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ST. XAVIERS COLLEGE, KOLKATA
Room No.06 SESSION 2008 !!
ST."AVIERS CO##EGE (KO#KATA)
PREFACE
M erger - It's the most talked about term today creating lot of excitementand speculative activity in the markets. But before Mergers & Ac uisitions !M&A"
activity speeds up# it has to actually pass through a long chain of procedures !both
legal and financial"# $hich at times delays the deal.
%ith the liberali ation of the Indian economy in (( # restrictions on Mergers
and Ac uisitions have been lo$ered. )he numbers of Mergers and Ac uisitions
have increased many times in the last decade compared to the slack period of
(*+-,+s $hen legal hurdles trimmed the M&A gro$th. )o put things in
perspective# from mergers in ((,# the number crossed to over ,+ in /0+ .
%ith a do$nturn in the capital markets# valuations have come do$n to historic
lo$s. It's high time that the consolidation game speeds up.
In simple terms# a merger means blending of t$o or more existingundertakings into one# conse uent to $hich each undertaking $ould lose their
separate identity. )he most common reasons for mergers are# operating synergies#
market expansion# diversification# gro$th# consolidation of production capacities
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and tax savings. 1o$ever# these are 2ust some of the illustrations and not theexhaustive benefits.
1o$ever# before the idea of Merger and Ac uisition crystalli es# the firm
needs to understand its o$n capabilities and industry position. It also needs to
kno$ the same about the other firms it seeks to tie up $ith# to get a real benefit
from a merger.
3lobali ation has increased the competitive pressure in the markets. In a
highly challenging environment a strong reason for merger and ac uisition is a
desire to survive. )hus apart from gro$th# the survival factor has off late# spurred
the merger and ac uisition activity $orld$ide.
OBJECTIVE OF STUDY:
)o discuss the form of mergers and ac uisitions.
)o highlight the real motives of merger and ac uisitions.
)o focus on the considerations that are important in the mergers and
ac uisitions negotiations.
)o find out reason for merger in the banking sector.
)o understand the implications and evaluation.
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METHODOLOGY: ACCOUNTING APPROACH
Accounting methodology using the benchmark approach is one of the commonly
and fre uently used accounting approaches to asses the performance of a company
follo$ing a merger or an ac uisition. )his approach compares the financial
performance the ac uiring companies $ith either a non-ac uiring companies in the
same line of business of a smaller si e or $ith companies $hich have never
engaged in a merger or ac uisition deal.
4ifferent ratios are employed to asses the financial performance of the companylike 5eturn on 6 uity !576" and 5eturn on Assets !57A". 4ifferent values
re uired can be found in the balance sheet of the company. )he income statement
is also a ma2or part of financial statement of the company. )he annual reports of
the company can be found on the internet or different published sources.
After conducting the ratio analysis# the next step is to compare the results $ith the
values of the benchmark company or companies# to compare the profitability. )his benchmark is usually one or more industry competitors in same line of business. If
the value of the ratios such as 576 and 57A is found to be less than that of the
benchmark group# one can conclude that the merger didn't result in improved
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performance and didn't create value for the shareholders having a negative effecton profitability and vice-versa.
Strengths of accounting methodology
" Accounts are certified.
" 8sed by investors in 2udging corporate performance. An indirect measure of
economic value creation.
Weakness of accounting methodology
" 9ossibly non-comparable data for different years. :ompanies may change their
reporting practices. Also reporting principles and regulations change over time.
" Back$ard looking.
;" Ignores value of intangible assets.
" 4ifferences among companies in accounting policies adds noise.
4ifferences in accounting principles from one country to the next make cross-
border comparison difficult.
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? :ontents ?
Chapters Page No.
:hapter . Introduction to Mergers and Acquisition. 7-12
:hapter . Purpose of merger and acquisition. 13-16
:hapter ;. Types of Mergers. 17-20
:hapter
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Introduct on to !ergersand Ac"u s t on
BUSINESS FIRMS IN THEIR PURSUIT OF GROWTH,ENGAGE IN BROAD RANGE ORESTRUCTURING ACTIVITIES. ACTIONS TAKEN TO EXPAND OR CONTRACT A FIRMS BAOPERATIONSO OR FUNDAMENTALLY CHANGE ITS ASSETS OR FINANCIAL STRUCTURE ARREFERRED TO AS CORPORATE RESTRUCTURING ACTIVITIES.
