Merger& Acquistion Process in India With JLR TATA Merger Case Study

Project: Merger & Acquisition Process in India Roll No.64 MFM Semester V TIMSR

TITLE: MERGER & ACQUISTION IN INDIA

A PROJECT SUBMITTED IN

PART COMPLETION OF

MASTER IN FINANCIAL MANAGEMENT

TO

THAKUR INSTITUTE OF MANAGEMENT STUDIES & REASEARCH

BY

JATIN PRABHUDAS MEVADA

UNDER THE GUIDANCE OF

PROFESSOR: MS. GITIKA MAYANK

THAKUR INSTITUTE OF MANAGEMENT STUDIES & RESEARCH (TIMSR)

MFM BATCH: 2008-2011

THAKUR EDUCATION COMPLEX, THAKUR VILLAGE, KANDIVALI (E) MUMBAI

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CERTIFICATE

This is to certify that the study presented by JATIN PRABHUDAS MEVADA (ROLL

NO.64) to THAKUR INSTITUTE OF MANAGEMENT STUDIES & RESEARCH (TIMSR) in

part completion of MASTERS IN FINANCIAL MANAGEMENT under MERGER &

ACQUISITION IN INDIA has been done under my guidance in the year 2008-2011

(Batch)

The Project is in the nature of original work that has not so far been submitted for

any other course in this institute or any other institute. Reference of work and

relative sources of information have been given at the end of the project

Signature of the Student

Name of Student: Jatin Prabhudas Mevada

Forwarded through the Research Guide

Signature of the Guide

Name of Professor: Ms. Gitika Mayank

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ACKNOWLEDGEMENT

First and foremost, I would like to thank Thakur Institute of Management

Studies And Research for giving me this opportunity to work on the project

“Merger & Acquisition Process in India ”

I am also grateful to Prof. Ms. Gitika Mayank for her valuable support and

guidance, which helped me to complete my project in the given period

during my minimum exposure period.

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EXECUTIVE SUMMARY

We have been learning about the companies coming together to form

another company and companies taking over the existing companies to

expand their business.

With recession taking toll of many Indian businesses and the feeling of

insecurity surging over our businessmen, it is not surprising when we hear

about the immense numbers of corporate restructurings taking place,

especially in the last couple of years. Several companies have been taken

over and several have undergone internal restructuring, whereas certain

companies in the same field of business have found it beneficial to merge

together into one company.

In this context, it would be essential for us to understand what corporate

restructuring and mergers and acquisitions are all about.

All our daily newspapers are filled with cases of mergers, acquisitions, spin-

offs, tender offers, & other forms of corporate restructuring. Thus important

issues both for business decision and public policy formulation have been

raised. No firm is regarded safe from a takeover possibility. On the more

positive side Mergers & Acquisitions may be critical for the healthy

expansion and growth of the firm. Successful entry into new product and

geographical markets may require Mergers & Acquisitions at some stage in

the firm's development.

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OBJECTIVE

The objectives of my project can be described as:

To understand the pros and cons of Mergers and Acquisitions.

To understand the legal formalities undertaken in the acquisition process

To understand the case of Merger & Acquisition of Jaguar & Land Rover by

Tata Group

CONTENT LIST

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Sr. No. Particulars Page no.

1. Introduction to Merger & Acquisition 07

Merger 09

Acquisition 11

Takeover 12

2. History of merger & acquisition 15

3. Procedure for takeover & acquisition 18

4. Purpose of merger& acquisition 22

5. Types of merger 25

6. Advantage of merger & acquisition 37

7. Distinction between merger & acquisition 41

8. Merger & Acquisition in India 42

9. Merger & Acquisition in across Indian sector 43

10. Merger & Acquisition in banking sector 45

11. Merger & Acquisition in telecommunication sector 47

12. Merger & Acquisition in pharmaceutical sector 51

13. Changes in scenario of Banking sector 55

14. Case study (Acquisition of Jaguar & Land Rover by

Tata Group)

57

15. Conclusion 102

16. Bibliography 103

Merger & Acquisition in India

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Introduction to Mergers and Acquisition

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We have been learning about the companies coming together to

from another company and companies taking over the existing companies to

expand their business.

With recession taking toll of many Indian businesses and the

feeling of insecurity surging over our businessmen, it is not surprising when

we hear about the immense numbers of corporate restructurings taking

place, especially in the last couple of years. Several companies have been

taken over and several have undergone internal restructuring, whereas

certain companies in the same field of business have found it beneficial to

merge together into one company.

In this context, it would be essential for us to understand what

corporate restructuring and mergers and acquisitions are all about. The

phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of

corporate strategy, corporate finance and management dealing with the

buying, selling and combining of different companies that can aid, finance, or

help a growing company in a given industry grow rapidly without having to

create another business entity.

Thus important issues both for business decision and public

policy formulation have been raised. No firm is regarded safe from a

takeover possibility. On the more positive side Mergers & Acquisitions may

be critical for the healthy expansion and growth of the firm. Successful entry

into new product and geographical markets may require Mergers &

Acquisitions at some stage in the firm's development.

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Successful competition in international markets may depend

on capabilities obtained in a timely and efficient fashion through Mergers &

Acquisitions. Many have argued that mergers increase value and efficiency

and move resources to their highest and best uses, thereby increasing

shareholder value. To opt for a merger or not is a complex affair, especially

in terms of the technicalities involved. We have discussed almost all factors

that the management may have to look into before going for merger.

Considerable amount of brainstorming would be required by

the managements to reach a conclusion. e.g. a due diligence report would

clearly identify the status of the company in respect of the financial position

along with the net worth and pending legal matters and details about various

contingent liabilities. Decision has to be taken after having discussed the

pros & cons of the proposed merger & the impact of the same on the

business, administrative costs benefits, addition to shareholders' value, tax

implications including stamp duty and last but not the least also on the

employees of the Transferor or Transferee Company.

Merger

Merger is defined as combination of two or more companies into

a single company where one survives and the others lose their corporate

existence. The survivor acquires all the assets as well as liabilities of the

merged company or companies. Generally, the surviving company is the

buyer, which retains its identity, and the extinguished company is the seller.

Merger is also defined as amalgamation. Merger is the fusion of

two or more existing companies. All assets, liabilities and the stock of one

company stand transferred to Transferee Company in consideration of

payment in the form of:

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Equity shares in the transferee company,

Debentures in the transferee company,

Cash, or

A mix of the above modes.

In business or economics a merger is a combination of two

companies into one larger company. Such actions are commonly voluntary

and involve stock swap or cash payment to the target. Stock swap is often

used as it allows the shareholders of the two companies to share the risk

involved in the deal.

A merger can resemble a takeover but result in a new company

name (often combining the names of the original companies) and in new

branding; in some cases, terming the combination a "merger" rather than an

acquisition is done purely for political or marketing reasons.

