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CHAPTER IV

ANALYSIS OF DEALS SECTORWISE

In this chapter, case by case analysis of the M & A deals that took place

between the time period 2000 and 2011 and which involved one Indian

firm is presented . The deals are analyzed sector wise in accordance to the

visions of the organizations involved and also with respect to the strategic

objectives of both the organizations involved in the deals and the deals are

placed under the appropriate hypothesis based on the above. An effort is

made to identify and analyze the other benefits achieved by the

organizations by the deals.

Based on the research done in each sector, as outlined and discussed in

chapter one and in the literature survey, the following mentioned research

gaps were identified and outlined:

Research Gaps

1) Research on Mergers and Acquisitions has been very extensive, but most

of the studies do not emphasize the strategic objectives/reasons (stated vs.

actual) and alignment/satisfaction of these from the vision and mission of

the organization, For example, in their research paper, why do companies

merge and acquire, by Srinivasan and Mishra,(2007), the general reasons

on why various companies merge and acquire was studied, but detailed

analysis of the study on the reasons why the companies merge and acquire

in various sectors, i.e. a sectoral study on the mergers and acquisitions was

hither to not available. It becomes eminent that the reason behind the

companies merging and acquiring would be a characteristic of that

particular sector. (Srinivasan, and Mishra, 2007), Beena, (1998).

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2) It is, therefore eminent that there is a need to analyze the published/media

releases/print statements/other secondary sources and matching of these

statements / releases with the actual reasons was eminently needed, with

respect to sectoral analysis.(Srinivasan and Mishra, (2007).

3) The identification and study of the objectives behind these activities was

done based on the various theories of mergers and acquisitions. (Please see

detailed literature review) but backing of these study/objectives by any

data like secondary data and aligning of these objectives of Mergers and

Acquisitions with the mission and vision of the organizations was

envisaged with respect to the various sectors.(Jensen and Runback,

Srinivasan, and Mishra, 2007).

On identification of the above research gaps, based on the literature

survey, the following statement of purpose was identified.

Statement of purpose

To identify and analyze the strategic objectives behind the recent M & A

activities of companies in the various sectors considered, in the time frame

between January 2000 and February 2011, involving one Indian firm.

In correlation to the above mentioned statement of purpose, this research

conducts an analysis of the forty five mergers and acquisition activities/

deals in the various sectors like automobiles, aviation, banking, beverage,

cement, chemicals, infrastructure, Information technology , media,

petroleum, Pharmaceuticals, steel and metals, telecom wind energy and

consumer durables.

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To analyze the various deals in these sectors and in order to identify the

strategic objectives behind these deals/the following hypothesis were

formulated. The justification for which has already been given and

supported by research evidence. These hypotheses are based on the various

theories of mergers and acquisitions and also on the research hitherto

conducted. The various hypothesis that were tested are:

1) The companies which are leaders in that particular industry use M

and A to gain more market share.

2) The companies which are not leaders but have excess resources and

good vision use these moves to improve and strengthen their

positions and strengthen their vision.

3) Declining firms choose these moves to maneuver /safeguard the

resources (financial, human, and infrastructure) of the company.

4) Firms would use these moves to spatially expand their companies

and to tap uncatered markets.

5) Internationally /spatially differentiated companies may use these

moves to cater /tap locally concentrated markets.

6) The deal amount transacted is governed by the growth of the

particular sector.

7) The success of the mergers and acquisitions depend upon the

matching of the visions of the both the companies.

As discussed above, based on the analysis of the various secondary data,

the strategic objectives behind each merger and acquisition activities are

identified and analyzed and an effort is made to group all the deals from

the various sectors considered under the particular hypothesis they fall

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into. We will now see, the deals from the various sectors, which fall under

the hypothesis one.

The various sectors of which the deals analyzed were , banking, beverage,

cement, chemicals, , infrastructure, Information technology , media,

petroleum, Pharmaceuticals, steel and metals, telecom , consumer durables

and wind energy .

HYPOTHESIS 1

The companies which are leaders in that particular industry use M

and A to gain more market share.

This hypothesis is based on the Market Power Theory, which advocates

that, these moves of mergers and acquisitions help companies to add to

their market power by increasing their share in the market, thereby giving

them a control to operate in a supplier economy, and limit competition

entry. If the industry is very diversified and involving multiple products,

then this type of organic growth help companies to attain and achieve top

line growth and pave a path for achieving market monopoly or market

leadership. Lubatkin,1983, Chattereji, 1986, Porter, Srinivasan and

Mishra, 2007.)

This theory advocates that the process of mergers and acquisitions increase

the market position and power by increasing the market share, which aids

the industry concentration. When the industry concentration increases, it

creates an avenue for growth and expansion, and this growth will open a

new platform for accessing newer technology. When the companies are

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operating in a concentrated market, they obviously have a control on the

prices, supply schedule and they will achieve a position to control and

dictate industry norms. The market power can be achieved and attained by

creating high entry barriers, and there by restricting the competitors from

venturing into the market. (Garish. O C.Ormiston, S. Rovit and J

Critchlow, 2001, Srinivasan ,and Mishra,( 2007.)

The various deals in all the sectors were analyzed based on the various

secondary data consisting of media releases, statements, issued by the

organization in the public domain. On analysing the deals prima faci and at

the outset, looking at the visions and intent of both the organisations

involved, and on also observing the objectives of both the organisations to

enter into the deal, it was observed that, the following deals from the

various sectors fall under the above mentioned hypothesis. These deals

were grouped on the basis of their leadership position and the strategic

intent and the objectives intended by the organizations.

First let us consider the steel and metals sector. The following are the deals

in the steel sector which can be placed under the above hypothesis.

SECTOR: Steel and Metals

DEAL: Arcellor Mittal and Uttam Galva

ArcelorMittal, having the industrial presence in more than twenty

countries enjoys a leadership position in technically advanced products

and by the virtue of a high level integration from iron ore mining at one

end of the value chain and the distribution network at the other. The vision

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of Arcellor Mittal was to become the largest and safest steel company in

the world. (www.arcellomittal.com)

Arcellor Mittal, one of the world’s largest steel company and a leading

supplier of quality steel products in all major markets including,

automotive, construction, household appliances and packaging, with

leading R&D facilities as well as sizeable captive supplies of raw materials

and outstanding distribution networks, was looking for avenues to enter

into high growth Indian and Chinese markets to add to its leadership

position. (www.arcellormittal.com)

Uttam Galva Steels Limited is one of the largest manufacturers of cold

rolled steel ("CR") and galvanized steel (GP) in western India. The

Company is into the business of procuring hot rolled steel (HR and

processing it into CR and further into GP and Color Coated Coils. Uttam

Galva Steels Limited, with a net income of 1024.70 million (US $ 22.48

million) in 2010, is among the largest manufacturers of cold rolled steel

and galvanized steel (GP) in Western India, with a capacity of 0.8 million

tones, wanted to transform itself from a galvanized player to an integrated

steel maker. (www.ourmetals.com, www.uttamgalva.com)

The vision of Uttam Galva was to consistently provide quality steel

products and ensuring customer delight and the mission was to become the

world’s favored steel products brand. (www.uttamgalva.com)

This was a 497 crore deal, which materialised in three different stages.

During the first and the initial stage, Arcellor Mittal purchased 5% stake

for Rs 69.6 crore at Rs120 a share. In second stage, ArcelorMittal made an

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open offer to buy a 30% stake at the same price valuing the company at

Rs1, 384.3crore.

On analysing this deal in line with the vision of the organizations involved

in the deal, and the hypothesis with respect to the strategic objective of the

organizations involved, this deal enabled Uttam Galva to capitalise on the

strengthened brand name of Arcellor and aided Uttam Galva to expand

its production portfolio by utilizing the superior operating practices of

Arcellor Mittal thereby helping the company to increase its market

position, which is in line with the hypothesis. This deal helped and aided

Arcellor Mittal in becoming an integrated producer of the highest quality

steel and provided the company an access to the growing Indian steel

market which provided good prospects in the long run which enabled the

company to improve profitability by widening the production portfolio

and thereby increase its market share, and this deal also enabled

ArcelorMittal achieve revenues of $78.0 billion and crude steel production

of 90.6 million tones, representing approximately 8 per cent of world steel

output in 2010, the benefits which are achieved are in line with the

hypothesis. In short, the result of this M&A clearly shows that this deal

has been able to achieve the strategic intent as well the strategic objectives

of both the organizations. (www.mittalsteel.com,

www.workforarcellormittl.com, www.economictimes.com)

DEAL: Corus and Tata

The Tata Steel group is a company which always believed in facilitating

the benefit of the countries of its operations, benefiting the organizations it

is associated with and the employees involved with the company in its

journey to growth. This company has built its prominent presence across

the globe not limiting its operations only in India. The various investment

moves of Tata Steel abroad have helped the company to expand and tap

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the production and marketing network in Europe, South East Asia and the

Pacific-rim countries. Tata company believes according to the company

sources that diversity of any organization enriches the collective

capabilities and that a clear shared vision is a key factor for organizational

success. It attempts to achieve this by fostering team work, nurturing

talent, and enhancing leadership among its people. It also believes in

creating value to its customers by delivering premium products and

services, by developing leading edge solutions in technology, processes

and products as the stated and practiced philosophy of the organization.

Tata Steel aimed to become a global steel industry bench mark for value

creation and corporate citizenship. (www.tatasteel.com, www.rediff.com)

The Corus group which is now known as Tata Steel Europe was created by

the merger of Koninklijke Hoogovens and British Steel. Corus is the

second largest producer of steel in Europe. Corus group aimed on achieving

leadership positions in growing markets which would ensure sustainable

growth. (www.finance.mapsofworld.com,www.tatasteeleurope.com)

Looking at the details of the deal, this was an all cash deal. After various

negotiations from both sides, Tata steel bought an 100 percent stake in the

Corus group on January 30, 2007 for a bid amount of 7.6 $ billion. This

deal made Tata Steel the world’s fifth largest steel group. Prior to this deal,

Tata steel was majorly catering to the Indian market which was accounting

to the 69% of the sales of the company. (www.financial express.com,

www.icmrindia.com, www.equitymaster.com)

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By entering into this, Tata Steel aimed to gain access to the global steel

market and expand its production capacity to keep pace with growing

demand for steel and become a market leader and this deal would enable

Corus to get a low cost partner to increase the profitability in the long

run.(www. Rediff.com, www.imrindia.com)

The deal is in line with the vision, strategic intent and objectives of Tata

Steel and helped and aided Tata, to move from world’s 56th largest steel

maker position to the 5th largest steel maker, thereby increasing its

leadership position and market share which is in line with the hypothesis.

This deal also helped to create a manufacturing and marketing network, in

various Pacific countries which helped the organization in increasing the

market share which once again confirms our hypothesis. This deal also

enabled Corus to enter into the emerging Asian markets.

(www.equitymaster.com, www.boloji.com)

DEAL: Arcellor and Mittal

The company, Arcellor was created by a merger of the companies,

Aceralia (Spain), Usinor (France) and Arbed (Luxembourg) in 2002.

Arcellor S.A became the world’s largest steel producer in terms of

turnover and the second largest in terms of steel output in 2004, which

advocated the inherent desire to grow and increase the market share.

(www.arcellomittal.com)

The vision and strategy of Arcellor was to grow continuously with

emphasize on size and scale and they aimed at achieving product diversity

by producing high value products and concentrating on high and

continuous growth by producing customer focus products based on

customer needs and wants. (www.arcellomittal.com)

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This deal would help the company in achieving rapid integration; in

effectively managing the daily operations and in accelerating revenue and

profit growth. This deal was expected to create a truly global steel

company with leading positions in the five main regions (South America,

NAFTA, European Union, Central Europe and Africa). It would also

enable Arcelor to expand its operations in high-growth economies with

low-cost, profitable assets and local operating expertise in numerous

emerging markets and will give it leadership position in high-end segments

in North America, with strong R&D capabilities.

(www.arcellormittal.com)

Arcelor would get access to raw materials and upstream integration and

very low cost slab potential in Ukraine to serve West Europe.

(ww.workforarcellormittal.com, nrao-m-a-handbook.bogspot.in)

Mittal Steel, which was formed by the acquiring of LNM Holdings with

Ispat International, and by the subsequent merger of both the companies

with International steel group had the vision of consolidation of the steel

industry based on geographical reach and product line expansion. The

company concentrated upon its core competence of identifying the right

plants for acquisitions and investing the right amount of money and people

and turning them into profitable ventures. The deal would help the

company in expanding geographic footprint with leading positions in a

number of regions. This Geographic diversification would reduce volatility

for the enlarged group while presenting numerous strategic opportunities.

It would also strengthen the range of products and solutions for global

customers and would give the company a leadership position in high-end

segments in Western Europe, with strong R&D capabilities.

(www.ibscdc.org, www.slideshare.net)

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The merger of Arcellor and Mittal which materialized on June 25th, 2006,

paved a revival path for a very fragmented steel industry and this deal led

and initiated an integration path for this unconsolidated sector

(www.8questions.wordpress.com)

On analysis of this deal once again confirms the hypothesis, the vision and

the strategic intent of the organizations involved which were achieved.

This deal enabled Mittal to consolidate its leadership position in the high

end segments in North America. Arcelor benefited by the successful

distribution network in Europe. This deal resulted in a combined company

which held 10 % of the global steel market and also enabled Tata Steel

gain access to the global steel market to expand its production capacity to

keep pace with growing demand of steel and to increase its leadership

position. This deal also enabled Corus to utilise the benefits of a low cost

partner and to increase its profitability in the long run, which is in line with

the hypothesis. (www. 8questions .wordpress.com,

www.arcellormittal.com)

DEAL: Novelis and Hindalco

Novelis, headquartered in Atlanta is a leading producer of rolled aluminum

products in Europe and South America, and number two producer in both

North America and Asia, and the global leader in aluminum beverage can

recycling. The company believes in creating a future in which it would

continuously reinforce the value proposition offered to the customers by

creating high-value products through innovation, and making the world

lighter, brighter and better. This deal with Hindalco would provide good

value for share holders as the Novelis which was in huge financial problem

according to reports. This deal would also increase the credibility as it was

going through constant restructuring and would also improve the debt –

equity ratio of the company. (www.novelis.com)

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Hindalco an industry leader in aluminium and copper, the metals Flagship

Company of the Aditya Birla Group is the world's largest aluminium

rolling company and one of the biggest producers of primary aluminium in

Asia. Its copper smelter is the world’s largest custom smelter at a single

location. This company according to company sources wanted to become a

metals major, global in size and reach, operating globally and excelling in

everything it did, thereby creating value to its share holders.

(www.hindalco.com)

This merger would help the company to establish itself as a global

integrated aluminium producer with low-cost alumina and aluminium

production facilities combined with high-end aluminium rolled product

capabilities. This merger would enable Hindalco to emerge as the biggest

rolled aluminium products maker and fifth –largest integrated aluminium

manufacturer in the world. With this merger, Hindalco would be able to

ship primary aluminium from India and make value-added products and

thereby increase the scale of operation, and enhance the global presence.

This acquisition would give Hindalco access not only to higher-end

products but also to superior technology, which would aid the company to

become the world's leading producer of aluminium flat rolled products.

This deal would also give Hindalco a strong presence in recycling of

aluminium business. (www.business-standard.com, www.hindalco.com,

www.iitk.ac.in)

Coming to the details of the deal, Hindalco acquired Novelis in 2007.

Novelis Inc. a world leader in aluminium rolling and can recycling,

manifest a noteworthy milestone in the history of the aluminium industry

in India. Hindalco acquired Novalis at enterprise value of approximately

US $6.0 billion. The acquisition was in an all-cash transaction. It included

approximately US $2.4 billion of debt. (www.business-standard .com,

www.hindalco.com, www.iitk.ac.in)

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On analyzing the deal with respect to the strategic intent and objectives

intended, it was found that this merger made Hindalco, an established

global integrated aluminium producer with low-cost alumina and

aluminium production facilities accompanied with high-end aluminium

rolled product capabilities and post merger Hindalco became the largest

rolled aluminium products maker and fifth largest integrated aluminium

manufacturer in the world, which was in tandem with its vision of

becoming a premium metals major global in reach and size, and Hindalco

was able to achieve a 60% share in the presently small but potentially high

growth Indian products for rolled products, which fulfilled its strategic

objectives which are in agreement with the hypothesis. With respect to

Novelis with a global market share of about 19%, Novelis became the

global leader in aluminium rolled products and aluminium can recycling,

which again confirms the hypothesis.. (www.business-standard.com,

www.hindalco.com)

The next section now presents the various deals in the pharmaceutical

sector.