CORPORATE RESTRUCTURING IS A BROAD UMBRELLA THAT COVERS MANYTHINGS.ONE OF THE M IS THE MERGER OR TAKEOVER.FROM THE VIEWPOINT OF THE BUYEM&A REPRESENTT EXPANSION AND FROM THE PERSPECTIVE OF THE SELLER IT REPRESENTA CHANGE IN OWNERSHIP THAT MAY OR MAY NOT BE VOLUNTARY.IN ADDITION MERGERS,TAKEOVERS,AND CONTESTS FOR CORPORATE CONTROL,THERE ARE OTHER TYPECORPORATE RESTRUCTURING LIKE DIVESTITURES,REARRANGEMENTS,AND OWNERSHREFORMULATION
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Purpose o( !ergers and Ac"u s t on
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T)pes o( *ergers
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8B9 H'$%
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+ummary
=. o. ame )ype Main 9oints.1. Ranbaxy Ind Horizontal Vertical -Growth& Expansion
-Market leadership-Enteringnew frontiers-Strong brand
presence -High qualithu!an resources-Strong "
2. Sun pharma Horizontal Vertical -$ggressi%e growth-#o!estic !arketleadership
3. Reliance Industries Vertical Horizontal Global leadership-E eing s nergisticflows in the areasof feed stock
product range-Strong "
-Strategic align!ents4. Tata Power Mainl Vertical -Strong leadership in
power & energ -'ocuson "
5. Sterlite Industries Vertical (onglo!erate -Market leadership -(ostefficienc -Global pla er
6. Zuary Industries (onglo!erate -$ccelerated growth-)ncreasing product
portfolio
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WITH A VISION OF BEING IN THE TOP
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Ad+antages o( *ergers and ta&eo+ers
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8 9 Be"e %)- )' e"e$a# (!#%*
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$' %0e ' '$)("%)%e- '$ )he+ )' %" e-) )h%- +'"e/ %" ')he$ *'+ a"%e- 3h%*h 3%## e"e$a)e ($)he$ e+ #'/+e") a"0 $'3)h )' ( #% ) ' )hee*'"'+/ %" e"e$a#. Se*'"0#/, a"/ $e-)$%*)%'"- #a*e0 '" -(*h +e$ e$- 3%## 0e*$ea-e )he $'3)h a"0 %" e-)+e") a*)% %)/ 3%)h *'$$e- '"0%"0e*$ea-e %" e+ #'/+e"). B')h 3'$1e$- a"0 *'++("%)%e- 3%## -( e$ '"#e--e"%" :'! ' '$)("%)%e-, $e e")%" )he 0%-)$%!()%'" ' !e"e %)-$e-(#)%" $'+ 0% e$-% %*a)%'" ' $'0(*)%'" a*)% %)/.
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Cons derat on o( !erger and Ta&eo+er
Me$ e$- a"0 )a1e' e$- a$e )3' 0% e$e") a $'a*he- )' !(-%"e--*'+!%"a)%'"-. Me$ e$- a$e ($-(e0 ("0e$ )he C'+ a"%e- A*), > vide -e*)%'"-@ > @ )he$e' '$ +a/ !e e" %-a e0 ("0e$ )he $' %-%'"- ' I"*'+e5)a2 A*), > > '$a$$a" e0 )h$'( h BIFR ("0e$ )he S%*1 I"0(-)$%a# C'+ a"%e- A*), > 3he$ea-,)a1e' e$- a## -'#e#/ ("0e$ )he $e (#a)'$/ $a+e3'$1 ' )he SEBI Re (#a)%'"-, > .
MINORITY SHAREHOLDERS RIGHTS
SEBI $e (#a)%'"- 0' "') $' %0e %"-% h) %" )he e e") ' +%"'$%)/ -ha$eh'#0e$-"') a $ee%" )' )he )a1e' e$ ' e$. H'3e e$ -e*)%'" @ ' )he C'+ a"%e- A*), >
$' %0e- '$ )he a*4(%-%)%'" ' -ha$e- ' )he -ha$eh'#0e$-. A**'$0%" )' -e*)%'" @' )he C'+ a"%e- A*), % )he ' e$e$ ha- a*4(%$e0 a) #ea-) J %" a#(e ' )h'-e-ha$e- +a/ % e "')%*e )' )he "'"5a**e )%" -ha$eh'#0e$- ' )he %")e")%'" ' !(/%")he%$ -ha$e-. The J a**e )a"*e #e e# -ha## "') %"*#(0e )he -ha$e he#0 !/ )he ' e$e$'$ %)- a--'*%a)e-. The $'*e0($e #a%0 0'3" %" )h%- -e*)%'" %- !$%e #/ "')e0 !e#'3.
>. I" '$0e$ )' !(/ )he -ha$e- ' "'"5a**e )%" -ha$eh'#0e$- )he ' e$e$ +(-) ha e$ea*he0 )he J a**e )a"*e #e e# 3%)h%" +'")h- ' )he 0a)e ' )he ' e$, a"0"')%*e +(-) ha e !ee" -e$ e0 '" )h'-e -ha$eh'#0e$- 3%)h%" ? +'")h- '$ea*h%" )he J #e e#.
