of good sold.
From M.F.L’s point of view, it should merge with M.R.L rather making it a
subsidiary because cost reduction and united command is not there in a subsidiary
and holding relation. Moreover, merging will enable an increase in P.A.T by Rs1,
97,000 for the year ended 31st December 2006 from Rs 57,000 of 31st December
2005 and E.P.S of Rs.0.24 after merger. The risk can be diversified too.
From M.R.L’s point of view, the merger will help them to get processed material
at cheaper cost of production. The E.P.S of the company will increase by 33.5%.
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The market value of MRL will increase and the supplies of raw material or
intermediary product will be safe guarded.
Evaluating the other strategies
For future growth, business organizations have always resorted to M&A. This is
specially applicable in case of textile and FMCG industry. But what becomes
important is to see whether the acquisition fits both the companies. To evaluate
such fit one has to do the SWOT analysis not only from financial point, but also
from other keystones like cultural, brand perception, domain of growth etc.
Acquisitions have to be strategically fitting, in terms of both brand and culture. If
there are cultural mismatch between two organizations, then no acquisitions can
success and its bound to have a failure. Exactly what happened when HLL
acquired Modern Foods. And at the same time Coca Cola, being a MNC from the
country of Uncle Sam took atleast five years to match with Indian business
culture and then they acquired Thums Up.
Another core issue that has to be addressed is to find out an adequate strategy for
paying the acquired firm. So that by paying less the acquired firm doesn’t suffer
and at the same the by paying more the acquirer doesn’t have to bear the burden of
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over debt which might result in leverage problem in the future. This is palpable in
case of Aviva acquiring AmerUS. According to the concept of European
Embedded Value or EEV, Aviva is paying 1.9 times EEV for AmerUS, which is
much more as compared to 1.6 EEV paid by France’s AXA when it acquired
Winterthur. By doing so Aviva is taking a risk as its financial condition, which
only consists of $2.52 billion cash as per its balance sheet on 31st December, 2005,
is not strong enough.
Then what becomes important is to take a proper capital budgeting decision. This
has to be done by very carefully estimating the projected free cash flows. Then
multiplying or extrapolating their terminal value. For doing so one has to have a
through knowledge to forecast the market the merged entity is entering into. After
the terminal value of free cash flows are known, then Cost of Capital in terms of
financing the merger deal has to be find out. As mentioned earlier and one of the
objective of this study is to determine the optimum strategy for paying the
acquired firm. Once the cost of capital is determined then it has to be converted
into present value by multiplying it with the discounted factor. As evinced from
the case study its always advice able that the discounting factor should be the
Weighted Average Cost of Capital of the acquired firm.
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In Indian Inc M&A deal activity has grown to unprecedented level and will grow
even further in future in Indian corporate world. Companies will merge with each
other in this trend but generally only half of these mergers have succeeded in
adding value. To add value the aforementioned recommendations should duly be
followed. That is the strategies should be evaluated in such a way that it benefits
both the firm. The brand fitness, cultural fitness as well as the mode of payment
should be cross checked several times. At the same time what becomes important
is to evaluate the M&A deal from Capital Budgeting point of view. The amount to
be paid to the target company for the M & A must be evaluated by using well
expected valuation methods.
Once the M&A deal is approved, a team has to be formed with representative
comprising from both the corporation which will be headed by the chief
information officer (CIO) to evaluate, execute and implement the entire process
The synergies from the M& A need to be carefully estimated in different
scenarios-best, normal and worst case.
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Conclusions
With more than half of the M&A deal failing to deliver their expected results and
as per Business Standard’s article on 14th August, 06 only 2 out of every 10 M&As
can be coined as successful. So a comparison of evaluation strategies in M&A is
central to merger and acquisition decision making. This will enable whether the
two companies fit together in a practical or financial sense and not on whether
they could truly combine to make a whole that was greater than the sum of its
parts.
But before doing such competition, as learnt from KPMG what becomes important
is to identify the sources of the firm’s current and future competitive strengths. In
other words to determine, how sustainable and unique are the identified strengths?
This will enable to stop the focus on differences in the companies, which
employees immediately start doing once the deal is implemented. Based on these
identified sustainable strengths of both the organizations, the synergy has to be
estimated and by doing so corporations cab avoid the ‘great expectation’ of the
overstated synergy.