SECTOR: Pharmaceuticals

DEAL: Pfizer and Wyeth

Pfizer is a company which is committed to apply science and other

resources to improve health and well being at every stage of life. Pfizer is

one of the highest spenders and leaders in pharmaceutical R&D globally,

Pfizer has made clinical research investments of US$ 6.28 million

(November 2009) in India .They have a leading portfolio of products and

medicines that support well being of human beings and they have an

industry leading plans to manufacture new products that have the potential

to cure life threatening diseases. Pfizer wanted to be recognized for

meeting the diverse medical needs of patients in Emerging Markets around

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the world in an innovative, socially responsible and commercially viable

manner. Pfizer aimed to strive and achieve a leading place as the world’s

premier research based pharmaceutical company with the mission of

becoming the world’s most valued company to the patients, customers,

shareholders, business partners, families and the communities in which

they operate. (www.pfizer.com)

Pfizer was looking for an opportunity to diversify its pharmaceutical

product portfolio with focus on bio pharmaceuticals and vaccines wherein

it had a very little presence. Pfizer also wanted to reduce its over

dependence on one product, the patent for which was due to expire, the

drug which was accounting for 25% of the company’s revenue. It was

expected that this deal would enable Pfizer an entry to the small molecules

market. This deal would also help to arrest the declining sales of Pfizer and

would also enhance R&D productivity further by leveraging the combined

expertise of the companies in areas such as Alzheimer’s disease,

inflammation, oncology, and pain and psychosis and thereby increase the

product range and the market share. (www.pfizer.com)

According to Wyeth, it wanted and aimed to lead the way to healthier

world and to produce the healthcare products that would improve lives and

deliver outstanding value to the customers and shareholders. Wyeth had

strong product lines and it used to market its products in more than 140

countries and had manufacturing facilities in five continents. During late

2002, the company was uncertain about its total eventual liabilities which

made the company unable to reach merger agreements.

(www.fundnguniverse.com)

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Pfizer acquired rival drug maker Wyeth in a $68-billion cash-and-stock

deal. The combined entity, it was expected, to generate about Rs 1,500

crore revenues and would be one of the top 10 drug firms in the domestic

market. After this deal the two companies would have seventeen different

prescription drugs on the market in 2009. Owing to this deal each

company would bring $1 billion a year. After the joint operation these two

companies would result in a judicious diversification, scale and lot of

flexibility and ensure position of Pfizer’s as world’s largest pharmaceutical

company.(www.pfizer.com)

After the deal, the new entity became world’s best biopharmaceutical

company owing to its amazing blend of diversification, flexibility, and

scale. These qualities made the new entity a major force to reckon with in

a new dynamic global health care environment. The newly combined

company became the world’s best and largest pharmaceutical company,

offering its customers a very high range of products for every stage of life.

(www.news.bbc.co.uk)

On analyzing the deal with respect to the hypothesis under consideration, it

is well justified as Pfizer, the world’s leading Pharma company which was

striving to achieve and sustain the position and which was intending to

move away from its over dependence on a single drug which accounted for

25 % of its revenue, benefited from this deal with Wyeth ,which was one

of the largest Pharma industry and which had a global presence, this deal

helped Pfizer getting a strong hold in bio-pharmaceuticals and also by

Wyeth’s global presence and which was one of the largest Pharma

industry, which goes in line with the above

hypothesis.(www.news.bbc.co.uk)

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The next section now presents the various deals in the telecom sector, at

the outset can be placed under the above hypothesis.

SECTOR: Telecom

DEAL: VSNL and Teleglobe.

Videsh Sanchar Nigam Limited (VSNL) is a public sector enterprise to

cater to overseas communication services incorporated in 1986. The Indian

government privatized VSNL and the Tata Group took controlling stake in

the company in 2002. It is India's biggest player in international long-

distance services with a strong pan-India presence in domestic long-

distance services. The company runs landing stations, undersea cables,

managed services, leased lines and data centers through-out India. It also

operates network of earth stations, switches and submarine cable systems

and provide telecommunications services such as mobile, IP and voice

services. With more than 415 direct and bilateral relationships with leading

international voice telecommunications providers, providing more than 17

billion minutes of international wholesale voice traffic annually, VSNL is

the world’s biggest international wholesale carrier.

VSNL aimed at becoming a global industry leader providing customers

with converged communications solutions and wanted to expand their

presence into new markets and to provide a complete portfolio of solutions

to the global client base. (www.wikia.com)

The acquisition of Teleglobe would as expected make VSNL the leader in

voice services in the world and would gain benefits related to

infrastructure, operations and services. VSNL would emerge as a global

telecommunications company with operations in India, Sri-Lanka,

Singapore, South Africa, United Kingdom, Canada and the United States

of America.(www.wikipedia.org)

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Teleglobe Canada offers international telecommunications services

including voice, data and Internet protocol, and mobile signaling services.

The company owns and runs telecommunications networks, and subsea

and terrestrial cable systems, as well as offers satellite capability

connecting the Internet. It also functions as an Internet service provider.

The company aids telecommunications, mobile operators, and Internet

service providers. (www.tatacommunications .com)

As per the data, the acquisition which transacted at 1000 crores made

VSNL, the leader in voice service in the world, making it to achieve the

strategic objective it wanted to achieve and VSNL scaled higher scalability

and better connectivity. The merged company got access to broad based

ownership of data, voice and mobile network spanning 240 geographical

locations, which proves that this is in line with the hypothesis.

(www.tatacommunication.com, www.businessstandard.com)

DEAL: Vodafone and Hutchison-Essar

Hutch Essar a leading Indian telecommunications mobile operator with

23.3 million customers representing a 16.4% national market share

operates in 16 circles and has licences in additional six circles. In

December 2005, Hutch Essar reported revenue of US$1,282 million,

EBITDA of US$415 million, and operating profit of US$313 million and

in the first quarter 30 June 2006, Hutch Essar reported revenue of US$908

million, EBITDA of US$297 million, and operating profit of US$226

million.

Hutch, which expanded rapidly, was the third largest mobile service

provider in India which was facing the problem of saturated urban market

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wanted to target the rural market. But Hutch realized that targeting rural

market would not fetch the company higher returns and high average

revenue per user (ARPU) and hence it wanted to sell of its interest in India

which would enable it to be one of the Asia’s best capitalized companies.

( w w w . a s i a l a w . c o m )

Vodafone which is the world’s second largest Mobile telecommunications

company measured by both subscribers and revenues wanted to enter the

growing telecommunication market in India and as Hutch was the fourth

largest company in terms of market share, customer base in India and India

being the second most populated country with only 13 % mobile phone

penetration and Vodafone had a lot of scope to utilize this opportunity as

Hutch was already a visible brand in India. (www.vodafone.com)

If we look at the details of this deal, UK's Vodafone acquired stake in

Hutch-Essar from Hutchison Telecom International (HTIL). It had paid a

discounted price of $10.9 billion in cash for getting the 52% stake held by

Hutchison Telecom International (HTIL). Post completion, the deal gave

access to one of the fastest growing mobile markets.

(www.voda fone . com)

Looking at the deal of Vodafone and Hutchison–Essar, this deal

importantly, corroborated with Vodafone’s strategy of being in the top

three mobile operators wherever it operates. This deal also aided in

creating value in emerging mobile markets and realizing the same for the

benefit of shareholders at the right time. (www.indiatimes.com

www.economic times.com, www.123jump.com)

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The deal is considered to be a successful one. Today, Vodafone has around

130,920,732 users and 23% market share in India operating in all major

circles. According to Pitch-IMRB survey (2008), Vodafone was ranked

among the top 50 service and media brands in India, which corroborates

the achievement of the strategic objectives intended for which is in line

with the hypothesis (www.articles.timesofindia.com)

The next section presents an analysis of deals in the chemicals sector.

Sector: Chemicals

Deal: Reliance Industries and Hualon

Reliance Industries Limited (RIL) is India’s largest private sector company

on all major financial parameters like ,with turnover of Rs1,10,886 crore

(US$ 25.51 billion), cash profit of Rs15,768 crore (US$ 3.63 billion), net

profit of Rs10,908 crore (US$ 2.51 billion) and net worth of Rs57,147

crore (US$ 13.15 billion). RIL is the first and only private sector company

from India to feature in the Fortune Global 500 list of ‘World’s Largest

Corporations’ since 2004 and ranks amongst the world’s Top 200

companies in terms of profits. RIL emerged in the world’s 10 most

respected energy/chemicals companies and amongst the top 50 companies

that create the most value for their shareholders in a global survey and

research conducted by PricewaterhouseCoopers and Financial Times in

2004. RIL also features in the Forbes Global list of world’s 400 best big

companies and in FT Global 500 list of world’s largest companies.

(www.hindu.com)

Reliance aimed at consolidating its position as the world’s largest

polyester manufacturer and this deal would enable Reliance to strengthen

its position further as the World’s largest polyester manufacturer with 2.5

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million tones capacity, as this deal will add 25% increase from the existing

capacity and increase in revenue by around USD one Billion, and will

enable it achieve more than 7% global market share in polyester fiber and

yarn. The integrated assets of Hualon will help RIL to strengthen its

position in the entire textile value chain and RIL will graduate to become a

solution provider to the global textile industry. (www.hindu.com)

Established in 1989, Hualon is an integrated polyester to textile

manufacturing company in Malaysia with half a million tons of polyester

capacity, and the company also owns nylon filament manufacturing

capability with highly automated plants , cutting edge technology and the

most advanced machinery. Hualon which was aiming to ease out of

bankruptcy by entering into an alliance with financially strong partner.

The deal which materialized for Rs 2000 crore, enabled to increase the

total market share of reliance from 5 % to 7 % in the global textile

industry. This acquisition raised the polyester output by 25% and as

Hualon was the fifth largest exporter in the world, on acquiring it

Reliance was able to capture the increased market share and thereby

increase its position, which corroborates the achievement of the objective

intended which are in agreement with the hypothesis. (www.hindu.com,

www.domain-b.com)

On detailed analysis of deals in the Chemical sector, the strategic

objectives intended were achieved as this deal enabled Reliance to

consolidate its position as the world’s largest polyester manufacturer with

added 25% increase in the existing capacity, and an increase in the revenue

of US $ one billion which enabled it to achieve more than 7% global

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market share in polyester fiber and yarn which satisfied its strategic

objectives which is in line with the hypothesis.

CONCLUSION

The deals which on the outset which were placed under hypothesis one

were, Arcellor Mittal - Uttam, Tata – Corus, Novelis – Hindalco, in the

steel and metals sector, Pfizer – Wyeth in the pharmaceutical sector, and

VSNL – Teleglobe, Hutch – Vodaphone in the telecom sector, and

Reliance – Hualon in the chemicals sector.

These deals were grouped on the basis of their leadership position and the

strategic objective and the strategic intents of the organizations concerned.

On analyzing the various deals in detail, of the steel and metals sector,

which at the outset and prima foci were placed under the above hypothesis,

it was found that, the deals achieved the strategic intent and objectives

which they planned to achieve. Uttam Galva and Arcellor Mittal achieved

the objectives which aimed to achieve by this deal as in 2010. Arcelor

Mittal scaled revenues of dollar 78.0 billion and crude steel production of

90.6 million tones, representing approximately 8 % of the world steel

output, and gained more market share. On analyzing the Tata – Corus deal,

this deal was also able to achieve the objectives which it wanted to achieve

with respect to the vision and intent. This deal enabled Tata to move from

the world’s 56th largest steel maker position to the fifth largest steel

maker, thereby increasing its leadership position. On analyzing the

Arcellor – Mittal deal, this deal was also able to achieve the objectives it

set to achieve in line with the hypothesis, as this deal enabled Mittal to

achieve leadership position in the high end segments and was also

benefitted by the successful distribution network in Europe. This deal also

resulted in a combined entity which held 10% of the global steel market.

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On analyzing the Novelis- Hindalco deal, it was found that this deal was

able to achieve the objectives it set to achieve. This deal enabled Hindalco

to become the largest rolled aluminium manufacturer and the fifth largest

integrated aluminium manufacturer in the world and it was able to achieve

60 % share in the potentially high growth Indian market. Novelis on the

other hand became the global leader in aluminium rolled products with a

market share of about 19%, which is in line with its vision.

On analyzing the Pfizer Wyeth deal, of the pharmaceutical sector, this deal

was also successful in achieving the strategic objectives and intent which it

intended to achieve and after the deal, the new company became world’s

top biopharmaceutical company owing to its amazing blend of

diversification, flexibility, and scale. These qualities made the new entity a

major force to reckon with in a new dynamic global health care

environment. The newly combined company became the world’s top and

largest pharmaceutical company, offering its customers a very high range

of products for every stage of life. (www.news.bbc.co.uk)

On analyzing the various deals of the telecom sector, which at the outset

and prima faci were placed under the above hypothesis, on detailed

analysis it was found that, with respect to the deal of VSNL and Teleglobe,

the deal achieved the strategic intent and objectives it planned to achieve,

as this deal enabled VSNL to become the leader in the voice services in the

world and this enabled the accessibility of networks spanning 240

networks, thereby increasing the market share. Analysis of the Vodafone-

Hutch deal similarly revealed that this deal was also able to achieve its

strategic intent and objective and was in alignment with Vodafone’s

strategy of being in the top three mobile operators and it enabled Vodafone

to gain a market share of 23%.

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On analyzing the deals of the chemical industry, the deal of Reliance and

Hualon was also successful as this deal was able to aid in the increase in

the polyester output of Reliance by 25% and reliance was able to increase

its market share. It can therefore be concluded that the organizations under

study which are in leadership positions use mergers and acquisitions for

increasing market share and are properly aligned to the visions, strategic

objectives and strategic intent of the organization.

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HYPOTHESIS 2

The companies which are not market leaders but have excess

resources and good vision uses these moves to improve and strengthen

their vision.

This hypothesis is based on the thought that the mergers and acquisitions

which are undertaken by resource rich companies and companies with

good vision help these companies to strengthen their positions and also

help the companies to sail through any crisis. (Porter, Srinivasan and

Mishra,(2007)

The various deals in all the sectors were analysed based on the various

secondary data consisting of media releases, statements, issued by the

organization in the public domain. On analysing the deals prima faci and at

the outset, looking at the visions of both the organisations involved, and on

also observing the objectives of both the organisations to enter into the

deal, it was observed that, the following deals from the various sectors fall

under the above mentioned hypothesis. Primarily these deals were grouped

on the basis of the organizations resources and vision.

The following section presents the analysis of the deals of the

pharmaceutical sector.

SECTOR: Pharmaceuticals

DEAL: Dr. Reddy’s Laboratories and Betapharm Arzneimittel

Established in 1984, Dr. Reddy's Laboratories Ltd. is an integrated global

pharmaceutical company, committed to provide affordable and innovative

medicines for healthier lives. (www.drreddys.com)

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This deal with Betapharm, it was said , would enable the company to cater

and access the German generics market which is the second largest generic

market after U.S and grow at a much faster rate in Germany. The

acquisition would help the company to utilize the global product

development and marketing infrastructure of Betapharm and to expand its

presence in the European market in the long run. This deal would also help

DRL realize its ambition of becoming a US$1 billion mid-size global

pharmaceutical company by 2008. (www.dr reddys . com)

Betapharm Arzneimittel GmbH was founded in Augsburg in 1993. The

pharmaceutical company distributes reliably high-quality generics

(unpatented medicines) at affordable prices and is one of the leading

generic companies in Germany (www.betapharm.com).

This deal would enable Betapharm to add more products to its portfolio

and grow at a much faster rate in Germany. This acquisition would also

enable the organization to utilize DRL's global product development and

marketing infrastructure to expand its presence in the European market in

the long run. (www.nrao-m-a -handbook .b logspo t . i n )

On February 15, 2006, Dr. Reddy's Laboratories Limited (DRL), a leading

Indian pharmaceutical company, acquired the fourth-largest generic

pharmaceutical company in Germany. The acquisition was hailed as the

biggest overseas acquisition made by an Indian pharmaceutical company.

(www.nrao-m-a -handbook .b logspo t . i n )

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This deal helped and aided both the companies in their growth and

expansion plans which had growth and expansion as their strategic vision.

This deal enabled Betapharm to expand its growth trajectory and also

provided Dr. Reddy a strong foundation to leverage global product

development and marketing infrastructure to build a significant generic

business in the long run. This deal resulted in the surge of revenue for

Betapharm by 20% i.e., the revenues increased to INR 9824 million from

INR 8189 million in 2007 – 08, which justifies the achievement of the

strategic objectives intended for in line with the hypothesis.( www.nrao -

m-a -handbook .b logspo t . i n ) . In other words the organizations

which are resource rich used the deal to improve and strengthen their

vision.

The next section presents the analysis of the deal in the infrastructure

sector.

Sector: Infrastructure

DEAL: Lafarge and L&T

L&T is a technology, engineering, construction and manufacturing

company which is one of the largest and most respected companies in

India which is committed to total customer satisfaction and enhancing

shareholder value. A thrust on international business by the organization

has witnessed the overseas earnings of the company grow significantly

with offices and manufacturing facilities spread across multiple countries.

L&T was unable to manage the RMC business which it had retained and

which was spread across the country. This deal would enable L & T to buy

out from this business which it was finding difficult to manage.

( w w w . l a r s e n t o u b r o . c o m)

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Lafarge which entered the Indian market in 1999 through its cement

business is committed to offer its customers the best in innovative

materials and reliable products and services, reinforcing company’s

position as the world leader in relation to suppliers, employees, customers

and shareholders, generating value for clients, delivering the value creation

that match shareholders expectations .This deal would enable, Lafarge to

lead the Indian RMC (Ready-mix concrete) market and capture a market

share of 25 per cent in India. As the RMC market is expected to grow, this

deal will enable Lafarge to get access to 66 concrete plants of L&T located

in key markets. (www. l a f a rge . i n )

The deal was worth Rs. 1,480 crore ($349 m) and this deal was in tandem

with the long term strategy of L & T as L & T wanted to exit its non core

business and concentrate on its core business and also on the long term

strategy of Lafarge which wanted to capture the potential market of RMC

business in India. (www.bus ine s s - s t anda rd . com)

This deal enabled L & T to concentrate on its core business and this deal

enabled Lafarge to lead the Indian RMC market , which is a growing

market and to capture a market share of 25% and enabled an access to 66

concrete plants of L & T located in the key markets including Delhi,

Kolkata, Mumbai and Bangalore, which strengthened the vision of

generating value to the clients and share holders and to reinforce the

company’s position as the world leader in relation to suppliers and other

stake holders which is in line with the strategic objectives and the

hypothesis. This enabled L & T which had a strong base in eastern India to

have a pan – Indian presence, and buy out from the business which it was

finding difficult to manage and to concentrate on its core business.