Merger is a financial tool that is used for enhancing long-term

profitability by expanding their operations. Mergers occur when the merging

companies have their mutual consent as different from acquisitions, which

can take the form of a hostile takeover. The business laws in US vary across

states and hence the companies have limited options to protect themselves

from hostile takeovers. One way a company can protect itself from hostile

takeovers is by planning shareholders rights, which is alternatively known as

“poison pill.

If we trace back to history, it is observed that very few mergers

have actually added to the share value of the acquiring company and

corporate mergers may promote monopolistic practices by reducing costs,

taxes etc.

Managers are concerned with improving operations of the

company, managing the affairs of the company effectively for all round gains

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and growth of the company which will provide them better deals in raising

their status, perks and fringe benefits.

Acquisition

An Acquisition usually refers to a purchase of a smaller firm by a larger one.

Acquisition, also known as a takeover or a buyout, is the buying of one

company by another.

Acquisitions or takeovers occur between the bidding and the

target company. There may be either hostile or friendly takeovers.

Acquisition in general sense is acquiring the ownership in the property. In the

context of business combinations, an acquisition is the purchase by one

company of a controlling interest in the share capital of another existing

company.

Methods of Acquisition:

An acquisition may be affected by

(a)agreement with the persons holding majority interest in the company

management like members of the board or major shareholders

commanding majority of voting power;

(b)purchase of shares in open market;

(c) to make takeover offer to the general body of shareholders;

(d)purchase of new shares by private treaty;

(e)Acquisition of share capital through the following forms of

considerations viz. means of cash, issuance of loan capital, or

insurance of share capital.

There is different type of acquisition:-

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A. Reverse takeover: - Sometimes, however, a smaller firm will acquire

management control of a larger or longer established company and keep its

name for the combined entity. This is known as a reverse takeover.

a. Reverse takeover occurs when the target firm is larger than the bidding

firm. In the course of acquisitions the bidder may purchase the share or the

assets of the target company.

b. In the former case, the companies cooperate in negotiations; in the latter

case, the takeover target is unwilling to be bought or the target's board has

no prior knowledge of the offer.

B. Reverse merger: - A deal that enables a private company to get publicly

listed in a short time period.

a. A reverse merger occurs when a private company that has strong

prospects and is eager to raise financing buys a publicly listed shell

company, usually one with no business and limited assets.

b. Achieving acquisition success has proven to be very difficult, while

various studies have showed that 50% of acquisitions were unsuccessful.

The acquisition process is very complex, with many dimensions influencing

its outcome.

Takeover:

In business, a takeover is the purchase of one company (the

target) by another (the acquirer, or bidder). In the UK, the term refers to the

acquisition of a public company whose shares are listed on a stock

exchange, in contrast to the acquisition of a private company.

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http://en.wikipedia.org/wiki/Private_company

http://en.wikipedia.org/wiki/Mergers_and_acquisitions

http://en.wikipedia.org/wiki/UK

http://en.wikipedia.org/wiki/Company_(law)


A ‘takeover’ is acquisition and both the terms are used

interchangeably. Takeover differs from merger in approach to business

combinations i.e. the process of takeover, transaction involved in takeover,

determination of share exchange or cash price and the fulfillment of goals of

combination all are different in takeovers than in mergers. For example,

process of takeover is unilateral and the offer or company decides about the

maximum price. Time taken in completion of transaction is less in takeover

than in mergers, top management of the offered company being more co-

operative

There are different types of takeover:-

1. Friendly takeovers

2. Hostile takeovers

3. Reverse takeovers

1. Friendly takeovers

Before a bidder makes an offer for another company, it usually first informs

that company's board of directors. If the board feels that accepting the offer

serves shareholders better than rejecting it, it recommends the offer be

accepted by the shareholders.

In a private company, because the shareholders and the board

are usually the same people or closely connected with one another, private

acquisitions are usually friendly. If the shareholders agree to sell the

company, then the board is usually of the same mind or sufficiently under

the orders of the shareholders to cooperate with the bidder. This point is not

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http://en.wikipedia.org/wiki/Shareholder

http://en.wikipedia.org/wiki/Board_of_directors

http://en.wikipedia.org/wiki/Tender_offer

http://en.wikipedia.org/wiki/Takeover#Reverse_takeovers


relevant to the UK concept of takeovers, which always involve the acquisition

of a public company. Hostile takeovers

2. Hostile takeovers

A hostile takeover allows a suitor to bypass a target company's

management unwilling to agree to a merger or takeover. A takeover is

considered "hostile" if the target company's board rejects the offer, but the

bidder continues to pursue it, or the bidder makes the offer without

informing the target company's board beforehand.

A hostile takeover can be conducted in several ways. A tender

offer can be made where the acquiring company makes a public offer at a

fixed price above the current market price. Tender offers in the USA are

regulated with the Williams Act.

An acquiring company can also engage in a proxy fight, whereby

it tries to persuade enough shareholders, usually a simple majority, to

replace the management with a new one which will approve the takeover.

Another method involves quietly purchasing enough stock on

the open market, known as a creeping tender offer, to effect a change in

management. In all of these ways, management resists the acquisition but it

is carried out anyway.

1. Reverse takeovers

A reverse takeover is a type of takeover where a private

company acquires a public company. This is usually done at the instigation of

the larger, private company, the purpose being for the private company to

effectively float itself while avoiding some of the expense and time involved

in a conventional IPO. However, under AIM rules, a reverse take-over

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http://en.wikipedia.org/wiki/Alternative_Investment_Market

http://en.wikipedia.org/wiki/Initial_public_offering

http://en.wikipedia.org/wiki/Float_(finance)

http://en.wikipedia.org/wiki/Reverse_takeover

http://en.wikipedia.org/wiki/Simple_majority

http://en.wikipedia.org/wiki/Proxy_fight

http://en.wikipedia.org/wiki/Williams_Act




is an acquisition or acquisitions in a twelve month period which for an AIM

company would:

exceed 100% in any of the class tests; or

result in a fundamental change in its business, board or voting control;

or

in the case of an investing company, depart substantially from the

investing strategy stated in its admission document or, where no

admission document was produced on admission, depart substantially

from the investing strategy stated in its pre-admission announcement

or, depart substantially from the investing strategy

History of Mergers and Acquisitions

Tracing back to history, merger and acquisitions have evolved in

five stages and each of these are discussed here. As seen from past

experience mergers and acquisitions are triggered by economic factors.

The macroeconomic environment, which includes the growth in

GDP, interest rates and monetary policies play a key role in designing the

process of mergers or acquisitions between companies or organizations.

First Wave Mergers

The first wave mergers commenced from 1897 to 1904.

During this phase merger occurred between companies, which enjoyed

monopoly over their lines of production like railroads, electricity etc.

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The first wave mergers that occurred during the aforesaid time

period were mostly horizontal mergers that took place between heavy

manufacturing industries.

End of 1st Wave Merger

Majority of the mergers that were conceived during the 1st phase

ended in failure since they could not achieve the desired efficiency. The

failure was fuelled by the slowdown of the economy in 1903 followed by the

stock market crash of 1904. The legal framework was not supportive either.