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?. The "')%*e )' )he "'"5a**e )%" -ha$eh'#0e$- +(-) !e %" a $e-*$%!e0 +a""e$.A *' / ' a "')%*e a"0 a -)a)()'$/ 0e*#a$a)%'" !/ )he ' e$e$ 8'$, % )he ' e$e$%- a *'+ a"/, !/ a 0%$e*)'$9 %" )he $e-*$%!e0 '$+ *'" %$+%" )ha) )he*'"0%)%'"- '$ % %" )he "')%*e ha e !ee" -a)%- %e0 +(-) !e -e") )' )he )a$ e).
@. O"*e )he "')%*e ha- !ee" % e", )he ' e$e$ %- e")%)#e0 a"0 !'("0 )' a*4(%$e)he '()-)a"0%" -ha$e- '" )he )e$+- ' )he ' e$.
. I )he )e$+- ' )he ' e$ % e )he -ha$eh'#0e$- a *h'%*e ' *'"-%0e$a)%'", )he"')%*e +(-) % e a$)%*(#a$- ' ' )%'"- a a%#a!#e a"0 %" '$+ )he -ha$eh'#0e$-)ha) he ha- -%2 3ee1- $'+ )he 0a)e ' )he "')%*e )' %"0%*a)e h%- *h'%*e '*'"-%0e$a)%'" %" 3$%)%" .
. A) )he e"0 ' )he -%2 3ee1- $'+ )he 0a)e ' )he "')%*e )' )he "'"5a**e )%"-ha$eh'#0e$- )he ' e$e$ +(-) %++e0%a)e#/ -e"0 a *' / ' "')%*e )' )he )a$ e)a"0 a/ '$ )$a"- e$ )' )he )a$ e) )he *'"-%0e$a)%'" '$ a## )he -ha$e- )' 3h%*h)he "')%*e $e#a)e-. S)'*1 )$a"- e$ '$+- e2e*()e0 '" !eha# ' )he "'"5a**e )%" -ha$eh'#0e$- !/ a e$-'" a '%")e0 !/ )he ' e$e$ +(-) a#-' !e-e"). O"*e )he *'+ a"/ ha- $e*e% e0 -)'*1 )$a"- e$ '$+- %) +(-) $e %-)e$ )he' e$e$ a- )he h'#0e$ ' )he -ha$e-.
. The *'"-%0e$a)%'" +'"e/, 3h%*h %- $e*e% e0 !/ )he )a$ e), -h'(#0 !e he#0 '")$(-) '$ )he e$-'" e")%)#e0 )' -ha$e- %" $e- e*) ' 3h%*h )he -(+ 3a-
$e*e% e0.
. A#)e$"a)% e#/, % )he ' e$e$ 0'e- "') 3%-h )' !(/ )he "'"5a**e )%"-ha$eh'#0e$- -ha$e-, %) +(-) -)%## 3%)h%" '"e +'")h ' *'+ a"/ $ea*h%" )he
J a**e )a"*e #e e# % e -(*h -ha$eh'#0e$- "')%*e %" )he $e-*$%!e0 +a""e$' )he $% h)- )ha) a$e e2e$*%-a!#e !/ )he+ )' $e4(%$e )he ' e$e$ )' a*4(%$e )he%$
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-ha$e-. The "')%*e +(-) -)a)e )ha) )he ' e$ %- -)%## ' e" '$ a**e )a"*e a"0- e*% / a 0a)e a )e$ 3h%*h )he $% h) +a/ "') !e e2e$*%-e0, 3h%*h +a/ "') !e#e-- )ha" @ +'")h- $'+ )he e"0 ' )he )%+e 3%)h%" 3h%*h )he ' e$ *a" !ea**e )e0. I )he ' e$e$ a%#- )' -e"0 -(*h "')%*e %) 8a"0 %)- ' %*e$- 3h' a$e %0e a(#)9 a$e #%a!#e )' a %"e ("#e-- %) '$ )he/ )''1 a## $ea-'"a!#e -)e - )' -e*($e*'+ #%a"*e.
. I )he -ha$eh'#0e$ e2e$*%-e- h%- $% h)- )' $e4(%$e )he ' e$e$ )' ($*ha-e h%
-ha$e- )he ' e$e$ %- e")%)#e0 a"0 !'("0 )' 0' -' '" )he )e$+- ' )he ' e$ '$ '"-(*h ')he$ )e$+- a- +a/ !e a $ee0. I a *h'%*e ' *'"-%0e$a)%'" 3a- '$% %"a##/' e$e0, )he -ha$eh'#0e$ +a/ %"0%*a)e h%- *h'%*e 3he" $e4(%$%" )he ' e$e$ )a*4(%$e h%- -ha$e-. The "')%*e % e" )' -ha$eh'#0e$ 3%## - e*% / )he *h'%*e '*'"-%0e$a)%'" a"0 3h%*h *'"-%0e$a)%'" -h'(#0 a #/ %" 0e a(#) ' a" e#e*)%'".