(www.business-standard.com, articles.economictimes.indiatimes.com).

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Again in short, the deal helped the respective resource rich organizations

to improve and strengthen their position.

The next section presents the analysis of the deals in the chemicals sector.

SECTOR: Chemical

DEAL: Tata Chemicals and GCIP

Tata chemicals aims to become one among the premier chemical

companies by using science to deliver new and innovative offerings

,enhancing value to the customers and deliver superior returns to all the

stake holders . It aims to serve society by using the advantages of science.

( w w w . t a t a c h e m i c a l s . c o m )

This deal with GCIP would help Tata Chemicals to become the world's

second largest soda ash maker and will also enable Tata Chemicals to

produce 50 per cent of its soda ash through the natural route, which is very

cost effective, according to company sources. Eventually this merger

would provide Tata Chemicals access to markets in North America, Latin

America and the Far East which complements its existing markets and

help the company to deliver new and innovative offerings.

( w w w . t a t a c h e m i c a l s . c o m )

General Chemicals is one of the world's prominent and most experienced

producers of soda ash and is registered as one among the top 5 global

producers. Their ability to produce high quality soda ash is due to their

increased efficiency in mining and processing. They wanted to achieve

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expertise in shipping and storage facilities and wanted to become a global

player in the chemical market. (w w w . g e n c h e m . c o m ) .

Tata Chemicals (TCL) acquired General Chemical Industries Products

(GCIP) for USD 1.05 billion. This deal enabled Tata Chemicals to become

the world`s second-largest producer of soda ash, and enabled Tata

Chemicals to produce 50% of its soda ash through the natural route which

is very cost effective as General Chemicals which is one among the top

five quality soda ash producers known for their increased efficiency in

mining and processing which would enable Tata Chemicals to offer

innovative offerings and maximum value to stake holders, and to become

one among the premier chemical companies which is in tandem with its

strategic objectives and the mission. This deal also enabled the

organization to access the resources in Kenya and India. This acquisition

aided TCL to access some of the fast growing markets like Latin America

with low-cost natural soda ash reserves, which proved to be a strategic

advantage to the company which aided in strengthening the vision of

providing maximum returns to share holders, which is in line with the

hypothesis. a s t h e d e a l h e l p e d t h e m t o s t r e n g t h e n t h e i r

p o s i t i o n s . (w w w . d o m a i n - b . c o m ) ,

The next section presents the analysis of the deals in the banking sector.

SECTOR: Banking

DEAL: ICICI and ICICI Bank

ICICI Bank India's second-largest bank offers a wide range of financial

products and services to both corporate and retail customers through

appropriate delivery channels. (www. i c i c ibank . com) . As ICICI was

90  

not performing well and was having a large amount of outstanding it

needed a partner who would provide with low cost funds.

ICICI was a diversified financial services provider having various

subsidiaries and affiliates providing a wide range of products and services

to its corporate and retail customers wanted to develop an extensive asset

base which would support the organization with a competitive customer

base and network. This merger would enable ICIC create an extensive

asset base and would provide excellent customer base and network.

(www.s l i de sha re .ne t )

Owing to this deal, with assets of Rs 1 lakh crore, ICICI BANK became

India’s second largest bank. This merger helped ICICI, to venture into

retail finance, insurance, investment banking and venture capital because

of ICICI banks complete product range. It also gained improved capability

to diversify asset portfolio and business revenues leading to large capital

base. The deal resulted into creation of an optimal structure leading to

retail business presence and allowing the full range of asset and liability

products to be offered to all retail customers (www.s l i de sha re .ne t ) .

This deal helped ICICI to obtain access to cheaper funds for lending, and

to increase its competitive advantage to the investors which would help it

to raise the capital needed so that it could improve its financial position

and creation an asset base which would also add to the customer base and

network. This deal helped both the organizations in the long run, as ICICI

was to able to create an extensive asset base, excellent customer base and

network, and ICICI bank was able to create an optimal structure leading to

retail business presence and enabling the bank a full range of asset and

liability products to be offered to all retail customers, which benefited both

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the companies, in strengthening their visions which is in line with the

hypothesis. (www.s l i de sha re .ne t )

DEAL: HDFC AND Centurian Bank of Punjab

HDFC is a leading company providing a wide range of financial products

and services to over three hundred cities using multiple distribution

channels. In a short span of time the bank has emerged as a leading player

in retail banking, wholesale banking, and treasury operations, its three

principal business segments. HDFC Bank as per the bank sources, was

looking for an appropriate opportunity that would add scale, geography

and experienced staff to its advantage. This deal with Centurian Bank

would enable HDFC to achieve these benefits as per the bank.

(www.hdfcbank.com)

Centurion Bank of Punjab serves individual consumers, small and medium

businesses and large corporations with a full range of financial products

and varied services on financial planning. The bank is also a prominent

player in foreign exchange services. (HDFC Bank and Centurion Bank of

Punjab merger at share swap ratio of 1:29, 2008)

This deal would result in the creation of a world class bank both with

respect to quality and scale and would enable to compete on both local and

global platforms and also will provide significant synergies to the

combined entity and enable to offer more diversified products to the

customers. (www.banknetindia.com)

This deal which materialized for Rs. 9510 crores was one of the largest

mergers in the financial sector in India. This deal strengthened the

distribution network of HDFC in the northern and southern regions and

HDFC was able to acquire a strong SME portfolio from CBOP customers

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and the combined entity had the advantage of having network of 1148

branches, which satisfied the objective of HDFC Bank which was looking

for an appropriate opportunity that would add scale, geography and

experienced staff to its advantage, which satisfied its strategic objective,

which is in agreement with the hypothesis as this deal strengthened the

bank’s position. (www.banknetindia.com)

The next section presents the analysis of the deals in the I. T sector.

SECTOR: Information Technology

Deal: Silverline Technologies Limited and SeraNova, Inc.

Silverline is a very renowned software development and software

integration services firm. The strategy and mission of Silverline is to focus

on clients in various industries like automotive manufacturing, financial

services, discrete manufacturing, technology and telecommunications etc.

by delivering its vast set of services via a strategic network of software

development centres present all across the globe. (w w w . c r n . c o m )

SeraNova is a globally renowned Internet professional services provider

company, which focuses primarily on 5 industry verticals namely

telecommunication, healthcare, automotive, technology and financial

markets. This deal as per the company sources would enable SeraNova to

come out of the financial crisis it was in.

(w w w . f i n a n c i a l e x p r e s s . c o m )

By this merger, both the companies aimed to posses, service portfolio

including strategy consulting, design, project implementation, legacy

systems transformation, and ongoing application management and also to

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have extensive operations throughout the U.S., North America, Europe and

Asia/Pacific countries. ( w w w . f i n a n c i a l e x p r e s s . c o m )

( w w w . s i l v e r l i n e t e c h . c o m )

Looking at the details of the deal, this deal was signed in March 2001, for

99 million U.S. dollars. This deal was a success as it created one of the

largest global service companies which were operating with similar

offshore delivery model and which could provide software, IT services

and e- business solutions to customers spread across U.S., North America,

Europe and Asia/Pacific countries, which satisfied the strategic objective

of Silverline to focus on clients in varied industries like automotive,

manufacturing, financial services, discrete manufacturing ,technology

,telecommunication etc. This deal also enabled SeraNova to come out of

the financial crisis it was in, which satisfied the strategic objectives of both

the entities which is in line with the hypothesis.

(w w w . s i l v e r l i n e t e c h . c o m )

Deal: TECH MAHINDRA- SATYAM

Tech Mahindra a leading provider, providing varied solutions and services

to the telecommunications industry, considering Customer first, aiming to

respond to customers speedily, courteously and effectively, seeking long-

term success for all stakeholders without compromising on ethics or

transparency and aiming to be the leading global software solution

providers to the telecom industry.

Tech Mahindra caters to telecom service providers, equipment

manufacturers, software vendors and systems integrators worldwide and

by the virtue of their proven delivery models; distinctive IT skills and

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decades of domain expertise enable clients to maximize returns on their IT

investment. (www.mahindrasatyam.com)

This deal would enable to leverage as per the company sources Tech

Mahindra’s expertise in Mobility, System Integration, and delivery of

large transformations to Satyam’s diverse set of clients across multiple

verticals. This deal would enable the combined expertise in Enterprise

Solutions to create a more complete value proposition to be delivered to

the clients. (www.mahindrasatyam.com)

Satyam founded by Ramalingaraju is a leading global business and

information technology services company that leverages deep industry and

functional expertise, leading technology practices, and an advanced, global

delivery model to help clients transform their highest-value business

processes and improve their business performance. Satyam aimed to

leverage information knowledge and technology to enhance human

endeavor and focus on serving the global customer base across 45

countries using its domain competence. This deal would enable Satyam to

get out of deep trouble that it was in and to deliver industry leading

performance and also one more opportunity to get its reputation back in

global IT industry. (Merger of Tech Mahindra and Satyam announced,

2012))

This deal materialized for the amount of Rs. 2800 Crore. This deal proved

to be successful because now the combined entity can cater to the varied

markets like telecom, manufacturing, technology, media and

entertainment, banking etc and this combined entity leveraged the

Mahindras expertise across diverse set of clients across various verticals

and the merged entity benefited from the operational synergies, economies

of scale, sourcing benefits and standardization of business processes,

95  

which is in tandem with Mahindras objective of maximizing returns on

their IT investment.. This merged entity created the sixth largest India

based IT services with revenues of $2.4 billion and a market value of over

$ 3 billion which satisfied the objectives of both the organizations, which

is in line with the hypothesis of strengthening vision.( Merger of Tech

Mahindra and Mahindra Satyam announced, 2012). Tech Mahindra was

able to use the strengths of Satyam, especially the highly skilled human

resources and help Satyam to come out of crisis.

Deal: WIPRO - INFOCROSSING

Wipro Technologies one of the largest product engineering and support

service providers worldwide provides extensive research and development

services, IT solutions and services, including systems integration,

Information Systems outsourcing, package implementation, software

application development and maintenance services to global clients, in

Asia Pacific and Middle East markets.

This deal would enable Infocrossing to increase its presence in U.S and as

Infocrossing provides integrated and managed infrastructure services in the

U.S. and also as the global IT infrastructure management is projected at

US dollar 150 billion. This deal was expected to be profitable in the long

run. (w w w . o f f s h o r i n g t i m e s . c o m )

Infocrossing Inc. caters to large and medium customers by offering

complete infrastructure management solutions and aids clients to

concentrate on fulfilling their strategic goals and aims to continuously

96  

strive to improve the offerings and solutions.( n e w s . o n e i n d i a . i n ,

w w w . o f f s h o r i n g t i m e s . c o m )

This deal would enable Infocrossing to improve the margins as this deal

would enable Infocrossing to utilize the data centers efficiently with the

aid of Wipro. This deal was able to achieve its strategic objectives as

Wipro which was able to leverage its offerings in healthcare, BPO and IT

infrastructure services in the U.S. and Infocrossing was able to manage its

data centers efficiently according to news online. (n e w s . o n e i n d i a . i n )

The next section presents the analysis of the deals in the consumer

durables division.

Sector: Consumer Durables

DEAL: Videocon – Daewoo

Daewoo Electronics Corp. (DEC) which is the third largest Korean

consumer electronics company is one of the world's leading manufacturers

of consumer electronics, operating 16 subsidiaries with 42 branches in

over 30 countries, aimed to provide innovative products is aptly backed by

extensive global research and development facilities having R & D and

sales centers in more than 40 countries worldwide. Daewoo believed in

enhancing the quality of life through advanced technology and valuable

products manufactured by it. It aims at sustainable development through a

proactive approach to environmental protection. (www.sntdaewoo.com)

This deal would aim and fulfill the company’s desperate need for

technology development in which Videocon is specialized which would

help the consumer durables market to grow. As Daewoo was suffering

97  

losses this deal would enable Daewoo to leverage the European market as

Videocon has a strong presence in the European market and Daewoo could

take advantage of the complementing nature of the Videocon’s business.

(www.videoconworld.com, www.financialexpress.com)

Videocon Industries which was incorporated in 1986 concentrates on two

core activities, including manufacturing, assembly, marketing and

distribution of consumer electronics and home appliances, and exploration

and production of oil and gas. This aims to delight and deliver beyond

customer expectations by implementing ingenious strategy,

entrepreneurship, improved technology, innovative products, and careful

thinking about the future. (www. Videoconworld.com)

This deal would enable Videocon to get the brand name of Daewoo and its

customer base in Europe & Asia. As Daewoo Electronics' market presence

is spread across 40 countries, this deal would provide Videocon an

opportunity to increase global sales in Electronics business in lucrative

markets of in the US, the UK and South-East Asia and also the advantage

of the manufacturing facilities in. Korea, Mexico , Vietnam and

China.(news.outlookindia.com)

The deal between Videocon and Daewoo took place for about Rs. 3200

crore and this was the Videocon third major global acquisition. This deal

was beneficial to Videocon as this brought about significant synergies as

Daewoo had varied product portfolio including microwave ovens, air–

conditioners, electric motors, vacuum cleaners and compressors. This deal

also enabled Videocon to access markets abroad and enabled the company

to strengthen its position in markets in which it has modest presence. This

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deal also enabled the company to leverage the R&D capacities of Daewoo

and also utilizes the manufacturing capacities of Daewoo and helped

Videocon to deliver and delight beyond customer expectations by

implementing ingenious strategy, entrepreneurship, improved technology,

and innovative products as Daewoo is backed by extensive R and D back

up. (www.dnaindia.com)

This deal benefited Daewoo as it was facing a major financial crisis. This

deal provided the much needed inflow of investments to continue its

operations, which is in line with the objectives behind the deal.

(www.thehindubusinessline.in)

The next section presents the analysis of the deals in the petroleum sector.

SECTOR: Petroleum

DEAL: Reliance Petroleum and British Petroleum

Reliance Petroleum Limited is one of the India's largest private sector

companies having interests in the downstream oil business. This deal with

BP will enable Reliance to source LNG from BP’s global facilities and this

deal will bring together BP’s exploration expertise in the deep sea regions

in tandem to the reliance project execution skills. This deal will enable

RIL to access to the BP's major's expertise in finding and pumping oil and

gas from deep below seabed. This will also reduce RIL's exploration risk

burden and will provide development opportunities. (www.ril.com)

BP global oil and gas company which is headquartered in London, is the

third-largest energy company and fourth-largest company in the world

measured by revenues ($308.9 billion) and one of the six oil and gas super

99  

majors.. BP is very actively present in various areas of oil industry like ,

exploration and production, refining, distribution and marketing,

petrochemicals, power generation and trading. (ne ws .one ind i a . i n )

This deal will enable BP, to make an entry into India’s exploration sector

with the advantage of a strong domestic player like RIL and this

partnership is in line with the organizations strategy of entering into

alliances with strong national players as the organization completely

acknowledges and understands the risks of operating alone.

(timesofindia.indiatimes.com)

This deal was executed for dollar 7.2 billion and was successful as this

deal enabled BP to get a strong foot hold in India and Reliance could take

advantage of the oil exploration expertise of BP and would complement

the expertise of Reliance project execution skill w o u l d c o mpl e me n t

t h e v i s i o n o f a d d i n g t o d e v e l o p me n t o p p o r t u n i t i e s a n d

l o w e r i n g t h e r i s k b u r d e n o f ex p l o r a t i o n . (t i me s o f i n d i a .

i n d i a t i me s . c o m)

Deal: Reliance Industries Ltd. and Reliance Petroleum

The Reliance Group is India's largest private sector enterprise, with

businesses in the energy and materials value chain. Reliance believes in

opting for a pursued strategy of backward vertical integration and opts for

being fully integrated along the materials and energy value chains.

(www.ril.com)

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This deal with Reliance Petroleum will enable RIL to gain advantage in

various parameters like: scale, global competitiveness, operational

synergies, logistics advantages and cost efficiencies. RIL being a

petrochemical company needs gas and naphtha which is produced by RPL.

This deal will ensure that nearly 25% of RPL’s output will be used for

captive consumption, bringing in large saving in terms of sales tax because

these transactions will be treated as inter divisional transfers for the

company. (www.scribd.com)

Reliance Petroleum Limited which was set up by Reliance Industries

Limited (RIL), one of India's largest private sector companies is subsidiary

of RIL, and having interests in the downstream oil business. This deal will

enable the companies which operate on continuous basis to achieve

synergy in terms of operation, maintenance and expansions. (www. rpl.

com)

This deal which signed for Rs, 660.75 crores, helped both the entities to

achieve operational efficiency, cost effectives from optimum logistics and

optimized product placement and risk management. This deal also resulted

in large saving in terms of sales tax because these transactions were treated

as inter divisional transfers for the company, which proved beneficial to

both the companies. (ww w . s c r i b d . c o m) .