Then the valuation of the target company is to be done and then other strategies
are to be evaluated. And as assumed while developing the case study the
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organization are operating below the optimum level, holds in case of real corporate
world. Due to financial or any other constraint, no business organization
irrespective of its size operates to an optimum level. While evaluating the
strategies this has to be considered. Because of this drawback of not performing in
optimum level organizations comes together to overcome each other’s bottlenecks.
This is synergy takes birth and such synergy takes a time to be achieved. This time
limit depends on the parameters of the nature of business, its size and several other
factors.
Once the valuation of the target firm is done, then what becomes important is to
find out the modem of payment. This can be done in two ways, one is by cash
offer and the second one is by exchanging shares or allotting shares to the
shareholders of the acquired company. When it comes allotment of shares, it has to
be remembered that one has to keep in mind the impact on EPS, after all the
ultimate objective of a manager is to maximize shareholders wealth. Then the
taxation issue also becomes important, which according to Mr. Anand Vermani is
one of the major reasons for failure of M&A deals to add value.
In the over all Indian Inc scenario - the textile, FMCG, IT & BPO sector in India
have witnessed maximum business restructuring for the year 2006.
58
Implications
Most of the M&A deals in Indian Inc has failed to add value because of not
conducting a proper comparative evaluation of the various strategies involved both
in pre-merger scenario and in post merger scenario. Where Indian companies
misses out big time is in checking too quickly and ignoring the SWOT analysis of
M&A DEAL. Not only that, most of the managers focusing too narrowly on the
impact of mergers in the day-to-day operation of the business. With definite
conviction, this tantamount to a recipe for disaster.
But successful acquirers take a different approach. Like Dabur when it acquired
Balsara, they tested all the disciplined prioritization and fundamental strategies
and principles. Despite being a Finance thesis, strategies that are to be evaluated
cannot ignore another crucial issue- culture. Even in global corporate milieu too
many merger-bound CEOs do not pay heed to this key factor, which is so much
potential that it can make or break an M&A deal. Like HLL’s acquisition of
Modern Food, did not match with the culture of both the organization and now
HLL has plans to sale Modern food. Cultural due diligence can is a systematic
device for making fanatic cost-effective assessments of the cultures of both
acquirer firm and the target firm.
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Combining two business organization, is a humungous legal and operational
challenge and this is where evaluating all the strategies in M&A becomes
important. The best practice of this exercise can reduce the risk involve in M&A
largely. Now the million-dollar question arises, how to commence the exercise of
comparative evaluation strategies of M&A? It will onset from taking a complete
look at all the relevant sources of value and risk by determining the value of the
target firm. This increases the chances of a successful acquisition.
Conventionally, M&A integrations have been undertaken, as a measure to save
costs and to eliminate redundancy. On this keystone, today’s acquirers start over
estimating the synergies. So it is very important to evaluate synergy and then need
to realize (as shown in the case study), it takes some time to achieve the desired
synergy. So companies should not hurry up to achieve the equation of ‘One plus
One makes three’. And the key principle behind buying a company should be to
create shareholder value and not merely focusing on operational synergy. The
market value of the two companies together should be more valuable than two
separate companies. The case study that has been discussed earlier evinces how
the marketing value of the combined firm has to be determined.
Behemoths will keep on buying smaller companies to create a more competitive
company. And this is palpable in the FMCG world which has witnessed the
maximum M&A deals of Indian Inc. Not only in FMCG in other domain also
60
companies will come together hoping to gain a greater market share or to achieve
greater efficiency. And this might result in monopoly which can affect the overall
economy.
Often a booming stock market encourages mergers, which can create trouble for
the country’s economy. Deals done with highly rated stock is easy and cheap, but
there is no proper strategic thinking behind it.
In overall after developing the entire thesis, the implications are the M&A deal
must deliver the long-term growth and sustained profitability. And emphasis
should be on how the two companies fit together in a practical or financial sense,
rather than on whether they could truly combine to make a whole that was greater
than the sum of its parts.
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Bibliography
Article by Professor A.Sandeep.
Articles by Dr.Malayendu Shah, HOD – Finance, Calcutta
University
Articles by Prof. Aswath Damodaran (Guru of Valuation).