The Supreme Court passed the mandate that the anticompetitive mergers

could be halted using the Sherman Act.

Second Wave Mergers

The second wave mergers that took place from 1916 to 1929

focused on the mergers between oligopolies, rather than monopolies as in

the previous phase. The economic boom that followed the post World War I

gave rise to these mergers. Technological developments like the

development of railroads and transportation by motor vehicles provided the

necessary infrastructure for such mergers or acquisitions to take place.

The government policy encouraged firms to work in unison. This

policy was implemented in the 1920s. The 2nd wave mergers that took place

were mainly horizontal or conglomerate in nature. Te industries that went for

merger during this phase were producers of primary metals, food products,

petroleum products, transportation equipments and chemicals. The

investments banks played a pivotal role in facilitating the mergers and

acquisitions.

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End of 2nd Wave Mergers

The 2nd wave mergers ended with the stock market crash in

1929 and the great depression. The tax relief that was provided inspired

mergers in the 1940s.

Third Wave Mergers

The mergers that took place during this period (1965-69) were

mainly conglomerate mergers. Mergers were inspired by high stock prices,

interest rates and strict enforcement of antitrust laws.

The bidder firms in the 3rd wave merger were smaller than the

Target Firm. Mergers were financed from equities; the investment banks no

longer played an important role.

End of the 3rd Wave Merger

The 3rd wave merger ended with the plan of the Attorney

General to split conglomerates in 1968. It was also due to the poor

performance of the conglomerates. Some mergers in the 1970s have set

precedence.

The most prominent ones were the INCO-ESB merger; United

Technologies and OTIS Elevator Merger are the merger between Colt

Industries and Garlock Industries.

Fourth Wave Merger

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The 4th wave merger that started from 1981 and ended by

1989 was characterized by acquisition targets that wren much larger in size

as compared to the 3rd wave merger. Mergers took place between the oil

and gas industries, pharmaceutical industries, banking and airline industries.

Foreign takeovers became common with most of them being hostile

takeovers. The 4th Wave mergers ended with anti takeover laws, Financial

Institutions Reform and the Gulf War.

Fifth Wave Merger

The 5th Wave Merger (1992-2000) was inspired by globalization,

stock market boom and deregulation. The 5th Wave Merger took place

mainly in the banking and telecommunications industries.

They were mostly equity financed rather than debt financed. The

mergers were driven long term rather than short term profit motives. The 5th

Wave Merger ended with the burst in the stock market bubble. Hence we

may conclude that the evolution of mergers and acquisitions has been long

drawn. Many economic factors have contributed its development.

Procedure for Takeover and Acquisition

Public announcement:

To make a public announcement an acquirer shall follow the following

procedure:

1. Appointment of merchant banker:

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The acquirer shall appoint a merchant banker registered as category – I with

SEBI to advise him on the acquisition and to make a public announcement of

offer on his behalf.

2. Use of media for announcement:

Public announcement shall be made at least in one national English

daily one Hindi daily and one regional language daily newspaper of that

place where the shares of that company are listed and traded.

3. Timings of announcement:

Public announcement should be made within four days of finalization of

negotiations or entering into any agreement or memorandum of

understanding to acquire the shares or the voting rights.

4. Contents of announcement:

Public announcement of offer is mandatory as required under the SEBI

Regulations.

Therefore, it is required that it should be prepared showing there in

the following information:

(1) Paid up share capital of the target company, the number of fully paid

up and partially paid up shares.

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(2) Total number and percentage of shares proposed to be acquired from

public subject to minimum as specified in the sub-regulation (1) of

Regulation 21 that is:

a) The public offer of minimum 20% of voting capital of the

company to the shareholders;

b) The public offer by a raider shall not be less than 10% but

more than 51% of shares of voting rights. Additional shares can be had @

2% of voting rights in any year.

(3) The minimum offer price for each fully paid up or partly paid up share.

(4) Mode of payment of consideration;

(5) The identity of the acquirer and in case the acquirer is a company, the

identity of the promoters and, or the persons having control over such

company and the group, if any, to which the company belong;

(6) The existing holding, if any, of the acquirer in the shares of the target

company, including holding of persons acting in concert with him;

(7) Salient features of the agreement, if any, such as the date, the name

of the seller, the price at which the shares are being acquired, the manner

of payment of the consideration and the number and percentage of shares

in respect. Which the acquirer has entered into the agreement to acquire

the shares or the consideration, monetary or otherwise, for the acquisition

of control over the target company, as the case may be;

(8) The highest and the average paid by the acquirer or persons acting in

concert with him for acquisition, if any, of shares of the target company

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made by him during the twelve month period prior to the date of the

public announcement.

(9) Objects and purpose of the acquisition of the shares and the future

plans of the acquirer for the target company, including disclosers whether

the acquirer proposes to dispose of or otherwise encumber any assets of

the target company:

Provided that where the future plans are set out, the public

announcement shall also set out how the acquirers propose to implement

such future plans;

(10) The ‘specified date’ as mentioned in regulation 19.

(11) The date by which individual letters of offer would be posted to each

of the shareholders.

(12) The date of opening and closure of the offer and the manner in which

and the date by which the acceptance or rejection of the offer would be

communicated to the share holders.

(13) The date by which the payment of consideration would be made for

the shares in respect of which the offer has been accepted.

(14) Disclosure to the effect that firm arrangement for financial resources

required to implement the offer is already in place, including the details

regarding the sources of the funds whether domestic i.e. from banks,

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financial institutions, or otherwise or foreign i.e. from Non-resident Indians

or otherwise.

(15) Provision for acceptance of the offer by person who own the shares

but are not the registered holders of such shares.

(16) Statutory approvals required to obtain for the purpose of acquiring

the shares under the Companies Act, 1956, the Monopolies and Restrictive

Trade Practices Act, 1973, and/or any other applicable laws.

Purpose of Mergers and Acquisition

The purpose for an offer or company for acquiring another company

shall be reflected in the corporate objectives. It has to decide the specific

objectives to be achieved through acquisition. The basic purpose of merger

or business combination is to achieve faster growth of the corporate

business. Faster growth may be had through product improvement and

competitive position.

Other possible purposes for acquisition are short listed below: -

(1) Procurement of supplies:

1. to safeguard the source of supplies of raw materials or intermediary

product;

2. to obtain economies of purchase in the form of discount, savings in

transportation costs, overhead costs in buying department, etc.;

3. To share the benefits of suppliers economies by standardizing the

materials.