CONCLUSION

The deals which on the outset which were placed under hypothesis two,

which states that organizations which are not market leaders but have

excess resources and good vision use these moves to improve and

strengthen their vision were, Dr. Reddy and Beta Pharma in the

pharmaceutical sector, L & T and Lafarge in the infrastructure sector, Tata

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Chemicals and General Chemicals in the chemicals sector, ICICI and

ICICI bank and HDFC and Centurian bank in the banking sector, Silver

line and SeraNova , Tech Mahindra and Satyam , Wipro and Infocrossing

in the I.T. sector, Videocon and Daewoo in the Consumer durable sector,

Reliance petroleum and British Petroleum, Reliance Industries Ltd and

Reliance Petroleum in the Petroleum sector.

On detailed analysis of the above deals with respect to the vision and the

strategic objectives behind these deals it was observed that all they were

successful in achieving the strategic objectives aimed The deal of

Betapharm and Dr Reddy , enabled Betapharm to expand its growth

trajectory and provided Dr. Reddy a strong foundation to leverage global

product development and marketing infrastructure and resulted in the

surge of revenue for Betapharm by 20%.

The deal of L & T and Lafarge enabled L & T to concentrate on its core

business and enabled Lafarge to lead the RMC market and to access 66

concrete plants of L & T located in the key markets including Delhi,

Kolkata, Mumbai and Bangalore.

The deal of Tata chemicals and GICP enabled Tata Chemicals to become

the world`s second-largest producer of soda ash and enabled the

organization to access the resources in Kenya and India and aided TCL to

access some of the fast growing markets like Latin America with low-cost

natural soda ash reserves.

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The deal of ICICI and ICICI bank enabled and helped ICICI to obtain

access to cheaper funds for lending, and to increase its competitive

advantage to the investors which would help it to raise the capital needed

so that it could improve its financial position and ICICI bank was able to

create optimal structure leading to retail business presence. The deal of

HDFC and Centurian bank strengthened the distribution network of HDFC

in the northern and southern regions and HDFC was able to acquire a

strong SME portfolio from CBOP customers and the combined entity had

the advantage of having network of 1148 branches.

The deal of SeraNova and Silverline enabled both the companies to posses

service portfolio including strategy consulting, design, project

implementation, legacy systems transformation, ongoing application

management and also to have extensive operations throughout the U.S.,

North America, Europe and Asia/Pacific countries. The deal of Wipro and

Infocrossing enabled Infocrossing to improve the margins as this deal

enabled Infocrossing to utilize the data centers efficiently with the aid of

Wipro, this deal was able to achieve its strategic objectives as Wipro

which was able to leverage its offerings in healthcare, BPO and IT

infrastructure services in the U.S. and Infocrossing was able to manage its

data centers efficiently.

The deal of Mahindra and Satyam created the sixth largest India based IT

services with revenues of $2.4 billion and a market value of over $ 3

billion which satisfied the objectives of both the organizations.

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The deal of Videocon and Daewoo helped Videocon to leverage the R and

D capacities of Daewoo and also to utilize the manufacturing capacities of

Daewoo and this deal helped Daewoo as it was facing a major financial

crisis, as this deal provided the much needed inflow of investments to

continue its operations. The deal of Reliance and BP was successful as this

deal enabled BP to get a strong foot hold in India and Reliance could take

advantage of the oil exploration expertise of BP.

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HYPOTHESIS 3

Declining firms choose these moves to maneuver/safeguard the

resources (financial, human, infrastructure) of the company.

This hypothesis is based on the fact that loss making or declining firms use

these moves of mergers and acquisitions to disown the assets which are

draining out the cash and other resources and to enable them to wipe out

the accumulated loses.( Srinivasan and Mishra,( 2007) ;

www.economictimes.indiatimes.com)

This hypothesis is based on the efficiency theory. Efficiency theories

provide a platform for the concept of synergy which advocates that, when

the companies merge or acquire, the value of the combined firms is more

than the individual value of the combining firms. Synergies can be of three

types, namely, financial synergy, operational synergy and managerial

synergy. Financial synergy results in lower cost of capital, operational

synergy results from combining operations of hitherto separate units or

from knowledge transfer, Managerial synergy are realized when managers

of either the acquiring or the target firm posses superior planning and

monitoring abilities to their counterparts. (Srinivasan and Mishra,(2007),

Lubatkin M(1983).

The various deals in all the sectors were analysed based on the various

secondary data consisting of media releases, statements, issued by the

organization in the public domain. On analysing the deals prima faci and at

the outset, looking at the visions of both the organisations involved, and on

also observing the objectives of both the organisations to enter into the

deal, it was observed that, the following deals from the various sectors fall

under the above mentioned hypothesis. The deals were also grouped on the

basis of the “declines”of atleast one of the firms.

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The following section presents the analysis of the deals of the steel and

metals sector,

SECTOR: Steel and Metals

DEAL: Bharat Refractories by Steel Authority of India

BRL which was set up in the year 1958, is in the manufacturing of various

products of the refractories and also offers various services in designing,

manufacturing and installation of various refractories. BRL which was

incurring losses over the years was lacking in technological advancements,

needed the support of a company with strong technical support and was

bogged down by the problem of ageing plant and equipment hence was

facing the problem of low capacity utilization and this merger would

provide BRL the right opportunity to manage its own resources and

upgrade itself technologically. (www.sail.com)

Steel Authority of India Limited (SAIL) is the leading steel-making

company in India. It is a fully integrated iron and steel maker, producing

both basic and special steels for domestic construction, engineering,

power, railway, automotive and defence industries and for sale in export

markets. SAIL is also among the five Maharatnas of the country's Central

Public Sector Enterprises.(www.scribd.com, www.sail.com)

SAIL manufactures and sells a broad range of steel products, including hot

and cold rolled sheets and coils, galvanized sheets, electrical sheets,

structural, railway products, plates, bars and rods, stainless steel and other

alloy steels. SAIL believes in being a World Class Corporation and the

leader in Indian Steel Business in quality, productivity, profitability and

customer satisfaction.(www.indiamart.com, www.sail.com)

106  

By opting for this deal, SAIL would be able to utilize the excess capacity

of BRL for its present and future requirement of refractories. The

advantage of BRL’s in-house refractory making capability and capacity

would provide SAIL with the strategic advantage at a time when the

company is expanding its production capacity.

Looking at the details of this deal, this deal took place on April 2007, for

the amount of 77.13 crore. As per the decision of the Government, BRL

merged with SAIL. The merger procedure was completed in 100 days and

the ultimate orders for merger were issued to effectuate the merger of BRL

with SAIL within 100 days.

If we look at this deal, this deal helped in the resource management,

especially financial and technical infrastructure. With this merger, BRL

which was facing shortage of financial resources was able to circumvent it

and was able to cushion its order levels as 90 to 95 %of the orders are

received from SAIL, and this deal also helped BRL to meet the industry

standards by procuring adequate raw materials, and achieve its strategic

objectives which is in line with the hypothesis. On the othere hand this

deal also enabled SAIL to utilize the excess capacity of BRL for its present

and future requirement of refractories, and achieve the mission of being a

world class corporation and leader in the Indian Steel business in quality,

productivity, profitability and customer satisfaction. This deal of BRL

helped BRL to safeguard its resources which is in agreement with the

hypothesis. On the other hand SAIL could use the excess capacity of BRL

for its present and future requirement.( www.siliconindia.com,

www.sail.com)

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DEAL: Novelis and Hindalco

Novelis , headquartered in Atlanta is a leading producer of rolled

aluminum products in Europe and South America, and number two

producer in both North America and Asia, and the global leader in

aluminum beverage can recycling. The company believes in creating a

future in which it would continuously reinforce the value proposition

offered to the customers by creating high-value products through

innovation, and making the world lighter, brighter and better.

(www.novelis.com)

This deal would enable Novelis to provide good value for share holders

as the Novelis was in huge financial problem, this deal would also enable

to increase the credibility of Novelis as it was going through constant

restructuring and would also help in improving the debt – equity ratio of

the company, which was 7 :1.(www.novelis.com)

Hindalco an industry leader in aluminium and copper, the metals Flagship

Company of the Aditya Birla Group is the world's largest aluminium

rolling company and one of the biggest producers of primary aluminium in

Asia. Its copper smelter is the world’s largest custom smelter at a single

location. This company aimed at becoming a metals major, both in size

and reach, operating globally and excelling in everything it did, thereby

creating value to its share holders.(www.hindalco.net)

This merger would help the company to establish a global integrated

aluminium producer with low-cost alumina and aluminium production

facilities combined with high -end aluminium rolled product capabilities.

This merger would enable Hindalco to emerge as the biggest rolled

aluminium products maker and fifth – largest integrated aluminium

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manufacturer in the world. With this merger, Hindalco would be able to

ship primary aluminium from India and make value-added products and

thereby increase the scale of operation, and enhance the global presence.

This acquisition would give Hindalco access not only to higher-end

products but also to superior technology, which would aid the company to

become the world’s leading producer of aluminium flat rolled products.

This deal would also give Hindalco a strong presence in recycling of

aluminium business. (www.hindalco.com, www.iitk.ac.in)

Coming to the details of the deal, Hindalco acquired Novelis in 2007.

Novelis Inc. a world leader in aluminium rolling and can recycling,

manifest a noteworthy milestone in the history of the aluminium industry

in India. Hindalco acquired Novelis at enterprise value of approximately

US $6.0 billion. (www.hindalco.com, www.iitk.ac.in)

As the company is likely to ship primary aluminium to Novelis for

downstream value addition it will work as a forward integration for

Hindalco. A debt component US $2.8 billion was taken by Hindalco to

finance the deal. This had put tremendous pressure on profitability because

of high interest cost. The presence of corresponding expertise of both the

companies led to the success of this deal. Hindalco faced certain problems

as Novelis was in debt but Hindalco managed it by its technology and

efficient manpower. (www.hindalco.com, www.iitk.ac.in,

www.slideshare.com)

This deal helped Hindalco as it got the advantage of the superior

technology of Novelis and it got access to global market as Novelis was

present in 11 countries, which enabled Hindalco to achieve its vision of

becoming a global market leader producing low cost primary aluminium in

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the world, which is line with the hypothesis as this deal helped Hindalco to

use the resources of Novelis. (www.business-standard .com)

This deal helped Novelis in coming out of the debt and helped to capitalise

on the technological superiority and its low cost operation to achieve the

objective as it got also the advantage of technology and process leadership,

cost-effective manpower and ready market which helped to rationalize the

cost structures and balance the pressure on the bottom lines which satisfied

the strategic objective which is in line with the hypothesis.

(www.iitk.ac.in). This deal was also discussed under hypotheis one. This

clearly shows that mergers and acquisition actions may have multiple

objectives.

The following section presents the deals of the analysis of the deals in the

aviation sector.

SECTOR: Aviation

DEAL: Air India and Indian Air Lines.

Indian airlines are a major Indian airline focusing primarily on domestic

routes, along with several international services to neighboring countries.

Indian Airlines is one of the largest regional airlines in Asia with its fully

owned subsidiary Alliance Air owing a fleet of 62 aircrafts, 4 wide

bodied Airbus A300s, 41 Fly-by-wire Airbus A320s, 11 Boeing 737s, and

other aircrafts. (www.oppapers.com, www.scribd.com)

Since 1953 Indian Airline's has been setting the standards for civil aviation

in India. It pioneered introduction of the wide-bodied A300 aircraft on the

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domestic network, the fly-by-wire A320, Domestic Shuttle Service and

Walk-in Flights. This is the most comprehensively renowned Indian brand

symbol that with passage of time became synonymous with service,

efficiency and reliability. With its network ranging from Kuwait in the

west to Singapore in the East and covering 75 destinations, 59 within

India and 16 abroad, Indian Airlines aimed at providing an extensive

network which would encompass the whole of the nation

.(www.scribd.com)

Both the companies faced fierce competition from domestic private &

global airline companies and reduction in market share. They viewed that

the new entity would be in a better position to bargain while buying fuel,

spares and other materials. In addition to this, both airlines, desired

international footprint would significantly would enhance their customer

base and allow easy entry into one of the three global airlines alliances,

while making it the largest airline in India and comparable to other airlines

. (www.in.news.yahoo.com, www.airindia.in)

Air India is a flagship carrier airline of India which operates a fleet of

Airbus and Boeing aircraft which serves Asia, Europe and North America.

Air India aimed at becoming a complete airline in every level.

(www.in.news.yahoo.com) (www.airindia.in)

Looking at the details of the deal, this deal was signed in August 2007.

After the formal approval from Ministry of Corporate Affairs State-owned

carriers Air-India and Indian Airlines were formally merged. The two

airlines were merged into a new company National Aviation Company of

India Ltd., with its operation on the domestic as well as international

sectors. With a combined fleet of 112 aircraft it was to be among the top

10 and 30 airlines in Asia and globally.

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This merger was aimed to aid in the growth and expansion of Air India

and also in achieving the synergies in the areas of sales and distribution

network, fuel procurement, material procurement, passenger amenities,

ground handling and parking facilities, among others.( www.times of

india.indiatimes.com,www.scribd.com,)

This deal was a hope to eliminate the huge financial mess and losses the

company was in. The entity Air India, was a debt ridden company and was

in a financial mess and this was an effort to wave off the losses of the

companies. (www.thehindubusinessline.in, www.scribd.com)

Looking at the situation post merger this merger failed because of two

reasons. This failure can be attributed to two reasons, one being the ageing

fleet and both the companies could not adjust to one another. It was

expected that merger of the two entities would result in a profit of Rs

1,000 crore in the first year itself. Instead, in the three years following the

merger in 2007 it has seen losses escalate from Rs 1,200 crore in the first

to Rs 2,600 crore in the second to Rs 5,500 crore in the third year. Each

time, the management of the airline blamed the losses either on high fuel

prices or intense competition or some other factor. The inescapable fact is

that the airline today has accumulated losses of Rs 16,000 crore.

(www. me d ie scapes . com)

On analysis of the deal with respect to the hypothesis, this deal was a

failure as the merger instead of wiping out the losses by utilizing the

resources of the other entity to its advantage, has witnessed losses during

consistent three years after the merger, which has escalated from Rs 2600

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crore in the first year to Rs. 5500crore in the third year, which does not go

in sync with the hypothesis.

DEAL: Paramount airlines and Go Air

Go Airlines (India) Ltd. a member of the Wadia Group, operates its

services under the brand GoAir. Launched in November 2005, GoAir, was

a low-fare carrier launched with the objective of commoditizing air travel,

by offering airline seats at marginal premium to train fares across India.

Go Air aimed at striving to maintaining and enhancing perception of its

services by consistently improving the quality and reliability of its

operations and to provide safe, secure and efficient transportation by

providing necessary importance to the details. GoAir which had a debt of

Rs 400 in its books aimed to come out of the financial mess by opting for

this deal. (www.livemint.com)

Paramount Airways promoted by Mr.Thiagarajan is the first Airline in

India to launch the New Generation Embracer 170/190 Family Series

Aircrafts. They wanted to become the India's most favorite Airline, the

inevitable first choice for business and leisure travelers alike, providing a

unique and enjoyable experience at affordable fares. Paramount Airlines

wanted to provide world class services with unique comfort, providing and

ensuring true value for the customers by punctuality and efficient

operations. Paramount airlines which was operating in the south region

was planning to enter the western region and also wanted to benefit from

the integrated benefits with respect to engineering, inventories, IT services,

etc. The airlines wanted to achieve a strong domestic network before

venturing into international operations and connecting to every major

airport in the country. (www.business-standard .com).

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By entering into this deal Paramount aimed to start its operation in the

western region and achieve integration benefits such as engineering,

inventories etc as a result of the integration. (www.business-standard .com,

www.pa r a moun ta i rways . com)

Looking at the details of the deal, the deal took place on 6th October, 2009,

for an amount of 100 -150 crore which was, a cash and stock deal.

This deal helped and solved the financial mess of GoAir, which was

having a huge debt of 400 crore, which was picked up by Paramount

airlines, which would help in reinstating the reputation of the organization.

Paramount airlines were able to enter into the western region. This merger

achieved the objective which it had set to achieve, which is in line with the

hypothesis. (www.buisnessworld.in,www.bullishindian.com,

www.business-standard.com)

The following section presents the analysis of the deals in the banking

sector.

SECTOR: Banking

DEAL: IDBI and United Western Bank

United Western Bank Ltd (UWBL), begun its operations on March 08,

1937. UWBL was confirmed as a Scheduled Bank in the year 1951.

UWBL is one of the most desired private sector commercial banks in

western India .With a vision of being a technology savvy, customer centric

progressive bank with a national presence; it is driven by the highest

standards of corporate governance and guided by sound ethical values. It

also provides several diversified products like automobiles, finance,

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housing finance, corporate finance, export finance, finance for education,

and finance to SMEs, etc. (www. theh indubus ine s s l i ne . i n )

Western bank was facing the problem of poor asset quality and

deteriorating financials and it was casting a gloomy picture for the banks

future growth. Conflicts between its major shareholders regarding the

ownership of the bank, poor governance and inefficient management of

capital were the main reasons responsible for the fall of UWBL, and the

aimed to come out of this crisis by entering into this deal.

( w w w . t h e h i n d u b u s i n e s s l i n e . i n )

IDBI Bank Ltd. is today one of India's largest commercial Banks. IDBI

wants to be the most preferred and the most trusted bank enhancing value

for all stake holders. It is currently the tenth largest development bank in

the world with respect to the reach with 1514 ATMs, having 923 branches.

They aimed at delighting customers with excellent services, deploying and

implementing world class technology, encouraging a positive, dynamic

and performance oriented work culture and expand global

presence.(www.idbi.com)

This deal would enable IDBI to expand its retail presence as it would get

ready access to ready physical infrastructure, thus enabling to mobilize

low cost funds and would also help IDBI to get exposure to agriculture

credit through this deal. (www. i db i . co m, www.