. O" a #%*a)%'" +a0e !/ a" ha / -ha$eh'#0e$ 3%)h%" -%2 3ee1- $'+ )he 0a)e'" 3h%*h )he '$% %"a# "')%*e 3a- % e", )he *'($) +a/ +a1e a" '$0e$
$e e")%" )he ' e$e$ $'+ a*4(%$%" )he -ha$e- '$ a" '$0e$ - e*% /%" )e$+' a*4(%-%)%'" 0% e$%" $'+ )h'-e ' )he ' e$ '$ +a1e a" '$0e$ -e))%" '() )he)e$+- '" 3h%*h )he -ha$e- +(-) !e a*4(%$e0.
I" *e$)a%" *%$*(+-)a"*e-, 3he$e )he )a1e' e$ ' e$ ha- "') !ee" a**e )e0 !/)he $e4(%$e0 J %" a#(e ' )he -ha$e )' 3h%*h ' e$ $e#a)e- )he *'($) +a/, '"a #%*a)%'" ' )he ' e$e$, +a1e a" '$0e$ a()h'$%
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-ha$eh'#0e$-, a+'(") )' "') #e-- )ha" J %" a#(e ' )he -ha$e- -(!:e*) )')he ' e$; a"0*. )he *'"-%0e$a)%'" ' e$e0 %- a%$ a"0 $ea-'"a!#e.
The *'($) 3%## "') +a1e -(*h a" '$0e$ ("#e-- %) *'"-%0e$- )ha) %) %- :(-) a"0e4(%)a!#e )' 0' -', ha %" $e a$0, %" a$)%*(#a$, )' )he "(+!e$ ' -ha$eh'#0e$ 3h' ha-!ee" )$a*e0 3h' 0%0 a**e ) )he ' e$.
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Procedure (or Ta&eo+er and Ac"u s t on
PUBLIC ANNOUNCEMENT7
T' +a1e a (!#%* a""'("*e+e") a" a*4(%$e$ -ha## '##'3 )he '##'3%" $'*e0($e7
1* ppointment of merchant banker 7
The a*4(%$e$ -ha## a '%") a +e$*ha") !a"1e$ $e %-)e$e0 a- *a)e '$/ I 3%)hSEBI )' a0 %-e h%+ '" )he a*4(%-%)%'" a"0 )' +a1e a (!#%* a""'("*e+e") ' ' e$ '"h%- !eha# .
2. Use of media for announcement:
P(!#%* a""'("*e+e") -ha## !e +a0e a) #ea-) %" '"e "a)%'"a# E" #%-h 0a%#/ '"eH%"0% 0a%#/ a"0 '"e $e %'"a# #a" (a e 0a%#/ "e3- a e$ ' )ha) #a*e 3he$e )he -ha$e-
' )ha) *'+ a"/ a$e #%-)e0 a"0 )$a0e0.
- 2(
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8 9 The %0e")%)/ ' )he a*4(%$e$ a"0 %" *a-e )he a*4(%$e$ %- a *'+ a"/,)he %0e")%)/ ' )he $'+')e$- a"0, '$ )he e$-'"- ha %" *'")$'#' e$ -(*h *'+ a"/ a"0 )he $'( , % a"/, )' 3h%*h )he *'+ a"/!e#'" ;
8 9 The e2%-)%" h'#0%" , % a"/, ' )he a*4(%$e$ %" )he -ha$e- ' ))a$ e) *'+ a"/, %"*#(0%" h'#0%" ' e$-'"- a*)%" %" *'"*e$) 3%)hh%+;
8 9 Sa#%e") ea)($e- ' )he a $ee+e"), % a"/, -(*h a- )he 0a)e, )he "a+e' )he -e##e$, )he $%*e a) 3h%*h )he -ha$e- a$e !e%" a*4(%$e0, )he+a""e$ ' a/+e") ' )he *'"-%0e$a)%'" a"0 )he "(+!e$ a"0
e$*e")a e ' -ha$e- %" $e- e*) ' 3h%*h )he a*4(%$e$ ha- e")e$e0%")' )he a $ee+e") )' a*4(%$e$ )he -ha$e- '$ )he *'"-%0e$a)%'",+'"e)a$/ '$ ')he$3%-e, '$ )he a*4(%-%)%'" ' *'")$'# ' e$ )he )a$ e)*'+ a"/, a- )he *a-e +a/ !e;
