Mergers and Acquisitions Strategy

Dr. Sandeep Kulshrestha

Philosophy behind mergers and acquisitions

Part of the overall concept of “integration” A merger capitalizes on “mutual synergy” of the

Strengths of the merging entities Acquiring an existing company is better strategy

than scaling up on its own It is also an strategy to showcase an organisation

on a broader scale

Merger defined

A merger is unification of two or more firms into one entity, with an objective of better profitability and high value to the stakeholders”

In nutshell merger usually happens within companies who are in the similar line of business, with an objective to scale-up the operations Example: IDBI bank merged with United Western Bank

Acquisition defined

Acquisition normally signifies acquiring/buying of a smaller company by a large company in the similar line of business.

Acquisition can be either normal (by consent) or forced (by acquiring large amount of shares in a company) Example: United Breweries acquired Shaw Wallace’s liquor business.

The need of mergers and acquisitions

A well thought of corporate strategy to have substantial market share

Synergy of mutual expertise and experience, which helps in scaling up the market potential

Better reach of products and services Acquiring another company or merging with

another company gives a better leverage Can lead to better Earning per share and

shareholders’ expectations

Strategic Parameters

Synergy within corporations Capitalization of the Strengths of merging

companies/acquired company and nullification of weaknesses

The opportunity which the market may provide post merger/acquisitions

How the merger/acquisition will help the company’s long term vision

In short, what will be the value addition for a company!

Strategic Exercises

Financial modeling Governance issues Shareholding Patterns Human Resources Strategy Management of investments Fund allocation for new activities Re-framing of vision/mission Marketing strategy Fresh Branding exercises