Theh indubus ine s s l i ne . i n )

Looking at the details of the deal, this deal was signed on October 3, 2006,

for an amount of 150 crore. The merger led to increase in IDBI’s asset

115  

base by Rs 7,166 crore (Rs 71.66 billion) with over 20% expansion in

deposits. It also provided IDBI access to a ready physical infrastructure,

facilitating it to assemble low-cost funds. Considering this deal, this deal

helped the United Western Bank to overcome and to circumvent the bad

debt of 450 crores it was carrying which served the objective of the deal

which is in line with the hypothesis. (www.the hindubusinessline.in,

www.rediff.com)

SECTOR: Media

DEAL: Time Warner (TBS) – NDTV Imagine

NDTV Ltd is India's biggest news and infotainment network. It was

established in 1988. With 23 offices and studios India's most modern and

sophisticated production, newsgathering and archiving facilities, it boasts

about the country's paramount and brightest reporters, anchors,

camerapersons and producers. With an unmatched history of effective

beginning of three news channels in India and abroad, NDTV 24x7 is an

undisputed leader in the English news segment.

The deal would enable NDTV to tide over a financial crisis, as it had

accrued a loss of Rs 86-crore loss during the quarter ending September

2009, and as of March 31, 2009, the debts had increased to Rs 112 crore.

(www.ndtv.com, articles.economictimes.indiatimes.com)

Time Warner Inc., a global leader in media and entertainment with

businesses in television networks, film and TV entertainment and

publishing, uses its industry-leading operating scale and brands to create,

package and deliver high-quality content worldwide through multiple

distribution outlets. (www.timewarner.com)

116  

This deal would enable Turner to establish a strong hold in the Indian

television market, as India being a major economy and having a long term

potential this deal would enable investment in India as the key priority of

Turner. (www. t i me warne r . com)

Turner Asia Pacific Ventures acquired a 92 per cent stake in NDTV

Imagine Ltd on December 8, 2009 for USD 126.5 million. Turner Asia

Pacific Ventures is a completely owned subsidiary of Turner Broadcasting

System, which is a part of the Time Warner media. (www.

ar t i c l e s . e c o n o mi c t i me s . i n d i a t i me s . c o m)

This deal achieved the objective as it enabled NDTV to tide over the huge

losses and it became a debt free company and it got an opportunity to

concentrate on its core competence in the English news genera and to

expand its business plans, which is in line with the hypothesis.

(www.prnewswire.co, www.timewarner.com).

The following deals from the various sectors were analyzed with respect to

the hypothesis, the various deals which were analyzed with respect to steel

and metal sector were, BRL and SAIL, Novelis and Hindalco, Air India –

Indian Airlines, Paramount – Go Air, in aviation sector, IDBI – United

Western Bank, in the banking sector, Time Warner and NDTV in the

media sector.

CONCLUSION

On detailed analysis of the above mentioned deals, all the above deals

except the deal of Indian Airlines and Air India was able to achieve the

117  

strategic objectives. Looking at the BRL – SAIL deal ,BRL which was

facing shortage of financial resources was able to circumvent it and was

able to cushion its order levels and SAIL was able to utilize the excess

capacity of BRL for its present and future requirement of refractories.

Looking at the Novelis – Hindalco deal , the deal helped Hindalco as it

got the advantage of the superior technology of Novelis and also this deal

helped Novelis in coming out of the debt .

If we look at the deal of Air –India and Indian Airlines , this deal was a

failure and the failure can be attributed to two reasons, one being the

ageing fleet and both the companies could not adjust to one another, and

achieve the synergies with respect to fuel procurement, material

procurement, passenger amenities, ground handling, parking facilities etc,.

Looking at the deal of Paramount and Go air, this deal helped in solving

the financial mess of GoAir, which was having a huge debt of 400 crore,

which was picked up by Paramount airlines, which helped in reinstating

the reputation of the organization and Paramount airlines was able to enter

into the western region.

Looking at the deal of IDBI and UWB, the deal provided IDBI access to a

ready physical infrastructure, facilitating it to assemble low-cost funds and

this deal, this deal helped the United Western Bank to overcome and to

circumvent the bad debt of 450 crores it was carrying.

Looking at the deal of NDTV – Time Warner, this deal enabled NDTV to

tide over the huge losses and it became a debt free company and it got an

opportunity to concentrate on its core competence in the English news

genera and to expand its business plans.

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HYPOTHESIS 4

Firms would use these moves to spatially expand their companies and

to tap unattended markets. This may include both vertical and

horizontal integration.

This hypothesis states that, the firms use the moves of mergers and

acquisitions to either gain the Market entry in uncatered markets, or to

reap the benefits of the cash richness of the other company. (Srinivasan

and Mishra, (2007)

The various deals in all the sectors were analysed based on the various

secondary data consisting of media releases, statements, issued by the

organization in the public domain. On analysing the deals prima faci and at

the outset, looking at the visions of both the organisations involved, and on

also observing the objectives of both the organisations to enter into the

deal, it was observed that, the following deals from the various sectors fall

under the above mentioned hypothesis.

The following section presents the analysis of the deals in the

infrastructure sector.

Sector: Infrastructure

DEAL: Vedanta and Sesa –Goa

Vedanta is a globally diversified metals and mining company having most

of its business from India and also have assets and operations in Zambia

and Australia. It is the India’s largest non-ferrous metals and mining

company based on as far as revenues are considered. Vedanta is majorly

engaged in copper, zinc, aluminium and iron ore businesses, and intends to

119  

enter into a commercial power generation business. They aim to become a

world class, diversified resources company providing superior returns to

the shareholders with high quality assets, low cost operations and

sustainable development and generate superior financial returns.

(www.ve dan t a r e sou rce s . com)

This deal would enable the company to venture into iron ore business as

the company wanted to encash its experience in operating and expanding

their businesses in India to enable them to capitalize on attractive growth

opportunities arising from India’s large mineral reserves, relatively low

cost of operations and large and inexpensive labor and talent pools.

Sesa Goa Limited, India's largest producer and exporter of iron ore, was

engaged in the business of exploration, mining and processing of iron ore.

Sesa being one of the low-cost producers of iron ore in the world is well

placed to serve the growing demand of Asian countries. Sesa's iron ore

markets/customers are primarily in China, India, Japan, Korea, Europe and

other Asian countries and it is also having mining operations in Goa and

Karnataka in India. The company aimed to become one of the top four iron

ore mining companies in the world and to maximize stake holder wealth

by exploiting core skills of iron ore mining and to constantly seek high

levels of productivity and technical efficiency. As this organization,

India’s largest iron ore exporter was struggling with a restricted mine

production and high export duties and also battling the effect of the ban of

Supreme court on iron ore production in Karnataka in meeting the demand

from large consuming market like China. The company aimed to enter into

this deal to achieve the strategic objectives by overcoming the difficulties

it faced. ( a r t i c l e s . e c o n o mi c t i me s . i n d i a t i me s . c o m) ( w w w .

s e s a g o a . c o m)

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Looking at the details of the deal, this deal materialized on April 2007,for

an amount of $ 981 million. Vedanta Resources a London based business

conglomerate acquired a 51 percent stake in Sesa Goa. This acquisition put

Vedanta in control of the operations of the company. This deal enabled

Vedanta to move forward in the transformation line and enter into the

untapped market of producing pig iron, as and helped the organization to

capitalise on attractive growth opportunities arising from India’s large

mineral reserves, its relatively low cost operations and large, inexpensive

talent pool, and satisfy its strategic objectives which is inline with the

hypothesis. ( www.h indus t an t imes . com)

The following section presents the analysis of the deals in the Telecom

sector.

SECTOR: Telecom

DEAL: Tata and Docomo

Tata Teleservices Limited spearheads the Tata Group's presence in the

telecom sector including over 90 companies, having over 395,000

employees worldwide and more than 3.5 million shareholders.

Incorporated in 1996, it is also the market leader in the fixed wireless

telephony market. The company's network has been rated as the 'Least

Congested' in India for six consecutive quarters by the Telecom

Regulatory Authority of India through independent surveys. Initially Tata

Teleservices was focusing more on data users and was only into CDMA

services but it realized that, in today’s environment, it needed a smart

voice strategy which is demanded by the customers. The strategic

objective was to enter into an alliance with a partner which specialized in

the GSM market which would minimize the implementation cost.

(www.articles.economictimes.indiatimes.com)

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This deal would enable Tata to adapt the technology of GSM and CDMA

very quickly and efficiently as the Tokyo based NTT DOCOMO which is

one of the world’s leading mobile operators, providing leading-edge

mobile voice, data and multimedia services. With more than 60 million

customers in Japan, the company is one of the world's largest mobile

communications operators. DOCOMO also is an influential force in the

continuing advancement of mobile technologies and standards which

would enable it to expand its services across India on networks working on

the GSM and CDMA module. (www.nttdocomo.com)

NTT DOCOMO is Japan's premier provider of leading-edge mobile voice,

data and multimedia services. With more than 60 million customers in

Japan, the company is one of the world's largest mobile communications

operators. The company is also an influential force in the continuing

advancement of mobile technologies and standards. In 1999, DOCOMO

launched I-mode™, the world's most popular platform for mobile Internet

services including e-mail, browsing, downloading and more. In 2001,

DOCOMO introduced FOMA™, the world's first 3G commercial mobile

service based on W-CDMA, which has transformed the mobile landscape

in Japan while bringing the DOCOMO brand global recognition.

.(www.nttdocomo.com)

This deal would enable according to slideshare.net DOCOMO to penetrate

the ever-growing Indian market and become a global cellular leader as

there was a great scope of growth for GSM and CDMA net works in India

(www.slideshare.net)

122  

Tata Teleservices Limited merged with Japanese telecom major, NTT

DOCOMO in November 2008. NTT DOCMO purchased a 26% equity

stake in Tata Teleservices for about Rs. 13,070 crore. (www.knlwledge

.wharton.upenn.edu)

Looking at this deal, this deal enabled technologically strong NTT,

Docomo, to tap and get access into the world’s fastest growing cellular

market. This deal enabled TTSL to utilize the technology of GSM service.

It accomplished its goal by having largest number of demand for SIM card

as per customer statistics. It entered into market with various options like

P.P.S. (pay per second) scheme initially. On 5 November 2010, it became

the first private sector telecom company to launch 3G services in India.

This strategic partnership which took place between the two companies

with complementing visions enhanced the ability to introduce, evaluate

and effectively manage the next generation technologies. (www.

termpaperwarehouse. com)

This deal achieved the strategic objectives as DOCOMO was able to enter

the growing Indian market which added many new customers month wise

and Tata benefited by the technology of NTT DOCOMO as wireless

networks are very advanced in Japan. (w w w . l i v e m i n t . c o m )

The following section presents the analysis of the deals in the wind sector.

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SECTOR: Wind

DEAL: Hansen and Suzlon

The Suzlon Group is ranked as the world’s fifth largest wind turbine

supplier, in terms of cumulative installed capacity, in 2011. The company

has its operations Asia, Australia, Europe, Africa and North and South

America and 20,000 MW of wind energy capacity installed in 28

countries. (www.Suzlon.com)

The Group offers one of the most comprehensive product portfolios –

ranging from sub-megawatt on-shore turbines at 600 Kilowatts (KW), to

the world’s largest commercial 6.15 MW offshore turbine – built on a

vertically integrated, low-cost, manufacturing base. Suzlon wants to be the

technology leader in the wind sector, and aspires to be in the top three

wind companies in all the key markets of the world, and to be a global

leader in providing profitable, end-to-end wind power solutions and be the

'company of choice' for all stakeholders(www.Suzlon.com)

Suzlon wanted to achieve technological leadership by integration of R&D

and as Hansen had highest quality of products and services this deal would

help the company in accessing the technology and as Hansen had a strong

presence in the gearbox marketing. This deal would enable Suzlon to

expand in Belgium, and this deal would give Suzlon the highest level of

vertical integration in the wind turbine industry as Suzlon now would be

manufacturing all the major components in-house. This deal would enable

Suzlon pursue its growth objectives without facing the shortage of

components, especially gearboxes, where demand exceeds supply. This

deal would enable Suzlon to leverage the Hansen technology and set up

capacities for manufacturing additional gear boxes in markets such as

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China and India. This would help the organization to capitalize on the

growth opportunities in the gear box Industry. (w w w . s u z l o n . c o m )

Hansen had its primary manufacturing facilities in Belgium with sales,

assembly and service centers in UK, US, South Africa and Australia. It

had a manufacturing plant in China which manufactures wind turbine

gearboxes. This deal would enable Hansen to expand its low cost base by

setting up units in India and China and aid in its objective to become a

long term growth driver for Salon’s component business.

(www.hansen.com)

Suzlon Wind Energy made a strategic decision to acquire Hansen

Transmissions based in Belgium for a whopping 465 Mn Euros in all cash

transaction. Hansen Transmissions is one of the largest wind energy and

industrial gearbox manufacturers across the globe. Suzlon assumed

indirect 100% ownership of Hansen Transmissions International NV,

Belgium with all of its subsidiaries located in Australia, UK, Brazil, and

United States. All of these subsidiaries are engaged in the business of

development, design, supply of industrial, manufacturing and wind turbine

generator gear boxes. (w w w . s u z l o n . c o m )

The deal enabled Salon to use the competitive technology of gearbox and

to become a major player in becoming a total provider and Suzlon

leveraged the technology of Hansen to set up capacities for manufacturing

additional gear boxes in markets such as China and India. This deal

enabled Hansen to expand its low cost base by setting up units in India and

China and aid in its objective to become a long term growth driver for

Suzlon’s component business which is in line with the hypothesis.

(w w w . g o o g l e . c o . i n )

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The following section presents the analysis of the deals in the beverages

sector.

Sector: Beverage

Deal: Whyte Macay and U.B.

UB Group is part of the flagship company, United Breweries Limited, (UBL).

UBL also referred to as the Beer Division of the UB Group. UB group has

around 48% market share in the country.

The innovative, creative and aggressive marketing of the organization is

complemented by a strong distribution network. Their management is focused

on building brand equity and using it to its advantage with increased emphasis

on quality, and aims to become a market leader in all their target

markets.( www. theubg roup . com)

This deal would provide UB group a "missing link" in the UB product

portfolio by providing the company the strong presence it needed in the

‘scotch whiskey market’ and with the prices of Scotch Whisky rapidly rising

UB group needed a reliable supply source to secure their future . As there was

enormous potential for premium Scotch whisky in India they also wanted an

access to international distribution network, which would enable them to

export the products from India..( www. theh indubus ine s s l i ne . i n )

Whyte and Mackay was founded in Glasgow in 1844, believed that UB

group will help the organization in the marketing front and help them to

bring the international distribution to the potential market of India. This

deal would enable them to expand the Whyte and MacKay’s brand in the

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emerging economy of India and UB will aid them in the distribution front.(

www. why t eandmackay . com)

Looking at the details of the deal, this was an INR, 4783 crore deal which

materialized on 17th May 2007. This deal added a missing link in the

product portfolio of U.B and thereby added to the strong market position

of United Breweries. This merger proved beneficial for Whyte and

Mackay, as Whyte and Mackay was incurring losses. This deal provided

Whyte and Mackay a chance to enter into the emerging markets, like India.

This deal provided UB group ‘a missing link’ in their product portfolio, by

giving the company the strong presence it needed in the scotch whiskey

market, the deal achieved the objectives which is in line with the

hypothesis. (www.indiacatalog.com,www.omba.com,www.justdrinks.com

news .bbc . co .uk )

The following section follows the analysis of the deals in the I.T. sector.

Sector : Information Technology

Deal: IBM's and Lenovo

IBM is a global technology oriented company which believes in

innovation and continuous progress with operations in over 170 countries.

IBM, with its largest market for its PC in North America and Europe was

facing saturation and on the other hand, China which is the second largest

PC market was becoming an important potential market with its large

population and growing per capita income. (www.ibm.com)

By entering into this deal IBM, wanted to further consolidate its position

in the world’s fastest growing market, with its large population and

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growing per capita income i.e. China, as Lenovo is Chinas largest PC

maker and IBM s largest PC markets of Europe and North America were

saturated. (w w w . i b m . c o m )

Lenovo brand was established in 2004, became a US $ 21 billion personal

technology company and the world s second largest PC vendor, serving

customers in more than 160 countries and a global fortune 500 company

having operations all over the world .

Even though Lenovo was the largest PC maker in China, it was facing

fierce competition from aggressive foreign rivals such as Dell and HP in

the past few years which had put pressures on Lenovo’s margins. Although

Lenovo accounted for 27 per cent of China’s PC market, but Dell’s market

share in China grew to 48 per cent. In addition to this, the company also

suffered financial problems, earlier in the year 2004. Therefore, rather than

just continuing to concentrate on the domestic Chinese market, Lenovo

aimed to go global, which was an absolute necessity for Lenovo at the

critical time. As Lenovo’s distribution network was not well adapted to

serve the small and medium-sized companies, this deal with IBM would

help Lenovo, which had a well developed globalised distribution network.(

w w w . l e n o v o . c o m )

On December 8, 2004, Lenovo acquired global giant IBM’s PC division,

for $1.25 billion, to get a foothold in the market of the global leading

brand, and also an avenue to other international markets. Further, the deal

made Lenovo the world’s third largest producer of PCs after Dell and

Hewlett Packard (HP), with around 8% of the global market share.