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(2)Revamping production facilities:

1. to achieve economies of scale by amalgamating production facilities

through more intensive utilization of plant and resources;

2. to standardize product specifications, improvement of quality of

product, expanding

3. market and aiming at consumers satisfaction through strengthening

after sale

4. services;

5. to obtain improved production technology and know-how from the

offered company

6. to reduce cost, improve quality and produce competitive products to

retain and

7. Improve market share.

(3) Market expansion and strategy:

1. to eliminate competition and protect existing market;

2. to obtain a new market outlets in possession of the offered;

3. to obtain new product for diversification or substitution of existing

products and to enhance the product range;

4. strengthening retain outlets and sale the goods to rationalize

distribution;

5. to reduce advertising cost and improve public image of the offered

company;

6. Strategic control of patents and copyrights.

(4) Financial strength:

1. to improve liquidity and have direct access to cash resource;

2. to dispose of surplus and outdated assets for cash out of combined

enterprise;

3. to enhance gearing capacity, borrow on better strength and the

greater assets backing;

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4. to avail tax benefits;

5. To improve EPS (Earning per Share).

(5) General gains:

1. to improve its own image and attract superior managerial talents to

manage its affairs;

2. To offer better satisfaction to consumers or users of the product.

(6) Own developmental plans:

The purpose of acquisition is backed by the offer or company’s own

developmental plans.

A company thinks in terms of acquiring the other company only

when it has arrived at its own development plan to expand its

operation having examined its own internal strength where it might not

have any problem of taxation, accounting, valuation, etc. It has to aim

at suitable combination where it could have opportunities to

supplement its funds by issuance of securities; secure additional

financial facilities eliminate competition and strengthen its market

position.

(7) Strategic purpose:

The Acquirer Company view the merger to achieve strategic

objectives through alternative type of combinations which may be

horizontal, vertical, product expansion, market extensional or other

specified unrelated objectives depending upon the corporate

strategies. Thus, various types of combinations distinct with each other

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in nature are adopted to pursue this objective like vertical or horizontal

combination.

(8) Corporate friendliness:

Although it is rare but it is true that business houses exhibit

degrees of cooperative spirit despite competitiveness in providing

rescues to each other from hostile takeovers and cultivate situations of

collaborations sharing goodwill of each other to achieve performance

heights through business combinations. The combining corporate aim

at circular combinations by pursuing this objective.

Types of merger

Merger or acquisition depends upon the purpose of the offer or

company it wants to achieve. Based on the offer or objectives profile,

combinations could be vertical, horizontal, circular and conglomeratic as

precisely described below with reference to the purpose in view of the offer

or company. Merger types can be broadly classified into the following five

subheads as described below.

1. Horizontal Merger: - refers to the merger of two companies who are

direct competitors of one another. They serve the same market and sell the

same product.

2. Conglomeration: - refers to the merger of companies, which do not

either sell any related products or cater to any related markets. Here, the

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two companies entering the merger process do not possess any common

business ties.

3. Vertical Merger: - is effected either between a company and a customer

or between a company and a supplier.

4. Product-Extension Merger: - is executed among companies, which sell

different products of a related category. They also seek to serve a common

market. This type of merger enables the new company to go in for a pooling

in of their products so as to serve a common market, which was earlier

fragmented among them.

5. Market-Extension Merger: - occurs between two companies that sell

identical products in different markets.

It basically expands the market base of the product.

1. Certified Mergers and Acquisitions

2. Horizontal Mergers

3. Vertical Mergers

4. Market Extension Merger and Product Extension Merger

5. Conglomerate Mergers

1. Certified Mergers and Acquisitions

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http://www.economywatch.com/mergers-acquisitions/type/conglomerate.html

http://www.economywatch.com/mergers-acquisitions/type/extension-merger-product-extension.html

http://www.economywatch.com/mergers-acquisitions/type/vertical.html

http://www.economywatch.com/mergers-acquisitions/type/horizontal.html

http://www.economywatch.com/mergers-acquisitions/type/certified.html


There are a number of certified mergers and acquisitions advisory programs

available at the present time. With the help of these programs, a lot of

commercial entities are getting involved in merger and acquisition activities.

These programs are offered by numerous merger and acquisition consultants

and agencies. Some of them are also conducting educational programs and

seminars for the purpose of educating financial professionals about the

nuances of certified mergers and acquisitions and growing the knowledge

base of the merger and acquisition professionals.

One of the most important certified merger and acquisition

advisory programs is the Certified Valuation Manager Program offered by the

American Academy of Financial Management (AAFM). The American

Academy of Financial Management is also hosting a number of Certified

Valuation Manager Training Conferences throughout the year.

The certified mergers and acquisitions agencies help

commercial enterprises or business corporations in acquiring or taking over

other companies and also in significant issues related to mergers and

acquisitions. These agencies also help business entities regarding

management buyouts (MBOs), finding acquisition lookup, sources of equity

and debt financing, as well as valuation of businesses.

In this modern-day world, the power of globalization, market

liberalization and technological advancement has contributed towards the

formation of an increasingly competitive and active commercial world, where

mergers and acquisitions are more and more utilized for achieving

optimization of firm value and competitive benefits.

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With the help of certified merger and acquisition advisory services,

the clients can enjoy instant accessibility to:

A large number of certified business purchasers, which include

multinational or transnational corporations who are seeking to buy

profitable companies

A platform of the merger and acquisition professionals, sources of

funding, transaction makers, intermediaries and tax professionals

Knowledgeable principals

Advices on pricing and valuation

Forward-looking transaction formation, which will lead to value

addition

The certified mergers and acquisition advisory services can be

broadly categorized into the following types:

Business Valuation Services

Funding Services (Acquisition financing, recapitalizations, financial

reconstruction)

Asset Disposal Services

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Acquisition Lookup

Management Buyouts (MBOs)

Certified Equipment and Machinery Estimation

2. Horizontal Mergers

It is a merger of two competing firms which are at the same stage of

industrial process. The acquiring firm belongs to the same industry as

the target company.

The main purpose of such mergers is to obtain economies of scale in

production by eliminating duplication of facilities and the operations

and broadening the product line, reduction in investment in working

capital, elimination in competition concentration in product, reduction

in advertising.

Costs, increase in market segments and exercise better control on

market.

Horizontal mergers are those mergers where the company’s

manufacturing similar kinds of commodities or running similar type of

businesses merge with each other.

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Two companies that are in direct competition and share similar product

lines and markets. In the context of marketing, horizontal merger is

more prevalent in comparison to horizontal merger in the context of

production or manufacturing.

The principal objective behind this type of mergers is to achieve

economies of scale in the production procedure through carrying off

duplication of installations, services and functions, widening the line of

products, decrease in working capital and fixed assets investment,

getting rid of competition, minimizing the advertising expenses,

enhancing the market capability and to get more dominance on the

market.

Never the less, the horizontal mergers do not have the capacity to

ensure the market about the product and steady or uninterrupted raw

material supply.

Horizontal mergers can sometimes result in monopoly and absorption

of economic power in the hands of a small number of commercial

entities.

According to strategic management and microeconomics, the

expression horizontal merger delineates a form of proprietorship and

control. It is a plan, which is utilized by a corporation or commercial

enterprise for marketing a form of commodity or service in a large

number of markets.

Horizontal Integration

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Sometimes, horizontal merger is also called as horizontal integration. It is

totally opposite in nature to vertical merger or vertical integration.