8 9 The h% he-) a"0 )he a e$a e a%0 !/ )he a*4(%$e$ '$ e$-'"- a*)%"%" *'"*e$) 3%)h h%+ '$ a*4(%-%)%'", % a"/, ' -ha$e- ' )he )a$ e*'+ a"/ +a0e !/ h%+ 0($%" )he )3e# e +'")h e$%'0 $%'$ )' )he0a)e ' )he (!#%* a""'("*e+e");
8 9 O!:e*)- a"0 ($ '-e ' )he a*4(%-%)%'" ' )he -ha$e- a"0 )he ()($e
#a"- ' )he a*4(%$e$ '$ )he )a$ e) *'+ a"/, %"*#(0%" 0%-*#'-e$- 3he)he$ )he a*4(%$e$ $' '-e- )' 0%- '-e ' '$ ')he$3%-e e"*(+!e$a"/ a--e)- ' )he )a$ e) *'+ a"/7
P$' %0e0 )ha) 3he$e )he ()($e #a"- a$e -e) '(), )he (!#%*a""'("*e+e") -ha## a#-' -e) '() h'3 )he a*4(%$e$- $' '-e )'%+ #e+e") -(*h ()($e #a"-;
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8>J9 The =- e*% %e0 0a)e a- +e")%'"e0 %" $e (#a)%'" > ;
8>>9 The 0a)e !/ 3h%*h %"0% %0(a# #e))e$- ' ' e$ 3'(#0 !e '-)e0 )' ea*h' )he -ha$eh'#0e$-;
8>?9 The 0a)e ' ' e"%" a"0 *#'-($e ' )he ' e$ a"0 )he +a""e$ %" 3h%*h a"0 )he 0a)e !/ 3h%*h )he a**e )a"*e '$ $e:e*)%'" ' )he ' e$ 3'(#0 !e *'++("%*a)e0 )' )he -ha$e h'#0e$-;
8>@9 The 0a)e !/ 3h%*h )he a/+e") ' *'"-%0e$a)%'" 3'(#0 !e +a0e '$)he -ha$e- %" $e- e*) ' 3h%*h )he ' e$ ha- !ee" a**e )e0;
8> 9 D%-*#'-($e )' )he e e*) )ha) %$+ a$$a" e+e") '$ %"a"*%$e-'($*e- $e4(%$e0 )' %+ #e+e") )he ' e$ %- a#$ea0/ %" #a*e,%"*#(0%" )he 0e)a%#- $e a$0%" )he -'($*e- ' )he ("0- 3he)he$0'+e-)%* %.e. $'+ !a"1-, %"a"*%a# %"-)%)()%'"-, '$ ')he$3%-e '$
'$e% " %.e. $'+ N'"5$e-%0e") I"0%a"- '$ ')he$3%-e;
8> 9 P$' %-%'" '$ a**e )a"*e ' )he ' e$ !/ e$-'" 3h' '3" )he -ha$e-!() a$e "') )he $e %-)e$e0 h'#0e$- ' -(*h -ha$e-;
8> 9 S)a)()'$/ a $' a#- $e4(%$e0 )' '!)a%"e0 '$ )he ($ '-e 'a*4(%$%" )he -ha$e- ("0e$ )he C'+ a"%e- A*), > , )heM'"' '#%e- a"0 Re-)$%*)% e T$a0e P$a*)%*e- A*), > @, a"0 '$ a"/')he$ a #%*a!#e #a3-;
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8> 9 A $' a#- ' !a"1- '$ %"a"*%a# %"-)%)()%'"- $e4(%$e0, % a"/;
8> 9 Whe)he$ )he ' e$ %- -(!:e*) )' a +%"%+(+ #e e# ' a**e )a"*e- $'+)he -ha$eh'#0e$-; a"0
8> 9 S(*h ')he$ %" '$+a)%'" a- %- e--e")%a# '$) )he -ha$eh'#0e$- )' +a1ea" %" '$+e0 0e-% " %" $e a$0 )' )he ' e$.
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Case Stud es
#A+4 +T : 1
TATA-Tetley Deal
TATA )ea a*4(%$e0 Te)#e/ )ea %" Fe!$(a$/ ? , ?JJJ
I" > @, Ta)a Tea -e) ( Ta)a Te)#e/ L)0, 3%)h )he Te)#e/ $'( , %" C'*h%"
The *'+ a"/ a#-' -e) ( Ta)a Tea, G$ea) B$%)a%" '$ )h%- a*4(%-%)%'"
Va#(e ' 0ea#7 @>.@ +%##%'"
Ta)a Tea +a0e %)- G#'!a# De '-%)'$/ Re*e% ) %--(e '$ a$)5 ("0%" )h%-
a*4(%-%)%'".