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This deal enabled IBM to enter into a fast growing market of China, and to

cater into uncatered markets of servers and consulting deals. This deal was

beneficial for Lenovo because it acquired 2nd place as largest PC maker in

the world which was 8th before the acquisition. Lenovo was able to expand

its market out of China o which was its main objective behind the deal.

Both companies benefited in terms of financial and other resources that

they would have to spend on research or operational expense if they had to

develop themselves, if they had to achieve their objectives, which is line

with the hypothesis. ( w w w . i b s c d c . o r g )

DEAL: iGATE – PATNI

iGATE provides full-spectrum consulting, technology and business

process outsourcing, and product and & engineering solutions and

consistently delivers effective solutions to over 300 active global clients,

including a large number of Fortune 1000 companies. This company aims,

to be among the top three in the preferred employers list and want to

achieve 30 % of its revenue from business outcomes contracts.

( w w w . l i v e m i n t . c o m )

This acquisition will enable help iGATE to come out of the “small

provider” tag and emerge into the mainstream of the Indian IT service

provider arena. The advantage of the increased scale, enhanced talent pool,

client base, and breadth of capability would enable the combined entity to

qualify for larger deals that were previously out of reach.

Patni Computer Systems Ltd. is one of the leading global providers of

Information Technology services and business solutions. This deal would

enable Patni to cross-sell key solutions to a broader client base, to enhance

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efficiencies in operations and deliver services and achieve economies of

scale from consolidation of shared services. ( w w w . l i v e m i n t . c o m )

This deal enabled both the organizations to enter into bigger IT deals and

to cross sell their products to a broader client base, and the combined

entity achieved increased efficiency in operations and became key player

in various sectors like banking and finance, insurance, manufacturing,

retail, media and entertainment, and to achieve economies of scale from

consolidation of shared services which helped them to achieve the stated

objectives which is in line with the hypothesis.. (www.everestgrp.com)

DEAL : Wipro - Saraware

Wipro which was established in 1945, as a vegetable manufacturer

diversified into soaps and later on into other consumer care products.

Wipro provides comprehensive research and development services, IT

solutions and services, including systems integration, Information Systems

outsourcing, package implementation, software application development

and maintenance services to corporations globally.

In the Indian market, Wipro is a leader in providing IT solutions and

services for the corporate segment in India offering system integration,

network integration, software solutions and IT services. Wipro also has

profitable presence in niche market segments of consumer products and

lighting. In the Asia Pacific and Middle East markets, Wipro provides IT

solutions and services for global corporations. Wipro aims to aggressively

develop the R & D services by focusing on the high growth markets and

consciously focusing on increasing the revenue contribution from higher

end products and services and it also focuses in creating competitive

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advantage by understanding the industry and delivering the right

combination of products and services, and also in aims at reducing IT costs

by developing and implementing cost effective solutions at scale.

(a r t i c l e s . t i m e s o f i n d i a . i n d i a t i m e s . c o m )

This deal with Saraware would provide Wipro an opportunity to expand its

customer base in the telecom segment and also provide it with cross-

selling opportunities. This deal would also enable Wipro to gear itself for

the 3G evolution. This deal would also enable Wipro to penetrate into high

growth segments like secure communications and would give it an

advantage and capability to handle complete outsourcing deals in the

evolving telecom market and also enable it to access the market in Finland.

(www.slideshare.net)

Saraware, which is 21 year old company, is a leading provider of Design

and Engineering services to Telecom companies. It aims to provide the

best design and engineering services to telecom companies.

(www.scribd.com)

This deal would add expert domain competencies in the areas of Radio

Networks and Secure Mobile platforms and with this deal Wipro would

add scale and global access to Saraware domain competencies and this

deal would enable them to establish themselves as leaders in the Wireless

Networks and secure Mobile platforms globally.

(a r t i c l e s . e c o n o m i c t i m e s . i n d i a t i m e s . c o m

w w w . t h e h i n d u b u s i n e s s l i n e . i n )

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This deal was successful one as this gave an opportunity to expand the

customer base in the telecom segment and this deal opened a new

opportunity for Saraware employees to work with a global company and

this deal also helped them to penetrate into the high growth segments like

secure communications and gave them the competitive advantage to

handle complete outsourcing deals in the changing telecom market. This

deal enabled Wipro not only additional customer base but also access to

development centers in places like Austria, Portugal and Brazil, which

satisfied its strategic objectives in line with the hypothesis.

(a r t i c l e s . e c o n o m i c t i m e s . i n d i a t i m e s . c o m )

The following section presents the analysis of the deals in the automobile

sector.

SECTOR: Automobile

DEAL: Tata Motors and Jaguar and Land Rover

Jaguar Cars Ltd, known simply as Jaguar is a British luxury and sports car

manufacturer, headquartered in Whitley, England. This deal would enable

Jaguar to tap TATA‘s footprints in South East Asia which would help JLR

to reduce its geographic dependence from US and Western Europe. This

deal will also enable Jaguar to tap the opportunity of boosting up sales of

the luxury cars in India, owing to the increase in the spending power of

Indians , which was already tapped up by other luxury car manufacturers

like BMW, Audi etc .(www.ca r s - and-au tos . i n fo / j agua r -ca r s / )

As, Tata Motors was looking for an opportunity to spread its business

across different geographies and across different customers and was

aiming to enter the high – end premier segment of the global automobile

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market, this deal would enable Tata Motors to get access to two advance

design studios and technology which in turn would help the company to

modify its existing and upcoming products in India.

On March 26, 2008, Tata Motors entered into an agreement with Ford for

the purchase of JLR. Tata Motors agreed to pay US$ 2.3 billion in cash for

a 100% acquisition of the businesses of JLR. As part of the acquisition,

Tata Motors did not inherit any of the debt liabilities of JLR - the

acquisition was totally debt free.(www. ca r s and -au tos . i n fo /

j agua r -ca r s / ) ( a r t i c l e s . economic t i mes . i nd i a t imes . com)

The deal included the purchase of JLR's manufacturing plants, two

advanced design centers in the UK, national sales companies spanning

across the world and also licenses of all necessary intellectual property

rights ( a r t i c l e s . economic t i me s . ind ia t imes . com)

This deal gave Tata Motors instant recognition and credibility across globe

which would otherwise would have taken years. This deal also gave Tata

Motors the cost competitive advantage as Corus was the main supplier of

automotive high grade steel to JLR and other automobile industry in US

and Europe. Tata Motors also benefited from component sourcing, design

services and low cost engineering by obtaining intellectual property rights

related to the superior technologies. .( www. i cmr ind ia .o rg

www.s l idesha re .ne t )

After the deal , Tata Motors reported a massive 136% surge in

consolidated net profit to 6,234 crore in March 2012, the net profit of

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Tata Motors more than d doubled in March, driven by over 48.2% growth

in Jaguar Land Rover volumes which contributed about 95% of profits of

its Indian parent. JLR registered a growth in the operating profits, which

satisfied the objective of the company to enter into the luxury car segment

which is in line with the hypothesis. (www. i c mr ind ia .o rg ,

a r t i c l e s . economic t imes . ind i a t imes . com) Th i s dea l

bene f i t t ed bo th the o rgan iza t ions invo lved , wh ic h

sa t i s f i e s t he hypo thes i s .

DEAL: TATA - DAEWOO

Tata Motors Limited is India's largest automobile company, with

consolidated revenues of INR 1, 65, 54 crores (USD 32.5 billion) in 2011-

12. It is the leader in commercial vehicles in each segment, and among the

top three in passenger vehicles with winning products in the compact,

midsize car and utility vehicle segments. It is the world's fourth largest

truck and bus manufacturer. Tata motors aimed to be world-class

automotive innovators, and to develop world-class vehicles through the

advancement of its technical knowledge and its product engineering

processes. www. ta t amoto r s . com)

This deal would enable Tata motors to gain a globalised identity, and

presence worldwide as DWCV's robust manufacturing and quality

processes would enable it to deliver a contemporary product range, this

deal would enable the company to enjoy a market share in the Korean

heavy truck segment and enable Tata Motors to have a full production line

by adding large truck operations. (www. red i f f . com/ money)

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Daewoo Motors is part of the US $72-billion Daewoo group of Korea,

having presence in 123 markets, and with investments in Poland, China,

the Czech Republic, Romania, Uzbekistan and India. In India the group

had invested Rs 4,000 crore in setting up a state-of-the-art manufacturing

plant and research and development facilities. This deal would enable

Daewoo motors to clear the debt of $14.5 billion (domestic) and $ 1.5

billion (Foreign), and the company was on the verge of bankruptcy in

2004. (www. t a t a -daewoo .com)

This deal materialized for $102 million (Rs 465 crore). Tata Motors

witnessed a double fold increase in exports from 2004, the revenues also

increased which increased the operating profit and Tata Daewoo started

exporting trucks to more than 40 countries and in 2008 it acquired a dollar

200 million in exports and Tata Daewoo is the only company showing a

stable and steady growth among the three business arms that Daewoo

Motor company sold, this deal enabled both the companies to achieve their

strategic objectives which satisfies the hypothesis. (www.rediff.com)

Deal: Mahindra – Mahindra and Kinetic

Mahindra & Mahindra is one of the few Indian companies with A+ GRI

rating with a total turnover of about 6.3 billion USD and with a mission of

creating India’s largest automobile and automobile related products

distribution network by providing all the stake holders the largest choice of

unique world class products and services. Two wheeler market being

under – penetrated, this deal would give an opportunity to place Mahindra

in every household, owing to M&M’s dominant presence in the rural and

semi-urban segments and Mahindra Finance’s extensive reach in these

markets and this deal will enable the organization to establish itself as a

135  

full range player with a presence in almost every segment of the

automobile industry. ( i n fo s p i c e . B logs po t . i n ) ( w w w .

m a h i n d r a . c o m )

Kinetic Engineering Ltd was promoted by Kinetic Engineering Ltd. Pune

and Honda Motor Co. Ltd. Japan jointly. This deal would enable the

company in shifting its focus to being from 2 wheelers manufacturer to

automotive systems and power train components supplier.(

a r t i c l e s . e c o n o mi c t i me s . i n d i a t i me s . c o m)

M & M entered this deal by purchasing all the operating assets of the

company for a sum of Rs 110 crore. This deal enabled M & M to enter

strongly in the two wheeler segment by utilizing the marketing channels of

Kinetic motors to its advantage and helped it to expand its business and for

Kinetic motors it proved to be a right reason as it helped the company to

clear its debts and it also enabled M & M to establish itself as a full range

player with a presence in almost every segment of the automobile industry,

which satisfied the objectives of both the companies and also the

hypothesis. (www.dna ind i a . com)

The following section presents the analysis of the deals in the petroleum

sector.

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SECTOR: Petroleum

Deal: ONGC Videsh Ltd – Imperial Energy

ONGC Videsh Ltd. (OVL) is a subsidiary of India’s premier oil and gas

corporation ONGC. ONGC accounts for 77% of India’s crude oil

production and 81% of India’s total natural gas production. ONGC is

presently carrying out the exploration and development activities in 26

sedimentary basins of India. ONGC owns a whopping 11000 kilometers of

pipelines in India. ONGC not only is the premier oil and gas companies in

India but also across the globe.( w w w . o n g c i n d i a . c o m)

This deal with Imperial Energy will enable OVL to establish presence in

Western Siberia, one of the world's largest oil and gas producing regions,

by acquiring an asset with significant long-term production and reserves

potential. This addition to OVL's global portfolio, which spans across

North Africa, Latin America and Southeast Asia, provides OVL with the

opportunity to expand its presence in Russia and will further enhance its

position as one of the industry's leading exploration and production

companies.( w w w . o n g c i n d i a . c o m)

Imperial Energy is an upstream oil exploration and production company

focused on Russian Federation. The Company was founded by a group of

Russian and foreign investors as an independent middle size oil producer

in 2004. Through a series of acquisitions, by the end of 2004, the company

had controlling stakes in four license-holding companies. As the value of

reserves of oil of Imperial Energy was falling, this deal would provide a

financial boost to this company. This deal would act as boost to imperial

137  

energy as the value of reserves of oil of Imperial energy was declining and

the company would benefit from the deal amount.

(www. i mpe r i a l ene rgy . com)

ONGC Videsh acquired Imperial Energy Corporation for a total cost of

USD 2.1 billion. This deal enabled ONGC to enter into the retailing

business and also enabled the company to establish presence in western

Siberia, this deal resulted in the decrease in the debt – equity ratio and also

an increase in the net worth of ONGC from 2009 to 2010 -2011. ( Increase

in debt- equity ratio from 1.8 in 2009 to 1.41 in 2011 and in net worth

from 1,15,156 to 1,45,532 in 2011 in dollar million , which satisfied the

objectives of both the companies and also the hypothesis.

(www.ongc ind i a . com, w w w . b l o o mb e r g . c o m)

The following section presents the analysis of the deals in the consumer

durables division.

Deal: Videocon – Thompson:

Videocon founded in 1987 manufactured TV and washing machines and

had 17 manufacturing plants in India and also in China, Poland, Italy and

Mexico, is the third largest picture tube manufacturer in the world. It is a

US$ 5 billion global conglomerate continuing and aiming to set trends in

every sphere of its activities. It has varied business interests in consumer

electronics and home appliances, oil and gas, power and

telecommunications. It aims to achieve customer satisfaction by

concentrating on proactive planning for survival with the aid of good

leadership, concentrating on newer technology, innovation, reinforcing

marketing strengths to achieve marketing goals and being prepared for

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future uncertainties by being flexible to adopt new technologies.

(www.videoconworld.com)

This deal would enable Videocon to tap the opportunities in the emerging

countries for color picture tubes, the deal would also enable them to access

the advanced technology and control over the R & D facility located in

Italy and this deal would enable them to shift their activities to low cost

locations.

Thomson provides innovative and reliable technology and provides

products and services, having latest technology, which are easy to use and

which deliver highest value and longevity. This deal would enable the

organization to exit the consumer and electronic businesses which were

incurring significant losses as their products were facing reduced demand

in developed markets mostly for television with color picture tubes. This

deal would also enable them to enter into the high growth digital media

and technology business and would enable them to move towards flat

screen and plasma television.(www.thomsonconsumer.com,

www.referenceforbusiness.com)

The deal took place for Rs. 1263.6 crores and this was a zero debt deal.

This deal was beneficial to both the organizations as for Videocon, this

deal enabled it to expand outside its home market in which it was facing

competition form Korean electronics makers and this deal enabled

Videocon with a strong negotiation position and also gave an opportunity

to reduce the costs by upgrading the existing production lines, this deal

also enabled Videocon in vertically integrating the glass shell business and

also gave it a ready market for its glass business. This deal enabled

Thomson to exit from the consumer and electronic business which was

139  

making losses and they were able to increase their market share, which

satisfied the objectives of both the entities and the hypothesis.

(www.financialexpress.com, www.thehindubusinessline.in)

The various deals which were analyzed in different sectors, with respect to

the hypothesis were, Vedanta and Sesa Goa in the infrastructure sector,

Tata and Docomo, in the Telecom sector, Hansen and Suzlon, in the Wind

Energy sector, Whyte and MacKay and United Breweries in the beverage

sector, IBM- Lenovo , IGate and Patni, Wipro and Saraware in the I T

sector, Tata Motors and Jaguar Land Rover , Tata and Daewoo, Mahindra

and kinetic in the automobile sector, ONGC Videsh and Imperial Energy

in the Petroleum sector, Videocon and Thomson in the consumer durables

sector.

CONCLUSION

On analyzing the deal mentioned above all the deals mentioned above

were able to achieve the strategic objectives. With respect to Vedanta –

Sesa goa, this deal was able to circumvent the problem of restricted iron

ore production and also the ban of supreme court and Vedanta was able to

move ahead the transformation line and to enter into the untapped market

of producing pig iron.

Looking at the Tata – Docomo deal, with this deal Docomo was able to

enter the growing Indian market and Tata benefited by the technology of

Docomo. Looking at the Hansen- Suzlon deal, the deal enabled Hansen to

expand its low cost base in India and China and Suzlon was able to

leverage the technology of Hansen to set up manufacturing gear boxes.

140  

In the beverage sector, looking at the Whyte and MacKay deal, Whyte and

MacKay which was facing losses benefited from this deal as it got an

avenue to enter to the emerging markets and U.B was able to tap the

missing link in their product portfolio.

Looking at the Lenovo – IBM deal, the deal enabled IBM to enter the fast

growing market of China and Lenovo benefited by becoming the world’s

third largest Pc producer. With respect to the deal of iGate and Patni, both

the organizations were able to cater to bigger deals and the combined

entity was able to achieve efficiency in operations.

In the Automobile sector, looking at the Tata Motors and Jaguar Land

Rover deal, this deal gave Tata an instant recognition in the global market

and also the benefit from component sourcing, design services and low

cost engineering by the virtue of patents and JLR was able to tap the

growing Indian luxury car segment, with respect to the Tata – Daewoo

deal, this helped Daewoo to come out of the financial crisis and Tata was

able to witness a double fold increase in exports. Looking at the Mahindra-

Kinetic deal, Mahindra was able to establish its presence in almost every

segment of the auto industry and Kinetic was able to shift its focus to

being power train component supplier.

Looking at the ONGC Videsh and Imperial energy deal, ONGC was able

to enter into the retailing business and this deal provided a cash boost to

the Imperial energy.