Horizontal Monopoly

A monopoly formed by horizontal merger is known as a horizontal monopoly.

Normally, a monopoly is formed by both vertical and horizontal mergers.

Horizontal merger is that condition where a company is involved

in taking over or acquiring another company in similar form of trade. In this

way, a competitor is done away with and a wider market and higher

economies of scale are accomplished. In the process of horizontal merger,

the downstream purchasers and upstream suppliers are also controlled and

as a result of this, production expenses can be decreased.

Horizontal Expansion

An expression which is intimately connected to horizontal merger is

horizontal expansion. This refers to the expansion or growth of a company in

a sector that is presently functioning. The aim behind a horizontal expansion

is to grow its market share for a specific commodity or service.

Examples of Horizontal Mergers:-

Following are the important examples of horizontal mergers:

The formation of Brook Bond Lipton India Ltd. through the merger of

Lipton India and Brook Bond

The merger of Bank of Mathura with ICICI (Industrial Credit and

Investment Corporation of India) Bank

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The merger of BSES (Bombay Suburban Electric Supply) Ltd. with

Orissa Power Supply Company

The merger of ACC (erstwhile Associated Cement Companies Ltd.) with

Damodar Cement

3. Vertical merger

A customer and company or a supplier and company. Think of a

cone supplier merging with an ice cream maker.

Vertical mergers refer to a situation where a product

manufacturer merges with the supplier of inputs or raw materials. In can also

be a merger between a product manufacturer and the product's distributor.

A company would like to take over another company or seek its

merger with that company to expand espousing backward integration to

assimilate the resources of supply and forward integration towards market

outlets.

The acquiring company through merger of another unit

attempts on reduction of inventories of raw material and finished goods,

implements its production plans as per the objectives and economizes on

working capital investments. In other words, in vertical combinations, the

merging undertaking would be either a supplier or a buyer using its product

as intermediary material for final production.

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The following main benefits accrue from the vertical combination to the

acquirer company i.e.

(1)it gains a strong position because of imperfect market of the

intermediary products, scarcity of resources and purchased products;

(2)Has control over products specifications.

Vertical mergers may violate the competitive spirit of markets.

It can be used to block competitors from accessing the raw material source

or the distribution channel. Hence, it is also known as "vertical foreclosure".

It may create a sort of bottleneck problem. As per research, vertical

integration can affect the pricing incentive of a downstream producer. It may

also affect a competitor’s incentive for selecting input suppliers.

There are multiple reasons, which promote the vertical integration

by firms. Some of them are discussed below.

The prime reason being the reduction of uncertainty regarding the

availability of quality inputs as also the uncertainty regarding the

demand for its products.

Firms may also enter vertical mergers to avail the plus points of

economies of integration.

Vertical merger may make the firms cost-efficient by streamlining its

distribution and production costs. It is also meant for the reduction of

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transactions costs like marketing expenses and sales taxes. It ensures

that a firm's resources are used optimally.

4. Market-extension merger

Two companies that sell the same products in different markets.

As per definition, market extension merger takes place between

two companies that deal in the same products but in separate markets. The

main purpose of the market extension merger is to make sure that the

merging companies can get access to a bigger market and that ensures a

bigger client base.

Example of Market Extension Merger

A very good example of market extension merger is the

acquisition of Eagle Bancshares Inc by the RBC Century. Eagle Bancshares is

headquartered at Atlanta, Georgia and has 283 workers. It has almost

90,000 accounts and looks after assets worth US $1.1 billion.

Eagle Bancshares also holds the Tucker Federal Bank, which is

one of the ten biggest banks in the metropolitan Atlanta region as far as

deposit market share is concerned. One of the major benefits of this

acquisition is that this acquisition enables the RBC to go ahead with its

growth operations in the North American market.

With the help of this acquisition RBC has got a chance to deal in the

financial market of Atlanta, which is among the leading upcoming financial

markets in the USA. This move would allow RBC to diversify its base of

operations.

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5. Product-extension merger

Two companies selling different but related products in the same market.

According to definition, product extension merger takes place

between two business organizations that deal in products that are related to

each other and operate in the same market. The product extension merger

allows the merging companies to group together their products and get

access to a bigger set of consumers. This ensures that they earn higher

profits.

Example of Product Extension Merger

The acquisition of Mobilink Telecom Inc. by Broadcom is a proper example of

product extension merger. Broadcom deals in the manufacturing Bluetooth

personal area network hardware systems and chips for IEEE 802.11b wireless

LAN.

Mobilink Telecom Inc. deals in the manufacturing of product designs meant

for handsets that are equipped with the Global System for Mobile

Communications technology.

It is also in the process of being certified to produce wireless

networking chips that have high speed and General Packet Radio Service

technology. It is expected that the products of Mobilink Telecom Inc. would

be complementing the wireless products of Broadcom.

6. Conglomeration

Two companies that have no common business areas.

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As per definition, a conglomerate merger is a type of merger whereby the

two companies that merge with each other are involved in different sorts of

businesses. The importance of the conglomerate mergers lies in the fact that

they help the merging companies to be better than before.

Types of Conglomerate Mergers

There are two main types of conglomerate mergers:-

1. pure conglomerate merger

2. Mixed conglomerate merger.

1. pure conglomerate merger

The pure conglomerate merger is one where the merging

companies are doing businesses that are totally unrelated to each other.

2. Mixed conglomerate merger

The mixed conglomerate mergers are ones where the

companies that are merging with each other are doing so with the main

purpose of gaining access to a wider market and client base or for

expanding the range of products and services that are being provided by

them There are also some other subdivisions of conglomerate mergers

like the financial conglomerates, the concentric companies, and the

managerial conglomerates.

Reasons of Conglomerate Mergers

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There are several reasons as to why a company may go for a

conglomerate merger. Among the more common reasons are adding to the

share of the market that is owned by the company and indulging in cross

selling. The companies also look to add to their overall synergy and

productivity by adopting the method of conglomerate mergers.

Benefits of Conglomerate Mergers

There are several advantages of the conglomerate mergers.

One of the major benefits is that conglomerate mergers assist the companies

to diversify. As a result of conglomerate mergers the merging companies can

also bring down the levels of their exposure to risks.

Advantages of mergers and acquisition

Mergers and takeovers are permanent form of combinations which vest in

management complete control and provide centralized administration which

are not available in combinations of holding company and its partly owned

subsidiary.

Shareholders in the selling company gain from the merger and

takeovers as the premium offered to induce acceptance of the merger or

takeover offers much more price than the book value of shares. Shareholders

in the buying company gain in the long run with the growth of the company

not only due to synergy but also due to “boots trapping earnings”.

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Motivations for mergers and acquisitions

Mergers and acquisitions are caused with the support of

shareholders, manager’s ad promoters of the combing companies. The

factors, which motivate the shareholders and managers to lend support to

these combinations and the resultant consequences they have to bear,

are briefly noted below based on the research work by various scholars

globally.