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Tata tea limitedO3"e0 !/ I"0%a6- Ta)a $'(
Se) ( %" > a- a :'%") e")($e 3%)h UK !a-e0 a+e- F%"#a/ a"0 C'+ a"/
W'$#06- -e*'"0 #a$ e-) +a"( a*)($e$ a"0 0%-)$%!()'$ ' )ea
La$ e-) )ea !$a"0 %" I"0%a
O e$a)%'"- %" J *'(")$%e- a$'("0 )he 3'$#0
I) %- '"e ' I"0%a6- %$-) +(#)%"a)%'"a# *'+ a"%e-
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Tetley TeaF+, . / 1'22 0 J+ %#! " . E. "&. T%$ %
"& % $ $%" +7#" / $!% U /$%. 8/ .+7
I 9% $+& + $!% $%" 0"
T%$ % 0 % . ; #" < ; 7"&
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P,+T-M4 4 @I A #IA P4 @, MA #4
- 4)
Mergerimp)ication
Tata tea ?preacquisition
Tet)ey ?preacquisition
#onso)idated ?post acquisition
osition in
the va"uechain
4 0 turnover
from packettea1tea bags
# 0 turnover
from packettea1tea bags
Compan' has move up the va"ue chain
0 Turnover from packet tea1tea bags.
-ncreasedoutsourcing
roduced ) 0of the teare uirements inhouse
Outsourcedentire tea re .from 3(countries
5procurementof 3m kg of teaever' 6eek7
! 0 of Tata tea re . outsourced from 2countries 5 reduction of risk arising out off"uctuation in
production arising out of differentfactors7.
redictab"emargins
,argins high"'corre"ated 6ithtea c'c"es
,argins 6erenot corre"atedto tea c'c"es
,argins hedged
8"oba"footprints 9omesticoperations U+ and U/accounts forbu"k sa"es
8"oba" presence
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I +&.%& $+ %9" ,"$% $!% + %=,% % + $!% M>A " $/9/$ ; I +7#"&%.
$!% / " /" #%& +&7" % + T"$" T%" L$.*; /$! $!% #%& +&7" % + /$
+7#%$/$+& H/ ., $" L%9%& L$.*; " ,0 /./"& + U / %9%&*
H/ ., $" L%9%& L$.*?HLL@ / + % + $!% "& % $ #&+., %& + $%" " .
$ + 7" +& 0&" . L/#$+ " . B&++A " $/9/$/% +9%& $!% " $ .% ".%* H% % HLL+ $/$,$%. $!% 0% !7"&< +7#" * B +7#"&/ $!% / " /"
#%& +&7" % + HLL " . T"$" T%" L$.*; I $% $%. $!% + + /
! #+$!% / :
Hypothesis
M>A " $/9/$ !"9% " % "$/9% /7#" $ + T"$" T%" #&+ /$"0/ /$ $!"$ /ROA " . ROE + $!% +7#" "&% % "$/9% " . + %& $!" $!"$ +
+7#%$/$+& *
T"0 % 0% + !+ $!% %$ " % ; EBIT; ROA; %$ / +7% ? + @ " .
ROE + T"$" T%" " . H/ ., $" L%9%& L$.* +& $!% #%&/+. 0%$ %%
2))1 " . 2)) *
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T"04% : Profitability of i'd-sta' Lever Ltd. over the periods of 2001 to 200
!"A# $et %ales&$#
millio's/
$et &'(ome&$#
millio's/
Total Assets
&$#millio's/
#)A* +per year
Total ",-ity&$#
millio's/
#)"** +per year
2001 6 441 141 3 563 35 30436 42002 1232 1 35 40423 43 365 42003 4103 2435 341 1 20 2 0 112004 002 224 3 3615 62 213 2 102005 632 23 0 4211 56 20 2 0 11
2006 6 20 24240 40300 60 230562 10200 10544 22050 4 553 45 2 234 Av. 2 54 21221 401 4 25 40