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In the next section we will examine the case of spatially differentiated

companies.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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HYPOTHESIS 5

Internationally spatially differentiated companies may use these

moves to cater /tap locally concentrated markets.

This hypothesis states that, spatially differentiated companies use moves of

mergers and acquisitions to get entry into the domestic markets and take

advantage of the local resources to help them deliver their products and

services competitively. (Lubatkin , (1983), Chatterejee , (1986), Porter,

Srinivasan ,and Mishra,( 2007).

The various deals in all the sectors were analysed based on the various

secondary data consisting of media releases, statements, issued by the

organization in the public domain. On analysing the deals prima faci and at

the outset, looking at the visions of both the organisations involved, and on

also observing the objectives of both the organisations to enter into the

deal, it was observed that, the following deals from the various sectors fall

under the above mentioned hypothesis.

The following section presents the analysis of the deals in the

pharmaceutical sector.

Sector: Pharmaceuticals

DEAL: Daiichi Sankyo and Ranbaxy Laboratories

Ranbaxy Laboratories Limited, aiming at achieving customer satisfaction

by providing product and service of highest quality is one of the India's

largest pharmaceutical companies which is a research oriented, integrated

pharmaceutical company producing a wide range of quality, affordable

generic medicines, trusted by all its stake holders. Ranbaxy concentrates

according to company sources on enriching lives across the globe by

producing quality and affordable pharmaceuticals. (www.ranbaxy.com)

143  

Daiichi Sankyo Group of Japan aims at development of innovative

pharmaceuticals and is dedicated to the production and supply of

innovative pharmaceutical products to address the diversified, unmet

medical needs of patients in both mature and emerging markets. In

addition, the Daiichi Sankyo Group has advocated a "Hybrid Business

Model," which will cater to the demands of the diversified demands of the

customers and tap and optimize the growth opportunities all across the

value chain. (www.daiichisankyo.com)

This deal would aid and enable Daichi Sankyo to achieve geographic

diversification as this deal will enable it to have presence all around the

world. The deal will also enable the company to extend its product

portfolio by entering into non-proprietary drugs and also enable it access

the low cost drug manufacturing facility by Ranbaxy. The deal would also

enable the Company to capture the emerging markets of generic drugs and

optimize the value chain efficiency by 2015. This deal would enable

Daiichi to develop new drugs by taking advantage of Ranbaxy’s expertise.

This deal would enable Ranbaxy to seek the aid of Daichi in its R & D

operations and this deal would also help the company to achieve strategic

growth to be world no 5 and a $5 billion company by 2012.

(www.articles.economictimes.indiatimes.com, www.financialexpress.com)

Looking at the details of the deal, this deal took place on 7/Nov/2007, for

an amount of Rs. 3585, crore. This deal enabled to put forth a hybrid

business model which would unlock the underlying strengths of both the

companies. This deal bought unprecedented values to all stakeholders by

using Ranbaxy’s strengths, and Daiichi Sankyo would expand its products

144  

range and continuously maintain stable supply.

(www.tmtctata.com,www.kpsepg.com)

By this deal Ranbaxy bypassed many US and European countries who

were finding it difficult to enter into Japanese market, which enabled its

objective of enriching lives across the globe by producing quality and

affordable pharmaceuticals. Even Daichi Sankyo got geographical

diversification from the deal, as this deal enabled Daiichi to benefit from

Ranbaxy’s leadership in the generics segment and it also acquired a

broader product base and well distributed risk and it also achieved

geographical diversification from the deal which satisfied its strategic

objective which is in line with the objectives and is in line with the

hypothesis. (www.dnaindia.com, www.financialexpress.com)

The following section presents the analysis of the deals in the media

sector.

SECTOR: Media

DEAL: Time Warner (TBS) and NDTV Imagine

Time Warner Inc., a global leader in media and entertainment uses its

industry-leading operating scale and brands to create, package and deliver

high-quality content worldwide through multiple distribution outlets. As

India was a major emerging economy, Time Warner wanted to tap this

potential market as its strategic objective. (www.timewarner.com)

NDTV Ltd, established in 1998, is India's biggest news and infotainment

network, with 23 offices and studios, India's most modern and

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sophisticated production, newsgathering and archiving facilities and with

an unmatched history of effective beginning of three news channels in

India and abroad, it is also a clear leader in English news segment and it is

also one of the country’s foremost Hindi news channels. The deal would

additionally provide opportunity to NDTV to tide over a financial crisis, as

is reflected in the Rs 86-crore loss posted by the group during the quarter

ending September 2009 and also get rid of the debts it was carrying.

( a r t i c l e s . e c o n o mi c t i me s . i n d i a t i me s . c o m)

Looking at the details of the deal, this deal was materialised on December

8, 2009, for US $ 126.5 million. Turner Asia Pacific Ventures acquired a

92 per cent stake in NDTV Imagine Ltd. Turner Asia Pacific Ventures is a

completely owned subsidiary of Turner Broadcasting System, which is a

part of the Time Warner media.

This deal made NDTV group debt free and there was a cash surplus on a

consolidated basis and with this reduced risk of debt, the organization

could focus on its core competence area of news business. This deal

helped Turner to grab a strong hold in the potential television market. This

deal enabled Time Warner to tap the Hindi entertainment channel, in

which NDTV had a strong hold in. (www.timewarner.com)

This deal achieved the strategic objective which it had set to achieve as

Time Warner was able to tap the Hindi entertainment channel in the

growing Indian economy which was NDTV’s strong forte which is in line

with the hypothesis.

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CONCLUSION

The above deals from the various sectors were analyzed with respect to the

hypothesis. The deals which were analyzed were, Daichi – Ranbaxy from

pharmaceutical sector, NDTV – Time Warner from the media sector. On

detailed analysis it was observed that the deals mentioned above achieved

the strategic objectives. With respect to Daiichi – Ranbaxy, as Ranbaxy

was able to access the Japanese market and Daichi was able to expand its

product range, Daichi also benefited from Ranbaxy’s leadership in

generics market and it also acquired broader product base. Looking at the

deals of the media sector, this deal made NDTV group debt free and

enabled Turner to tap the Hindi entertainment business which was very

advantageous.

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HYPOTHESIS 6

The deal amount transacted is governed by the growth of the

particular sector.

This hypothesis states that, internationally, spatially differentiated

companies do not hesitate to pay higher amounts, for the deals, in

particular sectors which are growing in the emerging economies as they

value the market access into growing sectors as valuable in emerging

economies, and realize the fact that self building of all the infrastructure in

these economies in the growing sectors is a very costly and time

consuming affair. (Luibatkin, ( 1983) Chatterjee,(1986), Porter, Srinivasan

and Mishra,( 2007).

The various deals in all the sectors were analysed based on the various

secondary data consisting of media releases, statements, issued by the

organization in the public domain. On analysing the deals prima faci and at

the outset, looking at the visions of both the organisations involved, and on

also observing the objectives of both the organisations to enter into the

deal, it was observed that, the following deals from the various sectors fall

under the above mentioned hypothesis.

The following section presents the analysis of the deals in the steel sector.

SECTOR: Steel

DEAL: Tata and Corus

The Tata Steel group is a company which always believed in facilitating

the benefit of the countries of its operations benefiting the organizations it

is associated with and the employees involved with the company in its

journey to growth. This company has built its prominent presence across

the globe not limiting its operations only in India. The various investments

148  

moves of Tata Steel abroad have helped the company to expand and tap

the production and marketing network in Europe, South East Asia and the

Pacific-rim countries. Tata company believes that diversity of any

organization enriches the collective capabilities and that a clear shared

vision is a key factor for an organizational success and achieves this by

fostering team work, nurturing talent, enhancing leadership among its

people, it also believes in creating value to its customers by delivering

premium products and services, by developing leading edge solutions in

technology, processes and products. (www.tatasteel.com)

Tata Steel aimed to become a global steel industry bench mark for value

creation and corporate citizenship. (www.tatasteel.com, www.rediff.com)

The Corus group which is now known as Tata Steel Europe was created by

the merger of Koninklijke Hoogovens and British Steel. Corus is the

second largest producer of steel in Europe. Corus group aimed on

achieving leadership positions in growing markets which would ensure

sustainable growth.

(www.finance.mapsofworld.com,www.tatasteeleurope.com)

Looking at the details of the deal, this was an all cash deal. After various

negotiations from both sides, Tata steel bought an 100 % stake in the

Corus group on January 30, 2007 for a bid amount of 7.6 $ billion.

Looking at the bidding process, it can be noted that, Tata Steel had

emerged winner with a 608 pence final bid when CSN conceded its defeat

after its last bid of 603 pence a share following a closely fought nine round

auction. (www.financial express.com)

149  

By entering into this Tata Steel aimed to gain access to the global steel

market and expand its production capacity to keep pace with growing

demand for steel and become a market leader and this deal would enable

Corus to get a low cost partner to increase the profitability in the long run.

(www.rediff.com, ww w. t a t a s t ee l . c om)

Looking at the deal in line with the hypothesis, Tata paid 68% more than

the average of Corus' stock price over the year ending October 4, 2006,

which was a premium price. The premium paid was justifiable according

to equitymaster because this deal gave the European manufacturer a way

to the emerging Asian markets. Taats was a major supplier to the Indian

auto industry and as the demand for value added steel products was

growing in this market. This deal gave a powerful combination of high

quality developed and low cost high growth markets. This deal made Tata

Steel the world’s fifth largest steel group. Prior to this deal, Tata steel was

majorly catering to the Indian market which was accounting to the 69% of

the sales of the company. (www.financial express.com,

www.icmrindia.com, www.equitymaster.com)

On analyzing the deal it was found that this was in line with the vision and

in line with the hypothesis. This deal , helped and aided Tata, to move

from world’s 56th largest steel maker position to 5th largest steel maker,

thereby increasing its leadership position and market share as in line with

the earlier hypothesis. This deal also helped to create a manufacturing and

marketing network in various Pacific countries which would help the

organization in increasing the market share which justifies the premium

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paid and which is in line with the hypothesis. ( www. i c mr ind i a . o rg ,

w w w . e q u i t y ma s t e r . c o m)

The next section presents the analysis of the deals in the Telecom sector.

SECTOR: Telecom

DEAL: Spice communication by Idea Cellular

Idea Cellular, a Mumbai based wireless telephony company is operating in

all the 22 telecom circles in India. This company is the third largest GSM

Company in India. Ideas strong growth in the urban telephony market is a

result of its deep penetration in urban and rural markets. It has the highest

share of rural subscribers as a percentage of total subscribers. This

company as per the company sources,believes in delighting customers

while meeting their individual communication needs anytime, anywhere.

This company also wanted to be the most customer focused mobile service

brand continuously innovating to help liberate the customers from the

shackles of time and space. ( w w w . i d e a c e l l u l a r . c o m )

Spice Telecom is the brand name of Spice Communications Limited, a

service provider in India. Spice Telecom is currently operating in the in 2

circles of 23 Telecom Circles of India. Spice Communications Limited is

now a subsidiary of Mumbai based Idea Cellular Ltd. (an Aditya Birla

group company). Launched over ten years ago, Spice’s cellular services

have a customer base of over 4 million as on December 2008 in Punjab

and Karnataka. (www.spicecommunication.com)

By entering into this deal Idea could get the strategic advantage, of Spice

which holds spectrum in the highly efficient 900 MHz, which can

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accommodate a large number of subscribers. This deal would enable Idea

to cater Punjab and Karnataka. This deal would enable Idea the immediate

benefit of catering to these states. Instead if it had started fresh operations

in these 2 states, it would have taken minimum 3 years to reach breakeven

point. In addition, the deal would result in Idea Cellular moving ahead of

Tata Teleservices to become the country’s 5th largest mobile service

provider. The merged entity would have operations in 13 of the 22 telecom

circles in the country with a subscriber base of around 28.5mn. Also Idea

would be gaining the expertise of TMI as a strategic investor. TMI has a

significant experience in emerging market operations in countries like Sri

Lanka, Pakistan, Malaysia, Indonesia and Bangladesh. TMI also has strong

experience in operating 3G networks in other markets, which would be of

help for Idea in the future. (www.economictimes,indies.comatim,

www.ideacellulr.com)

Spice Telecom is the brand name of Spice Communications Limited, a

service provider in India which is currently operating in the in 2 circles of

23 Telecom Circles of India.

This deal would provide Spice which would enable it to quickly exit as it

was rejected pan – India license. Owing to fierce and increased

competition, the net profit of Spice was decreasing and it was facing

losses, this deal would provide the organization an opportunity to come out

of the losses. (www.spicecommunications.com)

The Aditya Vikram Birla group-controlled Idea Cellular acquired BK

Modi’s 40.8% stake in Spice Communications for around Rs 2200cr. The

deal finalized between Rs 77 and Rs 78 per share, which was a premium of

45%. The swap ratio was determined at 49 shares of Idea for every 100

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shares of Spice. Idea had to pay approximately Rs 544 crore as a non –

compete fee to the Spice group, which is in addition to the Rs. 77.30 per

share, which totals the total payment to Spice group to Rs. 3,264 crore.

(www.economictimes.indiatimes.comAngel broking, net worth, 2008)

This deal gave Idea an addition of 44 lakh subscribers in Punjab and

Karnataka in addition to its own 2.6 subscribers in 11 circles. This

acquisition also gave Idea the much needed headway in Punjab and

Karnataka, which accounted for more than 10 % of India‘s wireless

subscribers. This deal enabled Idea to acquire the crucial spectrum of

licenses acquired by Spice for operating in four more circles including

Delhi, Tamilnadu and Andrapradesh. But apart from that, by an unique

brand identity, Idea was able to capture its market and to become the 3rd

largest mobile service provider of India, which justifies the premium paid

to the deal, which justifies the hypothesis. (w w w . g o o g l e . c o . i n ,

N e t w o r t h , 2 0 0 8 )

The following section presents the analysis of the deals of the beverage

sector.

Sector: Beverage

DEAL: Tetley and Tata Tea

Tata Tea Limited (TTL) with a presence in over 35 countries across the

globe is the second largest tea company in India. Branded teas contribute

88% of the consolidated turnover of the group. Tata Tea has one of the

most amazing distribution networks in the country. (www.info.shine.com,

www.icmrindia.or, www.tataglobalbeverages.com)

153  

This deal would help Tata Tea in improving its operating efficiency as

Tetley's operating margins were superior in comparison to Tata Tea, that is

20% versus 14% in 1999-2000. The acquisition would also result in

instant expansion of product lines of Tata Tea. Most importantly, with this

deal Tata tea would become world’s 2nd number tea brand. This deal

would increase the product portfolio as this deal would enable Tata to

access Tetley’s premium brands and the global distribution network.

(www.tata.com)

With respect to Tetley, this deal would enable Tetley to get access to Tata

Tea’s gardens and the production base. (www.tetleyusa.com)

Looking at the details of the deal, this deal was signed in 2000, for US $

450 million. In 2000, Tata Tea embarked on an ambitious, aggressive

growth, dominated by plans of global expansion strategy. The first step

towards global expansion was acquiring Tetley. This deal improved the

position of Tetley and turned Tata-Tetley into the world's second-biggest

tea conglomerate with sales in 44 countries. This deal also enabled Tata to

penetrate into European Market and Tetley benefited from the expertise of

Tata in production of Tea.(www.tata.com, ww w. g o o g l e . c o . i n )

This acquisition of Tetley made Tata Tea world’s second biggest tea

company with approximate combined turnover of Rs. 2,800 – 2,900 crore.

This acquisition marked the end of drought of Indian companies

acquisitions of foreign companies and opened up plethora of opportunities

for other companies. This acquisition mesmerized Indian corporate sector

as they witnessed a path breaking achievement, which was never ever

heard of or seen before in the history of corporate India. This deal was first

ever leveraged buy-out (LBO) by any Indian company and the amount of

154  

deal was huge. This deal was materialized at 271 million pounds (US $450

m) which was more than the valuation by Tata tea of Tetley, which was

originally valued at US $ 114 million. (www.tataglobalbeverages.com)

Tata tea acquired Tetley, for dollar 450 million which was three times its

size which cemented the belief of the prospects of growth potential of that

sector. This acquisition of Tetley made Tata Tea world’s second biggest

tea company with approximate combined turnover of Rs. 2,800 – 2,900

crore which justifies the strategic objective and the hypothesis.(

www. i c mr ind i a . o rg )

CONCLUSION

The following deals from the various sectors were analyzed with respect to

the hypothesis. The various deals which were analyzed were, Tata – Corus

in the steel sector, Idea –Spice in the telecom sector and Tata – Tetley in

the beverages sector.

On analyzing the various deals in the above mentioned sectors, it was

observed that all the above deals were able to achieve the strategic

objective. Looking at the Tata – Corus deal, this deal enabled Tata to

move from the 56th largest steel producer to the 5th largest steel maker

position and this deal also helped to create the manufacturing and

marketing network in various Pacific countries , which justified the

premium paid. Looking at the Idea – Spice deal this deal gave Idea an

addition of 44 lakh subscribers in Punjab and Karnataka and enabled Idea

to acquire the crucial spectrum licences and become the third largest

mobile service provider, which justifies the premium paid. Looking at the

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Tata – Tetley deal, this made Tata Tea the world’s second biggest tea

company which justified the premium paid. All the organizations

(acquirers) paid premium to acquire which helped them to enter growing

markets.

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HYPOTHESIS 7

The success of the mergers and acquisitions depend upon the

matching of the visions / objectives of both the companies.