(1) From the standpoint of shareholders:-

Investment made by shareholders in the companies subject to

merger should enhance in value.

The sale of shares from one company’s shareholders to another

and holding investment in shares should give rise to greater values i.e.

the opportunity gains in alternative investments. Shareholders may gain

from merger in different ways viz. from the gains and achievements of the

company i.e. through

(a) realization of monopoly profits;

(b) economies of scales;

(c) diversification of product line;

(d) acquisition of human assets and other resources not available

otherwise;

(e) Better investment opportunity in combinations.

One or more features would generally be available in each

merger where shareholders may have attraction and favors merger.

(2) From the standpoint of managers

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Managers are concerned with improving operations of the

company, managing the affairs of the company effectively for all round

gains and growth of the company which will provide them better deals in

raising their status, perks and fringe benefits.

Mergers where all these things are the guaranteed outcome get

support from the managers. At the same time, where managers have fear

of displacement at the hands of new management in amalgamated

company and also resultant depreciation from the merger then support

from them becomes difficult.

(3) Promoter’s gains

Mergers do offer to company promoters the advantage of increasing the

size of their company and the financial structure and strength. They can

convert a closely held and private limited company into a public company

without contributing much wealth and without losing control.

(4) Benefits to general public

Impact of mergers on general public could be viewed as aspect of

benefits and costs to:

(a) Consumer of the product or services;

(b) Workers of the companies under combination;

(c) General public affected in general having not been user or

consumer or the worker in the companies under merger plan.

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(a) Consumers

The economic gains realized from mergers are passed on to

consumers in the form of lower prices and better quality of the product which

directly raise their standard of living and quality of life.

The balance of benefits in favors of consumers will depend

upon the fact whether or not the mergers increase or decrease competitive

economic and productive activity which directly affects the degree of welfare

of the consumers through changes in price level, quality of products, after

sales service, etc.

(b) Workers community

The merger or acquisition of a company by a conglomerate or

other acquiring company may have the effect on both the sides of increasing

the welfare in the form of purchasing power and other miseries of life. Two

sides of the impact as discussed by the researchers and academicians are:

1. Mergers with cash payment to shareholders provide opportunities for

them to invest this money in other companies which will generate

further employment and growth to uplift of the economy in general.

2. Any restrictions placed on such mergers will decrease the growth and

investment activity with corresponding decrease in employment. Both

workers and communities will suffer on lessening job opportunities,

preventing the distribution of benefits resulting from diversification of

production activity.

(c) General public

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Mergers result into centralized concentration of power.

Economic power is to be understood as the ability to control prices and

industries output as monopolists. Such monopolists affect social and political

environment to tilt everything in their favors to maintain their power ad

expand their business empire. These advances result into economic

exploitation. But in a free economy a monopolist does not stay for a longer

period as other companies enter into the field to reap the benefits of higher

prices set in by the monopolist. This enforces competition in the market as

consumers are free to substitute the alternative products.

Therefore, it is difficult to generalize that mergers affect the

welfare of general public adversely or favorably. Every merger of two or

more companies has to be viewed from different angles in the business

practices which protects the interest of the shareholders in the merging

company and also serves the national purpose to add to the welfare of the

employees, consumers and does not create hindrance in administration of

the Government polices.

Distinction between Mergers and Acquisitions

Although they are often uttered in the same breath and used as though they

were synonymous, the terms merger and acquisition mean slightly different

things:-

When one company takes over another and clearly established itself as

the new owner, the purchase is called an acquisition.

When merger happens when two firms, often of about the same size,

agree to go forward as a single new company rather than remain

separately owned and operated. This kind of action is more precisely

referred to as a "merger of equals".

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Both companies' stocks are surrendered and new company stock is

issued in its place. A purchase deal will also be called a merger when

both CEOs agree that joining together is in the best interest of both of

their companies.

But when the deal is unfriendly - that is, when the target company

does not want to be purchased - it is always regarded as an

acquisition. This is challengeable.

An acquisition can be either friendly or hostile. An example of a recent

friendly takeover was when Microsoft bought Fast Search and Transfer

(OSE Stock Exchange, Ticker FAST).CEO of the acquired company

(FAST) revealed that they had been working with Microsoft for more

than 6 months to get the deal which was announced in January, 2008.

Mergers and Acquisitions in India

The process of mergers and acquisitions has gained substantial importance

in today's corporate world. This process is extensively used for restructuring

the business organizations.

In India, the concept of mergers and acquisitions was initiated

by the government bodies. Some well known financial organizations also

took the necessary initiatives to restructure the corporate sector of India by

adopting the mergers and acquisitions policies.

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The Indian economic reform since 1991 has opened up a whole

lot of challenges both in the domestic and international spheres. The

increased competition in the global market has prompted the Indian

companies to go for mergers and acquisitions as an important strategic

choice.

The trends of mergers and acquisitions in India have changed

over the years. The immediate effects of the mergers and acquisitions have

also been diverse across the various sectors of the Indian economy.

India has emerged as one of the top countries with respect to

merger and acquisition deals. In 2007, the first two months alone accounted

for merger and acquisition deals worth $40 billion in India.

Mergers and Acquisitions across Indian Sectors

Among the different Indian sectors that have resorted to

mergers and acquisitions in recent times, telecom, finance, FMCG,

construction materials, automobile industry and steel industry are worth

mentioning.

With the increasing number of Indian companies opting for

mergers and acquisitions, India is now one of the leading nations in the world

in terms of mergers and acquisitions.

The merger and acquisition business deals in India amounted to

$40 billion during the initial 2 months in the year 2007. The total estimated

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value of mergers and acquisitions in India for 2007 was greater than $100

billion. It is twice the amount of mergers and acquisitions in 2006.

Mergers and Acquisitions in India: The Latest Trends

Till recent past, the incidence of Indian entrepreneurs acquiring

foreign enterprises was not so common. The situation has undergone a sea

change in the last couple of years. Acquisition of foreign companies by the

Indian businesses has been the latest trend in the Indian corporate sector.

There are different factors that played their parts in facilitating the

mergers and acquisitions in India. Favorable government policies, buoyancy

in economy, additional liquidity in the corporate sector, and dynamic

attitudes of the Indian entrepreneurs are the key factors behind the

changing trends of mergers and acquisitions in India.

The Indian IT and ITES sectors have already proved their

potential in the global market. The other Indian sectors are also following the

same trend. The increased participation of the Indian companies in the

global corporate sector has further facilitated the merger and acquisition

activities in India.

Major Mergers and Acquisitions in India

Recently the Indian companies have undertaken some important

acquisitions. Some of those are as follows:

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Hindalco acquired Canada based Novelis. The deal involved transaction

of $5,982 million.

Tata Steel acquired Corus Group plc. The acquisition deal amounted to

$12,000 million.

Dr. Reddy's Labs acquired Betapharm through a deal worth of $597

million.

Ranbaxy Labs acquired Terapia SA. The deal amounted to $324 million.

Suzlon Energy acquired Hansen Group through a deal of $565 million.

