Final Bpsm
Transcript of Final Bpsm
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LEADERSHIP THROUGH
WEALTH CREATION BYMERGERS AND
ACQUISITIONS
Presented by: Group 7
Tisha Gugliani D05
Shraddha Tripathi D08
Pankaj Ishpujani D30
Rishabh Jain D48
Gaurav Goel D53
Karan Malhotra D59
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Mergers and Acquisitions
Merger - A Merger may be defined as the combination
of two or more independent business corporations into
a single enterprise, usually involving the absorption of
one or more firms by a dominant firm.
Mergers may be broadly classified as Horizontal,
Vertical or Conglomerate
Acquisition may be defined as an act of one enterprise
of acquiring, directly or indirectly of shares, voting
rights, assets or control over the management, of
another enterprise .
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Mergers
STRUCTURE 1
A = Amalgamating Company: Ceases to Exist
B = Amalgamated Company
B receives all of As assets and liabilities
Shareholders of A receive shares in B and maybe other benefits
like debentures, cash
Transfer assets and liabilities
A B
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4
Mergers
STRUCTURE 2 A, B and C = Amalgamating Companies: Cease to exist
D = Amalgamated Company: may or may not have existed
before Merger
All assets and liabilities of A, B and C transferred to D
Shareholders in A,B and C get shares in D.
A
DB
C
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Why M&A?
Underlying Principle for
M&A Transactions2 + 2 4
Additional Value of Synergy
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Mergers and Acquisitions
Reasons for mergers & acquisitions:
Strategic: The combined FCFs (Free Cash Flows) of
the merged operation are greater than the sum of
the individual cash flows.
Financial: The cash flows and also the market
value of the target are below their true value, due
to perhaps inefficient management. Such firmsare typically restructured after the acquisition.
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Types of Takeovers
How the Deal is FinancedCash Transaction
The receipt of cash for shares by shareholders inthe target company.
Share Transaction The offer by an acquiring company of shares or a
combination of cash and shares to the targetcompanys shareholders.
Going Private Transaction (Issuer bid) A special form of acquisition where the
purchaser already owns a majority stake in thetarget company.
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ESSAR COMMUNICATIONS
Essar Communications operates in four businesssegments: Telecom, telecom retail, telecom
infrastructure and Aegis Services.
It has a joint venture with Vodafone, a chain of telecom
retail outlets, a nationwide telecom tower network and apresence in IT enabled services.
Essar Telecom Infrastructure Private Limited (ETIPL) is
one of the largest independent telecom infrastructure
service provisioning companies in the country. It builds telecom site infrastructure and shares it with
multiple telecom operators in India.
It has already set up over 3,500 towers in India, with
plans to build 20,000 towers.
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Why Hutch was willing to sell its stake in
HutchisonEssar?
Aid in creating value in emerging mobile markets and
realizing the same for the benefit of shareholders at the
right time
Will be able to generate huge cash for launch of
operations in Vietnam and Indonesia
HTIL Suffers loss of HK$768 million in 2005
The Company did not declare any dividends for the
year ended 31 December 2006.
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WhyVodafone interested to
acquire control inHutchEssar??
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Hutch Essar andVodafone
Controlling interest in a major, fast growing market
Meets twin financial investment criteria
Strong management team with good cultural fit
Vodafone and Essar will derive greater value together
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India: A very large market
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IndianMobile Market
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Oneofonly 4 major mobileoperators
inIndia
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Sep
tembe
r 21, 2007
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THE DEAL In the year 2007, the worlds largest telecom company in
terms of revenue, Vodafone Plc (Vodafone) made a majorforay into the Indian telecom market by acquiring a 52% stakein the Indian telecom company Hutchinson Essar Ltd., througha deal with the Hong Kong based HutchinsonTelecommunication International Ltd. It was the biggest dealin the Indian telecom market. Vodafones main motive goingin for the deal was its strategy of expanding into emerging andhigh growth markets like India. In 2007, India has emerged asthe fastest growing telecom market in the world outpacingChina. But it still had low penetration rates, making it themost lucrative market for global telecom companies.
British telecom giant vodafone has bagged the 67% HTIL at anenterprise value of $19.3 billion (approx. Rs. 86000 crore)which comes to $794 per share.
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PRINCIPLE BENEFITS
Accelerates Vodafones move to a controllingposition in a leading operator in the attractiveand fast growing Indian mobile market
India is the worlds 2nd most populated countrywith over 1.1 billion inhabitants
India is the fastest growing major mobile marketin the world, with around 6.5 million monthly netadds in the last quarter
India benefits from strong economicfundamentals with expected real GDP growth inhigh single digits
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Contd.
Increases Vodafones presence in higher growth
emerging markets
proportion of Group statutory EBITDA from the
EMAPA region expected to increase from below
20% in the financial year ending 31 March 2007
(FY2007) to over a third by FY2012
As of 31st July 2010, Vodafone has 111,465,260numbering strong customer base.
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What isWealth ?
Net Worth that is the accumulation of your residualincome over time. Therefore, to create constant andlasting wealth, you need to add value to all yourfinancial resources. These financial resources are simply
utilized to create added residual value over time.
Steps in wealth creation:
-Create wealth
-Accumulate wealth
-Monitor and grow the wealth
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Leadership through wealth creation
The purpose of business leadership is to create
wealth financial and material, human and
social in the face of external developments
that are never entirely foreseeable.
Vodafone India reported revenues ofRs 69
billion, a growth of 13.2 per cent QoQ and
26.4 per cent YoY, one of the strongest growthin last 5 quarters.
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Attaining leadership Indias second largest telco by sales, Vodafone Essar, posted its strongest
growth in the last six quarters with a better-than-anticipated 26.4%
revenue jump in the three months ended June 30, 2010.
Vodafone Essar had turned cash-positive.
Posted revenues of 954 million for the June quarter, up 26.4% from the
same period last year.
It showed an impressive rise of 13.2%.
The improvement was driven by continued strong customer growth and
better usage trends in India where there have been no recent significant
price reductions by market leaders. Significant price declines have been successful and seeing minutes return
to operators with strong brands and performing networks.
Vodafone added 8.2 million new users in India during this period taking
its customer base to over 109 million. India accounted for over 75% of
customer additions globally during this quarter.
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Conclusion
Vodafone creating value in India
Controlling position in a leading operator with nationwide presence
Strong existing platform for growth
Additional value under Vodafone ownership
Increased Vodafones presence in high growth markets
Increased presence of big Global Players in India
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References
http://www.trai.gov.in
http://www.vodafone.com
http://www.afaqs.com/perl/news/case_studies/index.html?mid=13
http://www.indiaprwire.com/pdf/news/20188.pdf
http://www.vodafone.com/start/media_relations/news/local_press_releases/india/vod
afone_essar_press/vodafone_is_here_.html
http://www.tonsetelecom.com/pdf%20
files/B_E_Feb07
.pdf
http://www.rediff.com/money/2007/mar/08hutch.htm
http://www.domain-b.com/companies/companies_v/vodafone/2 0070212_control.htm
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