*#)A is (al(-lated as 'et i'(ome total assets
**#)" is (al(-lated as 'et i'(ome total shareholder s e,-ity.
#A+4 +T : 2
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Philips - %te'tor dealO$a*#e C'$ . a*4(%$e0 BEA S/-)e+- I"*. '" (#/ , ?JJ
Va#(e ' 0ea# 7 ? J +%##%'"
S)e")'$ 3%## !e %"*'$ '$a)e0 %")' )he Hea#)h*a$e IT !(-%"e-- ' Ph%#% -6 Me0%*a
S $%7 ./9/ /+
P!/ /# " . S$% $+& / + $/ ,% $+ #,& ,% $!%/&!"&%. 9/ /+ +& !%" $! "&% IT
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PhilipsF+, .%. / 1'(1
+& . %"./ " . E,&+#% "& % $ % % $&+ / +7#"
A $/9/$/% / $!&%% / $%& +
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%te'tor
F'("0e0 %" >
#ea0e$ %" )he 0%-)$%!()%'", +a"a e+e"), a"0 -)'$a e ' 0% %)a# +e0%*a# %+a e-
S)e")'$ %- a" ISO >@ *e$)% %e0 +e0%*a# 0e %*e +a"( a*)($e$
S)e")'$ %- a" ISO >@ *e$)% %e0 +e0%*a# 0e %*e +a"( a*)($e$
I" (#/ ?JJ , S)e")'$ ') C(-)'+e$ Va#(e E"ha"*e+e") A3a$0
A""(a# $e e"(e7 > , JJ,JJJ
#A+4 +T : 3
#a'ba y - Daii(hi deal
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D"// !/-S" < + " =,/&%. 34*' $"
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4AII:1I-=A C07 :7M9A 0DIMI)64
E $"0 / !%. / S%#$* 2'$! 2))5*?JAPAN@
> Japans second largest drug maker company
>Ranked 22nd
drug maker in the world
>Providing a stable supply of top- uality pharmaceutical products
>!"# $%&'&()* ()#+&
>,orkforce $ /201 People.
> a3or *ndustry $ "thical +rug anufactures.
>&nnual (ales in 4561$ 7(8 9.1 :n
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1o$ did 4aiichi-=ankyo ac uire 5anbaxyE
Date of A(, sitio'
Parti( lars $ mber of%hares
+ of oldi'7
)(tober 158 200 A(, isitio' ofshares 'der
ope' offerp rs a't to %"9e7 latio'. :#s. 3 - pershare
2851 8126 22.01
)(tober 208 200 Allotme't of%hares o'prefere'tial 9asis: #s. 3 - pershare.
46825 8063 11.00
)(tober 208200 A(, isito' of%hares from thethe' promotersof ;ompa'y :#s. 3 - pershare.
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=hareholding 9attern of 5anbaxy Daboratories Dtd.
:onsideration :omputation @
- 5)
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!A" 1o$ Much 4id 4aiichi-=ankyo 9ayEN"$,&% + T&" " $/+ A =,/ /$/+ C+ /.%&"$/+?/ M/ /+ Y% @
)pe' mar=et share p r(hases 16 840
%hare p r(hases from fo 'di'7family
>ai' from Promoters 2308 0
%hare p r(hases by iss a'(e of'e? shares
@o'ey &'f sed i' #a'ba y s9ala'(e %heet 58001
Dire(t a(, isitio' relatede pe'dit res
28 4
T+$" 4'';354
!B" 1o$ did 4aiichi-=ankyo value 5anbaxy EA %$ > L/"0/ /$/% V" ,% A$$&/0,$%.9oo= val e of assets a'd liabilities.
;ash8 &'ve'tory et(./
. 0
&'ve'tories&'(rease i' i've'tories to fair val e/
2.00
Ta'7ible assets La'd/ 10.00&'ta'7ible assets Leasehold la'd/ 5. 0&'ta'7ible assets &'(rease i'( rre't prod (ts8 et(. to fair val e/
41.0
&'-pro(ess #BD e pe'ses 6. 0Deferred ta liability 20.00/
@i'ority &'terest 45.00/>ood?ill 40 . 0T+$" C+ /.%&"$/+ 4''*3)
Faluation of 5anbaxy Daboratories Dtd.
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D% B )( D% B )' D% B ) D% B )6 D% B )5
)ther i'(ome 2 6.3 1.26 43 . .5 20 .66%to(= adG stme't -35.26 -1 0. 2 -40.66 -4 .65 -30. 6#a? material 18602.0 1854 . 0 18513.34 1865 .24 18535. 5Po?er a'd f el - - - - -"mployee e pe'ses 2 .4 4 0.0 421.61 342.2 301.65" (ise - - 44.6 4 .15 2.00
Admi' a'd selli'7 e pe'ses - - - - -
Research and developmente pe'ses - 422.5 413. 4 3 2. 2 4 6.36" pe'ses ( apitalised - - - - -)ther e pe'ses 18663.65 18 4.15 181 1.4 18032.2 1804 .4Provisio's made - - - - -Depre(iatio' 14 .2 125.3 11 . 3 111. 6 101.33Ta atio' 4 . 3 -5 4.3 156.6 60.11 -22.34$et profit loss 5 1. -18032.33 61 . 2 3 6.45 223." tra ordi'ary item - - 3 . 2 - -22.6 53.6Prior year adG stme'ts - - - - -", ity (apital 210.21 210.1 1 6.54 1 6.34 1 6.22", ity divide'd rate - - - - -
A77.of 'o'-prom. shares La(s/ 1462.05 1444.31 2323.26 2243.2 - A77.of 'o' promoto oldi'7 +/ 34. 34.36 62.2 60.1 -)P@ +/ 1 .23 5.33 13.43 14.0 1.