The acquisition of Daewoo Electronics Corp. by Videocon involved

transaction of $729 million.

HPCL acquired Kenya Petroleum Refinery Ltd. The deal amounted to

$500 million.

VSNL acquired Teleglobe through a deal of $239 million.

When it comes to mergers and acquisitions deals in

India, the total number was 287 from the month of January to May in

2007. It has involved monetary transaction of US $47.37 billion. Out of

these 287 merger and acquisition deals, there have been 102 cross

country deals with a total valuation of US $28.19 billion.

Mergers and Acquisitions in Banking Sector

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Mergers and acquisitions in banking sector have become

familiar in the majority of all the countries in the world.

A large number of international and domestic banks all over the

world are engaged in merger and acquisition activities. One of the principal

objectives behind the mergers and acquisitions in the banking sector is to

reap the benefits of economies of scale. With the help of mergers and

acquisitions in the banking sector, the banks can achieve significant growth

in their operations and minimize their expenses to a considerable extent.

Another important advantage behind this kind of merger is that

in this process, competition is reduced because merger eliminates

competitors from the banking industry. Mergers and acquisitions in banking

sector are forms of horizontal merger because the merging entities are

involved in the same kind of business or commercial activities. Sometimes,

non-banking financial institutions are also merged with other banks if they

provide similar type of services.

In the context of mergers and acquisitions in the banking sector,

it can be reckoned that size does matter and growth in size can be achieved

through mergers and acquisitions quite easily.

Growth achieved by taking assistance of the mergers and

acquisitions in the banking sector may be described as inorganic growth.

Both government banks and private sector banks are adopting policies for

mergers and acquisitions. In many countries, global or multinational banks

are extending their operations through mergers and acquisitions with the

regional banks in those countries.

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These mergers and acquisitions are named as cross-border

mergers and acquisitions in the banking sector or international mergers and

acquisitions in the banking sector. By doing this, global banking corporations

are able to place themselves into a dominant position in the banking sector,

achieve economies of scale, as well as garner market share. Mergers and

acquisitions in the banking sector have the capacity to ensure efficiency,

profitability and synergy. They also help to form and grow shareholder value.

In some cases, financially distressed banks are also subject to

takeovers or mergers in the banking sector and this kind of merger may

result in monopoly and job cuts. Deregulation in the financial market, market

liberalization, economic reforms, and a number of other factors have played

an important function behind the growth of mergers and acquisitions in the

banking sector. Nevertheless, there are many challenges that are still to be

overcome through appropriate measures. Mergers and acquisitions in

banking sector are controlled or regulated by the apex financial authority of

a particular country. For example, the mergers and acquisitions in the

banking sector of India are overseen by the Reserve Bank of India (RBI).

Mergers and Acquisitions in Telecom Sector

The number of mergers and acquisitions in Telecom Sector has been

increasing significantly.

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Telecommunications industry is one of the most profitable and

rapidly developing industries in the world and it is regarded as an

indispensable component of the worldwide utility and services sector.

Telecommunication industry deals with various forms of communication

mediums, for example mobile phones, fixed line phones, as well as Internet

and broadband services. Currently, a slew of mergers and acquisitions in

Telecom Sector are going on throughout the world.

The aim behind such mergers is to attain competitive benefits in

the telecommunications industry. The mergers and acquisitions in Telecom

Sector are regarded as horizontal mergers simply because of the reason that

the entities going for merger or acquisition are operating in the same

industry that is telecommunications industry.

In the majority of the developed and developing countries

around the world, mergers and acquisitions in the telecommunications sector

have become a necessity. This kind of mergers also assists in creation of

jobs. Both transnational and domestic telecommunications services providers

are keen to try merger and acquisition options because this will help them in

many ways.

They can cut down on their expenses, achieve greater market

share and accomplish market control. Mergers and acquisitions in the

telecommunications sector have been showing a prosperous trend in the

recent past and the economists are advocating that they will continue to do

so.

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The majority of telecommunication services providers have

understood that in order to grow globally, strategic alliances and mergers

and acquisitions are the principal devices.

Private sector investment and FDI (Foreign Direct Investment)

have also boosted the growth of mergers and acquisitions in the

telecommunications sector. Over the last few years, a phenomenal growth

has been witnessed in the number of mergers and acquisitions taking place

in the telecommunications industry.

The reasons behind this development include the following:

Deregulation

Introduction of sophisticated technologies (Wireless land phone

services)

Innovative products and services (Internet, broadband and cable

services)

Economic reforms have spurred the growth in the mergers and

acquisitions industry of the telecommunications sector to a satisfactory

level. Mergers and acquisitions in Telecom Sector can also have some

negative effects, which include monopolization of the telecommunication

products and services, unemployment and others.

However, the governments of various countries take appropriate

steps to curb these problems. In countries like India, mergers and

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acquisitions have increased to a considerable level from the mid 1990s. In

the United States, the mergers and acquisitions in the

telecommunications sector are going on in a full-fledged manner.

The mergers and acquisitions in the telecommunications sector

are governed or supervised by the regulatory authority of the

telecommunication industry of a particular country, for instance the

Telecom Regulatory Authority of India or TRAI. The regulatory authorities

always keep a tab on the telecommunications industry so that no

monopoly is formed.

Significant Mergers and Acquisitions in Telecom Sector

Following are the important mergers and acquisitions that took place in the

telecommunications sector:

The takeover of Mobilink Telecom by Broadcom. This can also be

described as a suitable example of product extension merger

AT&T Inc. taking over BellSouth

The acquisition of Scription Inc. by Nuance Communications Inc.

The taking over of Hutchison Essar by the Vodafone Group. Now it

has become Vodafone Essar Limited

China Communications Services Corporation Ltd. taking over China

International Telecommunication Construction Corporation

The acquisition of Ameritech Corporation by SBC (Southwestern Bell

Corporation) Communications

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The merger of GTE (General Telephone and Electronics) with Bell

Atlantic

The acquisition of US West by Qwest Communications

The merger of MCI Communications Corporation with WorldCom

Following are the benefits provided by the mergers and acquisitions

in the telecommunications industry:

Building of infrastructure in a more convenient way

Licensing options for mergers and acquisitions are often found to be

easier

Mergers and acquisitions offer extensive networking advantages

Brand value

Bigger client base

Wide array of products and services

Mergers and Acquisitions in Pharmaceutical Sector

There are several causes of mergers and acquisitions in the

global pharmaceutical industry. Among them are the absence of proper

research and development facilities, gradual expiry of patents and

competition within specific pharmaceutical genres. The high profile product

recalls have also played a major role in the continuing mergers and

acquisitions in the industry.

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Mergers and Acquisitions in Indian Pharmaceutical Sector

In the Indian pharmaceutical market there are a number of

companies that have entered into merger and acquisition agreements in the

context of the global market scenario. These companies would be selling off

the non-core business divisions like Over-the-Counter. This is expected to

further the consolidation in the mid-tier as far as the pharmaceutical industry

in Europe is concerned.