This hypothesis states that, when two companies opt for mergers and

acquisitions ,the long term vision of both the companies should match with

one another, that means to say that if one of the companies is opting for

this type of inorganic growth it is having a long term plan/ strategy of-

growth by huge investments. If the other company is having a large term

strategy of growth too by getting rid of non-performing assets, then, the

success of merger and acquisitions will be very difficult to

achieve.(Copeland and Weston,. Srinivasan and Mishra( 2007") .

The various deals in all the sectors were analysed based on the various

secondary data consisting of media releases, statements, issued by the

organization in the public domain. On analysing the deals prima faci and at

the outset, looking at the visions of both the organisations involved, and on

also observing the objectives of both the organisations to enter into the

deal, it was observed that, the following deals from the various sectors fall

under the above mentioned hypothesis

The following section presents the analysis of all the deals in the steel

sector.

SECTOR: Steel

DEAL: Arcelor merger with Mittal

The company, Arcellor was created by a merger of the companies,

Aceralia(Spain), Usinor( France) and Arbed ( Luxembourg) in 2002.

Arcellor S.A became the world’s largest steel producer in terms of

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turnover and the second largest in terms of steel output in 2004, which

advocated the inherent desire to grow and increase the market share.

The vision and strategy of Arcellor was to grow continuously with

emphasize on size and scale, they aimed at achieving product diversity by

producing high value products and concentrating on high and continuous

growth by producing customer focus products based on customer needs

and wants.( www.arcellormittal.com)

This deal would help the company in achieving rapid integration; in

managing effectively daily operations and in accelerating revenue and

profit growth. This deal was expected to create a truly global steel

company with leading positions in the five main regions (South America,

NAFTA, European Union, Central Europe and Africa). It would also

enable Arcelor to expand its operations in high-growth economies with

low-cost, profitable assets and local operating expertise in numerous

emerging markets and will give it leadership position in high-end segments

in North America, with strong R&D capabilities.

(www.arcellormittal.com)

This deal would enable Arcelor to get access to raw materials and

upstream integration and very low cost slab potential in Ukraine to serve

West Europe. (ww.workforarcellormittal.com) ( nrao-m-a-

handbook.blogspot.in)

Mittal Steel, which was formed by the acquiring of LNM Holdings with

Ispat International, and by the subsequent merger of both the companies

158  

with International steel group had the vision of consolidation of the steel

industry based on geographical reach and product line expansion . The

company concentrated upon its core competence of identifying the right

plants for acquisitions and investing the right amount of money and people

and turning them into profitable ventures. The deal would help the

company in expanding geographic footprint with leading positions in a

number of regions. This geographic diversification would reduce volatility

for the enlarged group while presenting numerous strategic opportunities.

It would also strengthen the range of products and solutions for global

customers and would give the company a leadership position in high-end

segments in Western Europe, with strong R&D capabilities.

(www.ibscdc.org, www.slideshare.net)

The merger of Arcellor and Mittal which materialized on June 25th, 2006,

paved a revival path for a very fragmented steel industry and this deal led

and initiated an integration path for this unconsolidated sector

(www.8questions.wordpress.com)

On analysis of this deal, in line with the hypothesis and with respect to the

strategic objective and vision, this deal enabled Mittal to achieve

leadership position in the high end segments in North America and Arcelor

benefited by the successful distribution network in Europe. As both were

having complementary assets and skill sets, and matching visions, this

merger proved to be successful in terms of cost cutting, increased

production levels, innovation in R&D and technology which resulted in

annual cost savings of $ 1.4 billion in comparison to targeted $1.6 billion.

This deal created a combined company which held 10 % of the global steel

market. (www.8questions.wordpress.com)

159  

This deal brought together the companies which had matching visions

and which lead in R&D and technology, which held sizeable captive

supplies of raw materials and which operated on extensive distribution

networks. Arcelor and Mittal were two companies which were considered

to be having complementary assets and skills and vision. This deal brought

around cost and production improvements for both the merging entities

which justifies and fulfils the strategic objectives and the hypothesis.

(www.arcellomittal.com,)

DEAL: Corus and Tata Steel

The Tata Steel group is a company which always believed in facilitating

the benefit of the countries of its operations benefiting the organizations it

is associated with and the employees involved with the company in its

journey to growth. This company has built its prominent presence across

the globe not limiting its operations only in India. The various investments

moves of Tata Steel’s abroad have helped the company to expand and tap

the production and marketing network in Europe, South East Asia and the

Pacific-rim countries. Tata company believes that diversity of any

organization enriches the collective capabilities and that a clear shared

vision is a key factor for an organizational success and achieves this by

fostering team work, nurturing talent, enhancing leadership among its

people, it also believes in creating value to its customers by delivering

premium products and services, by developing leading edge solutions in

technology, processes and products.

Tata Steel aimed to become a global steel industry bench mark for value

creation and corporate citizenship. (www.tatasteel.com, www.rediff.com)

160  

The Corus group which is now known as Tata Steel Europe was created by

the merger of Koninklijke Hoogovens and British Steel. Corus is the

second largest producer of steel in Europe. Corus group aimed on

achieving leadership positions in growing markets which would ensure

sustainable growth. (www.finance.mapsofworld.com)

(www.tatasteeleurope.com)

Looking at the details of the deal, this was an all cash deal. After various

negotiations from both sides, Tata steel bought an 100 % stake in the

Corus group on January 30, 2007 for as bid amount of 7.6 $ billion. This

deal made Tata Steel the world’s fifth largest steel group. Prior to this deal,

Tata steel was majorly catering to the Indian market which was accounting

to the 69% of the sales of the company.(www.financial express.com ,

www.icmrindia.com,www.equitymaster.com)

By entering into this Tata Steel aimed to gain access to the global steel

market and expand its production capacity to keep pace with growing

demand for steel and become a market leader and this deal would enable

Corus to get a low cost partner to increase the profitability in the long run.

(www.rediff.com, www.icmrindia.com)

On analysing the deal in line with the vision and in line with the

hypothesis, this deal, helped and aided Tata, to move from world’s 56th

largest steel maker position to 5th largest steel maker, thereby increasing its

leadership position and market share. This deal also helped Tata to access

the European market, the market wherein Corus had a strong relationship

in high margin industries like automobile, construction, aerospace etc

which would benefit the Tatas. This deal enabled Corus to enter into the

161  

emerging Asian markets. (www.equitymaster.com, www.boloji.com,

www.equitymaster.com)

This deal was able to tap a lot of synergies between both the companies,

like of Tatas, which was known as a low cost steel producer and of Corus

which was famous for creating a high value product. It also brought

together a strong retail and distribution network in India and South East

Asia which would help the European manufacturer an entry into the

emerging Asian markets. This also created a combination of high quality

and low cost high growth markets, which is in line with the vision,

strategic objective and the hypothesis. (www.equitymaster.com)

The following section presents the analysis of the deals in the Telecom

sector.

Sector: Telecom

DEAL: Tata and Docomo

Tata Teleservices Limited spearheads the Tata Group's presence in the

telecom sector including over 90 companies, over 395,000 employees

worldwide and more than 3.5 million shareholders. Incorporated in 1996,

it is also the market leader in the fixed wireless telephony market. The

company's network has been rated as the 'Least Congested' in India for six

consecutive quarters by the Telecom Regulatory Authority of India

through independent surveys. Initially Tata Teleservices was focusing

more on data users and was only into CDMA services but it realized that,

in today’s environment, it needed a smart voice strategy which is

demanded by the customers. The strategic objective was to enter into an

alliance with a partner which specialized in the GSM market which would

minimize the implementation cost.

(www.articles.economictimes.indiatimes.com, www.tataindicom.com)

162  

This deal would enable Tata to adapt the technology of GSM and CDMA

very quickly as the Tokyo based NTT DOCOMO which is one of the

world’s leading mobile operators, providing leading-edge mobile voice,

data and multimedia services. With more than 60 million customers in

Japan, the company is one of the world's largest mobile communications

operators. DOCOMO also is an influential force in the continuing

advancement of mobile technologies and standards which would enable it

to expand its services across India on networks working on the GSM and

CDMA module. (www.nttdocomo.com)

NTT DOCOMO is Japan's premier provider of leading-edge mobile voice,

data and multimedia services. With more than 60 million customers in

Japan, the company is one of the world's largest mobile communications

operators. The company is also an influential force in the continuing

advancement of mobile technologies and standards. In 1999, DOCOMO

launched I-mode the world's most popular platform for mobile Internet

services including e-mail, browsing, downloading and more. In 2001,

DOCOMO introduced FOMA the world's first 3G commercial mobile

service based on W-CDMA, which has transformed the mobile landscape

in Japan while bringing the DOCOMO brand global recognition.

(www.nttdocomo.com)

This deal would enable DOCOMO to penetrate the ever-growing Indian

market and become a global cellular leader as there was a great scope of

growth for GSM and CDMA net works in India (www.slideshare.net)

Tata Teleservices Limited merged with Japanese telecom major, NTT

DOCOMO in November 2008. NTT DOCMO purchased a 26% equity

163  

stake in Tata Teleservices for about Rs. 13,070 crore. (www.knlwledge

.wharton.upenn.edu, www.mint.com)

Looking at this deal, this deal enabled technologically strong NTT,

Docomo, to tap and get access into the world’s fastest growing cellular

market. This deal enabled TTSL to utilize the technology of GSM service.

It accomplished its goal by having largest number of demand for SIM card

as per customer statistics. It entered into market with various options like

P.P.S. (pay per second) scheme initially. On 5 November 2010, it became

the first private sector telecom company to launch 3G services in India.

This strategic partnership which took place between the two companies

with complementing visions enhanced the ability to introduce, evaluate

and effectively manage the next generation technologies.

(www.termpaperwarehouse.com, www.studymode.com)

This deal achieved the strategic objectives as DOCOMO was able to enter

the growing Indian market and Tata benefited by the technology of NTT

DOCOMO, which falls in line with the hypothesis of complementarity of

objectives..

The following section presents the analysis of the deals in the aviation

sector.

SECTOR: Aviation

DEAL: Deccan and Kingfisher

Kingfisher Airlines Limited has been facing financial issues for many

years. Until December 2011, Kingfisher Airlines had the second largest

share in India's domestic air travel market. However due to the severe

164  

financial crisis faced by the airline it is facing the problem of decreased

market share. The King Fisher Airlines believed in consistently delivering

a safe, value-based and enjoyable travel experience to all the customers.

(www.kingfisher.com)

Kingfisher which was facing several problems like, increasing costs, issues

in maintaining its brand image, competition from low-cost airlines and

competition from International Airlines would benefit from this deal as

this deal would enable Kingfisher to obtain the international flying license

which would positively influence its revenues. (www.kingfisher.com)

Air Deccan, the first low cost carrier of India truly changed the face of

Indian Aviation Industry by fulfilling the dream of common man to fly.

This deal would enable Air Deccan to achieve economies of scale, increase

in customer base and good training for its employees.

(w w w . d e c c a n a i r l i n e s . i n )

If we look at the details of the deal, UB Groups, Kingfisher acquired 26

per cent stake in Air Deccan at a cost of Rs 550 crore marking the third

major merger in the Indian civil aviation space this year in January 2007.

(w w w . d n a i n d i a . c o m )

This merger enabled the two airlines with complementary strategies to

share each other's infrastructure to achieve maximum synergies .This deal

provided a life saving cash boost for Air Deccan which was facing a huge

loss. The deal provided a financial cushion to Deccan, which reported a net

loss of about $52 billion.

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This deal helped the complementing visions of both the companies as Air

Deccan which was catering to the mid to the low end segment and which

was aiming to cater to the high end segment and also for kingfisher which

was very keen to fly offshore. (www.slideshare.net)

Even though the merger looked as a perfect match of complementing

visions but this merger failed as Kingfisher which was considered as

premium airline expanded without building a proper base and not

efficiently resolving the post merger challenges. Presently, KFA with has a

huge debt and accumulated losses and with banks refusing to extend

further credit is facing tough waters. Here the problem was not related to

complementarity of vision ,it was because of poor implementation and

integration.(www.slideshare.net).

The following section provides the detailed analysis of the deals in the

media sector.

SECTOR: Media

DEAL: Reliance Big Entertainment - Willow T.V.

Reliance BIG Entertainment is a media and entertainment business,

platforms with 12 radio stations across the country and with over 516

screens spread all over India, US, Malaysia and Netherlands and offerings

to over 35 million consumers Big Cinema is India’s largest cinema chain.

With 253 screens and 10 to 15% of box office contributions BIG Cinemas

has recognized leadership in film exhibition in India.

(www.moneycontrol.com, www.campaignindia.in)

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This deal will enable the company to strengthen its presence in the global

markets and reinforce the groups presence in the new media and this deal

will aid the company to expand in size, scale and scope. As Willow TV

has more than a million registered users worldwide, predominantly in the

US, Canada, Australia and Europe, this deal with Willow TV is in line

with Reliance’s strategy to strengthen its presence in the global markets

and reinforce the group's presence in new media.

( w w w . c a m p a i g n i n d i a . i n , ww w . w i l l o w . t v )

Willow.TV which is the largest broadcaster of Cricket in the United States

and Canada produces and manages "Willow Cricket", a 24x7 channel

dedicated to cricket and Willow also holds exclusive licenses from various

cricket boards worldwide. This deal would enable Willow T.V. to offer a

significantly superior product across all the three screens namely PC,

mobile and TV. (w w w . w i l l o w . t v )

Reliance T.V acquired Willow T.V. for Rs. 300 crore and this deal enabled

the company to enter into the global markets. This acquisition

complemented the strategy to strengthen its presence in the global markets

and restate the company’s presence in the new arena. This deal enabled

Willow T.V to significantly offer a superior product across three screens,

PC, Mobile and T.V. This deal was successful as this proved to be a

complete synergistic deal for the matching of the vision as Reliance could

provide entertainment across the universe and Willow would benefit by

accessing all the three forms of screens., which is in line with the

hypothesis. ( www.campa ign ind i a . i n )

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DEAL: Walt Disney – UTV Hungama

The Walt Disney Company is very prominent in the field of family

entertainment and the company with its subsidiaries and affiliates is a

leading diversified international family entertainment and media enterprise

with five business segments. Walt Disney focuses on generating the best

creative content possible fostering innovation by utilizing the latest

technology and expanding into new markets around the world.

This deal would enable the organization to significantly advance its

presence in India and enable it to develop a strategic relationship with one

of the country's leading integrated media companies and the deal would

enable the company to participate in UTV's diversified media businesses.

( w w w . p r n e w s w i r e . c o m )

UTV one of the India's primary and most respected integrated media and

entertainment companies, has leadership position in Television, Motion

Pictures and Broadcasting and has developed from a Television Production

house, into an integrated media company.

Disney went in for the acquisition of entertainment channel Hungama T.V

from UTV through the purchase of equity shares as well as convertible

preference shares for dollar 31.25 million. In addition to this Disney

would also acquire 19.5 million convertible preference shares held by

UTV software communications as a part of the deal.

( w w w . p r n e w s w i r e . c o m )

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This deal enabled Walt – Disney to advance their presence in India as

India was a long term strategic priority for the Walt – Disney company and

this acquisition of Hungama TV and the investment in UTV enabled them

to formulate a strategic relationship with one of the country's leading

consolidated media companies and this would enable Walt Disney

Company to participate in UTV's diversified media businesses. This deal

was successful as this combined the creative capabilities of Hungama T.V.

as it had a prominent hold on the Indian kids and families aided Walt

Disney to capture this segment, which justifies the hypothesis .

(w w w . h i n d u . c o m )

CONCLUSION

The following deals from the various sectors were analyzed with respect to

the hypothesis. The various deals which were analyzed were, Arcellor –

Mittal , Tata – Corus in the steel sector, Reliance Big Entertainment –

Willow T.V., Walt Disney – UTV Hungama, in the media sector, King

Fisher – Air Deccan, in the aviation sector and Tata – Docomo in the

telecom sector.

On analyzing the deals in detail, it was observed that all the deals except

the deal in the aviation sector, the deal of Kingfisher – Air Deccan were

successful and all the other deals were able to achieve the strategic

objective they planned to achieve.

Looking at the Arcellor – Mittal deal, this deal was successful as it was

able to bring together the companies which had matching visions which

proved to be beneficial in terms of cost cutting, increased production level,

innovations in R & D which resulted in annual cost savings. Looking at

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the deal of Tata – Corus, this deal was able to tap lot of synergies and

created a combination of high quality and low cost high growth markets.

The Tata – Docomo deal, enabled a technologically strong NTT

DOCOMO to enter the growing Indian market and enabled Tata to access

the GSM technology which was the competence of NTT DOCOMO.

The King Fisher – Air Deccan deal was a failure, even though the

companies had matching vision as Kingfisher expanded without a proper

base and was inefficient in resolving the post merger issues.

On looking at the deal of Reliance Big Entertainment and Willow T.V, this

deal proved to be complete synergistic deal as Reliance was able to

provide entertainment across the universe and Willow benefited by getting

access to all three forms of screens. Looking at the Walt Disney – UTV

Hungama deal, this deal enabled Walt – Disney to advance their presence

in India, which was in line with its long term strategy.

In parenthesis, it must be stated here that complementarity of strategic

intent and vision of two organizations are essential requirements of success

of any merger and acquisition. Here what we have done is to take a few

samples where published information is clearly available to analyze.

After analyzing the deals of the various sectors case wise with respect to

the hypothesis they fall into, the next section deals with the conclusions

arrived at with respect to the data analysis discussed in the above chapter.