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&mpa(t of #a'ba y deal o' Daii(hi-%a'=yo 9ala'(e %heetP"&$/ , "& I Y% 0/ /+ R%" +N%$ #&+ /$ ? + @ forDaii(hi-%a'=yo i'
( *6 #e(ordi'7 of H351.3 billio'i' e traordi'ary losses d eto a o'e-time.
N%$ #&+ /$ ? + @forDaii(hi-%a'=yo i'
?215*5@ ?rite-do?' of 7ood?illpertai'i'7 to thei'vestme't i' #a'ba y.
N%$ " ! sed i' i'vesti'7
a(tivities i'
4(*4 &t is d e to the (ash
a(, isitio's of shares i' I3Pharma a'd #a'ba y.N%$ " ! sed i' i'vesti'7a(tivities i'
413*' Jhi(h e'tailed (asho tflo?s.
S!+&$ $%&7 0" < +" i'
)*1 9orro?i'7s for thea(, isitio' of #a'ba y sshare H K240.0 billio'
S!+&$ $%&7 0" < +" i'
264*3 &'(rease by (o'solidatio' of#a'ba y.
Analysis @
R/ < / $!% .%" +& D"// !/-S" < + :
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#a'ba y s e pos re to the I% dollar.
I%
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%tre'7the' the positio' of the (ompa'y.
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; rre't val atio's of shares i' sto(= mar=ets The @BA 7ame i' the &'dia' (o'te t has already made ahealthy start. o?ever8 the str (t ral a'd le7al problems are adverselyaffe(ti'7 the 7ro?th rates. Altho 7h8 the 7over'me't has realiFed this fa(t8it is yet to be(ome proa(tive. Jith the e'try of m lti'atio'als i'to the &'dia'mar=ets8 (o'solidatio' ?o ld be the best ?ay to s rvive a'd to 7ai' mar=etshare.
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Bibliography
9oo=s M @er7ers a'd A(, isitio's M &;
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OT&/TaB)e $5 Acquisitions in t(e eC +eries Industries.
Industr y
Ac uirerGBidder )arget 4ate Motive
Ad ertisingAgenc
y
%99 3roup plc 6 uus Hune ((> 6ntry in Indian marketMc:ann-6rickson%orld$ide
McCann 6rikson India March ((, Buyout 2oint venture partner
%99 3roup plc 1industan )hompsonAssociates
Hune ((, Buyout 2oint venture partner
Bates %orld$idde Bates :arion Han +++ Buyout 2oint venture partner Tra e)Agency
:arlson %agonlit Ind )ravels August ((( 6ntry in Indian marketCuoni#=$it erland
=ita )ravels Han +++ 6ntry in Indian market
Cuoni )ravel =7): May ((* Increase stake/usiness
+er ices
Hardine /lemming Carvy :onsultants April ((> 6ntry in Indian market:oopers and
Daybrand
=B Billimoria Hune ((> 6ntry in Indian market
6rnst and 0oung =5 Batliboi Han ((* Buyout 2oint venture partner %atson %yatt %yatt India March ((, Buyout 2oint venture partner
PuB)is(ing
Macmillan 8C Macmillan India May ((* Increase stake
Mc3ra$ 1ill )ata Mc3ra$ 1ill April ((> Buyout 2oint venture partner 9olygramInternational1olding Bv
9olygram India Hune ((( Buyout 2oint venture partner
+oftC
are
Baring India
Investments#Mauritius
B/D =oft$are Hune ((, 6ntry in Indian market
Baring 9rivate6 uity 9artners!India"
=ynergy Dog-In =ystems April ((( 6ntry in Indian market
Martek 1oldingsIncorporation
Mascon 3lobal Dtd. Huly ((( 6ntry in Indian market
IBM IBM 3lobal =ervices =ept ((( Buyout 2oint venture partner
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IBM )ata IBM =ept ((( Buyout 2oint venture partner
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OT&/)able @ =hare of M and A s in /4I
Inf)oCs in India.0ear /4I Inflo$s
!J million"M and A /unds
!J million"=hare of M and A/unds in Inflo$s
!9ercent"((* ; ++ ;++ ((, (++ +++ ;
Source: Kumar based on RIS-ICDRC Database
TaB)e 35 #onsideration in o) ed in +e)ectM 4 e)ated Acquisition.
)otal:onsideration!5s. Million"
9ercent=hare
All deals !,*" ,*.*)op + deals >((( ,+.+
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