Business Standard (Making marriages work, 14th August, 2006)
Business and Economy ( 16th June, 28th July, 2006)
4Ps- Business and Marketing (4th August-17th August, 2006)
ICFAI finance Reader Feb 2005.
“Financial Management” by Prof. I.M Pandey.
“Merchant Banking” by Prof. M.Y Khan.
Public Releases by MTNL.
URLs:
www.stern.nyu.edu
M & As in Banking Industry: A tool for Competitiveness
by S.P.R. Vittal
www.indiainfoline.com
62
Appendices
Synopsis
‘Beat us or join us’ is the recent slogan of today’s corporate world which is
fiercely competitive. This competition paradoxically, gives rise to threats, cross
fire and trade rivalry, which paves the way for sickness and closure of corporate
enterprise. So many corporate organizations are resorting to business restructuring
in the form of mergers and acquisition.
However, companies before going for mergers or takeover do exercise an
evaluative strategy for the project. These evaluative strategies have to be very
friendly and not hostile because unless it is a win-win situation for both partners
no mergers or acquisition can take place.
Mergers and takeovers are motivated and negotiated based on these evaluation
strategies so one cannot ignore the importance of evaluation strategies in Mergers
and Acquisition. Unless it is a hostile takeover, the acquirer company should
follow a proper evaluation strategy for valuing the target company.
63
The Government also has a policy to safeguard the interest of shareholders and
investors before going for a merger. So the evaluation method used in Mergers and
Acquisitions it has to keep in mind that it should be a win-win situation for both
the parties on one hand and at the other hand it should be not against the interest of
shareholders and investors.
This thesis is an attempt to find out the evaluative strategies used by companies in
mergers and acquisition and comparing them based on their ability to fulfill the
parameters mentioned above.
IIPM faculty member Professor Ramakrishna would guide and assist me in the
thesis. The research methodology would commence from collecting data, both
from primary and secondary sources followed by an in-depth analysis of collected
data.
Sharma
64
Thesis Response Sheet- 1
Name- Nitin Sharma
ID Number- D04002940
Title of the Study -Comparative Evaluation Strategies in Mergers and
Acquisitions
Date when the Guide was consulted – 29. 06.06
The outcome of the discussion
The format, data collection method, sources for collecting primary data
was determined. We also had a discussion of the problems that may occur
while evaluating the strategies in M&A
The Progress of the Thesis
How to overcome the aforementioned problem was determined and
overall the objective of my research was palpably established.
65
Thesis Response Sheet- 2
Name- Nitin Sharma
ID Number- D04002940
Title of the Study -Comparative Evaluation Strategies in Mergers and
Acquisitions
Date when the Guide was consulted – 02.08.06
The outcome of the discussion
The main problem and core areas to be focused like valuation of the firm
and synergy was determined.
Thesis Response Sheet- 3
Name- Nitin Sharma
ID Number- D04002940
Title of the Study -Comparative Evaluation Strategies in Mergers and
Acquisitions
Date when the Guide was consulted –27.11.06
The outcome of the discussion
66
Some changes are made in the case study and the recommendation part was
discussed.
The Progress of the Thesis
The problem part was completed.
Thesis Response Sheet- 4
Name- Nitin Sharma
ID Number- D04002940
Title of the Study -Comparative Evaluation Strategies in Mergers and
Acquisitions
Date when the Guide was consulted –25.12.06
The outcome of the discussion
The recommendation part was changed entirely and my guide did some
value addition to it.
The Progress of the Thesis
The recommendation part was completed.
67
Thesis Response Sheet- 5
Name- Nitin Sharma
ID Number- D04002940
Title of the Study -Comparative Evaluation Strategies in Mergers and
Acquisitions
Date when the Guide was consulted –27.01.07
The Progress of the Thesis
End of the thesis
68
Questionnaires
1) What should be the core issue before finalizing a merger deal?
2) How does one evaluate the long run benefits provided by the merger deal?
3) In Indian Inc what are the main areas which have witness maximum
M&A activity and is expected to witness more in the coming future?
4) What should a manager focus first before finalizing an M&A deal?
5) What factors motivates companies to go for M&A?
6) How are the strategies for M&A to be evaluated?
69