1. Presentation
on
‘Merger and acquisition’
Presented by
Vandana
843

2. Mergers
business
Amalgamation
c ombination
Acquisitions
Takeovers

3. A merger is when two companies,
more or less on equal footing, decide
to join forces. It is considered to be an
equal transaction, with both parties
Merger accepting risk and sharing in the
potential rewards
in India merger is called
Amalgamation

4. Merger takes place in two way:-
Merger
Through
Absorption
Merger
MERGER
THROUGH
CONSOLIDATION

5. Merger
Through
Absorption
An Absorption is Combination of
Merger
two or more companies into an
existing company
All companies except one lose
their identity

6. Examples
Western Union Bank Of New
Bank Merged New Bank Of
York Merged
With India Merged
With Mellon
IDBI With PNB
Financial

7. Merger
Through
Consolidation
A consolidation is a combination of two or more
Merger
Companies into a new Company
All companies are dissolved to form a
new Company

8. Merger
Through
Consolidation
Hindustan
Hindustan Indian Software
Instruments
Merger Computers Ltd Co .Ltd
Ltd
Indian
Reprographic
Ltd HCL LTD

9. FORMS OF MERGER
Horizontal Vertical
Merger Conglomerate
Merger Merger
Cross border international M&A

10. 1. Horizontal
• A merger in which two firms in the same industry
combine.
• Often in an attempt to achieve economies of scale and/or
scope.
For example, combining of two book publishers or two
luggage manufacturing companies to gain dominant
market share
2. Vertical
• A merger in which one firm acquires a supplier or
another firm that is closer to its existing customers.
• Often in an attempt to control supply or distribution
channels.
For example, joining of a TV manufacturing(assembling)
company and a TV marketing company or joining of a
spinning company and a weaving company.

11. 3. Conglomerate
• A merger in which two firms in unrelated
businesses combine.
• Purpose is often to ‘diversify’ the company by
combining uncorrelated assets and income
streams
For example, merging of different businesses like
manufacturing of cement products, fertilizer
products, electronic products, insurance
investment and advertising agencies. L&T and
Voltas Ltd are examples of such mergers.
4. Cross-border (International) M&As
• A merger or acquisition involving a Indian and a
foreign firm a either the acquiring or target
company.

12. Acquisition
When one company takes over another and clearly
established itself as the new owner, the purchase is
called an acquisition. From a legal point of view,
the target company ceases to exist,
the buyer "swallows" the business and the buyer's
stock continues to be traded

13. Acquisition & Takeover
When Acquisition is unfriendly or hostile
It may be called Takeover

14. Faster Growth
Improving Profitability
Managerial
M&A
Effectiveness
Objectives Gaining Market Power
Leadership
Cost Reduction

15. Are there any alternatives to Mergers or acquisitions?

16. Joint Venture
Strategic Alliance
Eliminating Inefficient
Operations
Merger Productivity Improvement
Alternatives Hiring Capable
Managers

17. Limit Competition
Market Power
Diversification
Growth
Economy of Scale
Access to Foreign Market
Resources
Displace existing Management
MOTIVES & BENEFITS Aggressiveness
OF Diversifying Risk
MERGERS Profitability

18. Accelerated Growth
MOTIVES & BENEFITS Expanding Existing Markets
OF Entering New Markets
MERGERS Expand Internally
Expand Externally
Developing Operating Facilities
Price Paid for Merger

19. Enhanced Profitability
MOTIVES & BENEFITS
OF
MERGERS Economies of Scale
Operating Economies
Synergy

20. Reduction in Tax Liability
MOTIVES & BENEFITS
OF
Carry forward Losses
MERGERS
Tax on Share

21. Financial Benefits
Eliminating Financial Constraints
MOTIVES & BENEFITS Deploying Surplus Cash
OF
MERGERS Enhancing Debt Capacity
Lowering Financial Costs

22. Increased Market Power
Market Share
MOTIVES & BENEFITS Bargaining Power
OF
MERGERS Technological Advancement
Pricing
Limiting Competition

23. Planning
Steps in Search &
Analysis Screening
Of
Mergers Financial
& Evaluation
Acquisitions
Mode of
Merger
Negotiation
Post
Merger

24. Objective of Acquisitions
Steps in Planning Strengths & Weaknesses
Business Units-dropped
Analysis or Added
Of
Mergers
&
Acquisitions Industry Data
Target Firm
Quality Of Mgt
Market Growth Market Share Size
Competition Capital Structure
Ease Of Entry Profitability
Capital & Labour Production &Marketing
Degree of Regulation Capabilities etc

25. Search &
Screening
Steps in
Analysis
Of
Mergers
& Where to look for candidates
Acquisitions Is it too large or small
Engaged in related or unrelated Activity
Export oriented or Local
Amenable or not amenable to merger

26. Financial
Evaluation
Steps in
Analysis
Of
Mergers Current
& Market
Acquisitions Value
Determining
•Earnings
•Cash flows
•Areas Of Risk Premium
•Maximum Price Payable Value
•How to Finance Merger

27. Mode of
Merger
Steps in
Analysis
Of
Mergers
& •Regulations
Acquisitions
•Time frame
•Resources
•Degree of control
•Assume hidden
liabilities

28. Negotiation
Steps in
Analysis
Of
Mergers
&
Acquisitions
Your intentions should be to pay one dollar
more than the value to the next highest bidder
and an Amount that is less than the value to you

29. Post
Merger
Steps in
Analysis
Of Check Hostility
Mergers
& Anticipate Problems
Acquisitions “Art of taking over
Solve Problems Company
Without overtaking
Treat people
It”
With Dignity

30. Value Created by Merger
Economic Advantage (EA) if
VPQ > (VP + VQ)
Where VPQ =Combined PV of merged firms
VP= Worth of Firm P
VQ=Worth of firm Q

31. Value Created by Merger
Economic Advantage
EA = VPQ - (VP + VQ)

33. Few Mergers, Acquisitions, Take over