The sheer number of companies acquiring parts of other

companies has shown that the Indian pharmaceutical industry is ready to be

a dominant force in this scenario. In the recent times Nicholas Piramal has

taken the ownership of 17% of Biosyntech that is a major pharmaceutical

packing organization in Canada.

Torrent has got the ownership of Heumann Pharma, a general

drug making company and, formerly, a subsidiary of Pfizer. Matrix has

acquired Docpharma, a major pharmaceutical company of Belgium.

Sun Pharmaceutical Industries is set to make acquisitions in

pharmaceutical companies in the US and has set aside $450 million to

execute these plans. In Bengaluru, Strides Arcolab has aimed at acquiring 70

percent in a pharmaceutical facility in Italy that is worth $10 million.

Opportunities for Pharmaceutical Companies

There are a number of opportunities for the major pharmaceutical products

and services providers in the Indian pharmaceutical sector as the price

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controls have been relaxed and there have been significant changes in the

medicinal requirements of the Indians.

The manufacturing base in India is also strong enough to

support the major international pharmaceutical companies from the

performance perspective.

This may be said as the Indian pharmaceutical market is varied

as well as economical. It is expected that in the coming years the Indian

pharmaceutical companies would be executing more mergers and

acquisitions. It is expected that the regulated pharmaceutical markets in the

United States and Europe would be the main areas of operation.

In the recent years the Indian pharmaceutical companies have

been venturing into mergers and acquisitions so that they can gain access to

the big names of the international pharmaceutical scenario.

Patterns of Mergers and Acquisitions in Pharmaceutical Sector

One of the major features of the mergers and acquisitions in the

pharmaceutical sector of the Asia-Pacific region has been the integration of

the local pharmaceutical companies. This has happened especially in India

and China. Acquisition has made it convenient for a number of companies to

do business in various pharmaceutical markets. Previously the

pharmaceutical markets of Europe were closed to the companies of other

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countries due to the difference in language. There were also other problems

for companies like the trade barriers for instance.

Figures of Mergers and Acquisitions in Pharmaceutical Sector

As per the figures of mergers and acquisitions in pharmaceutical

sector, from the year 2004, there have been more mergers and acquisitions

in the pharmaceutical sector in the Asia-Pacific region compared to North

America. The combined financial value of the mergers and acquisitions in

Asia-Pacific region has been greater than North America. One of the major

merger and acquisition deals in the Asia-Pacific region in the recent years

has been the merger of Fujisawa and Yamanouchi in Japan.

This deal was worth $7.9 billion. In the same period the Asia-

Pacific region has experienced the highest percentage of growth in the

mergers and acquisitions in pharmaceutical sector. In the same period the

rate of growth in the Asia-Pacific region has been 37%. In Western Europe

the rate of growth has been 11% and in North America it has been 20%. The

pharmaceutical market in Eastern Europe has not experienced any increase

in the rate of mergers and acquisitions.

Mergers and Acquisitions in Global Pharmaceutical Sector

Since the year 2004 there has been an increase in the mergers and

acquisitions in the global pharmaceutical sector. This was reflective of the

increase in the mergers and acquisitions in other industries at the same

period. There was 20% increase in the number of deals, which stood at

1,808. There were eight deals with the value of more than $1 billion. This

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was three more than 2003. The total financial value of the deals was $112

billion and this was an increase of 53%. However, these figures do not

include the acquisition of Aventis by Sanofi-Synthelabo that was worth $60

billion. This is the biggest acquisition in the pharmaceutical industry after the

merger of Pharmacia and Pfizer in 2002.

Recent Mergers and Acquisitions

Mergers and Acquisitions have been very common incidents since the turn of

the 20th century. These are used as tools for business expansion and

restructuring.

Through mergers the acquiring company gets an expanded client base and

the acquired company gets additional lifeline in the form of capital invested

by the purchasing company.

Change in scenario of Banking Sector

1. The first mega merger in the Indian banking sector that of the HDFC Bank

with Times Bank, has created an entity which is the largest private sector

bank in the country.

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2. The merger of the city bank with Travelers Group and the merger of Bank

of America with Nation Bank have triggered the mergers and acquisition

market in the banking sector worldwide.

3. Europe and Japan are also on their way to restructure their financial

sector thought merger and acquisitions. Merger will help banks with

added money power, extended geographical reach with diversified branch

Network, improved product mix, and economies of scale of operations.

Merger will also help banks to reduced them borrowing cost and to spread

total risk associated with the individual banks over the combined entity.

Revenues of the combine entity are likely to shoot up due to more

effective allocation of bank funds.

4. ICICI Bank has initiated merger talks with Centurion Bank but due to

difference arising over swap ration the merger didn’t materialized. Now

UTI Bank is egeing Centurion Bank.

The proposed merger of UTI Bank and Centurion Bank will make them

third largest private banks in terms of size and market Capitalization

State Bank of India has also planned to merge seven of its associates or

part of its long-term policies to regroup and consolidate its position. Some

of the Indian Financial Sector players are already on their way for mergers

to strengthen their existing base.

5. In India mergers especially of the PSBS may be subject to technology and

trade union related problem. The strong trade union may prove to be big

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obstacle for the PSBS mergers. Technology of the merging banks to

should complement each other NPA management. Management of

efficiency, cost reduction, tough competition from the market players and

strengthen of the capital base of the banks are some of the problem

which can be faced by the merge entities. Mergers for private sector

banks will be much smoother and easier as again that of PSBS.

CASE STUDY

Acquisition of Jaguar & Land Rover by Tata Motors

INTRODUCTION

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We have been learning about the companies coming together to form another

company and companies taking over the existing companies to expand their

business.

With recession taking toll of many Indian businesses and the feeling of insecurity

surging over our businessmen, it is not surprising when we hear about the immense

numbers of corporate restructurings taking place, especially in the last couple of

years. Several companies have been taken over and several have undergone

internal restructuring, whereas certain companies in the same field of business

have found it beneficial to merge together into one company.

In this context, it would be essential for us to understand what corporate

restructuring and mergers and acquisitions are all about.

All our daily newspapers are filled with cases of mergers, acquisitions, spin-offs,

tender offers, & other forms of corporate restructuring. Thus important issues both

for business decision and public policy formulation have been raised. No firm is

regarded safe from a takeover possibility. On the more positive side Mergers &

Acquisitions may be critical for the healthy expansion and growth of the firm.

Successful entry into new product and geographical markets may require Mergers &

Acquisitions at some stage in the firm's development.

The objectives of our caselet can be described as:

1. To understand the pros and cons of Mergers and Acquisitions.

2. To understand the legal formalities undertaken in the acquisition

process.

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WHAT IS LAW?

Law denotes rules and principles either enforced by an authority or self

imposed by the members of a society to control and regulate people’s

behavior with a view to securing justice, peaceful living and social security.

Mercantile law is that branch of law which comprises law concerning trade,

industry and commerce.

INDIAN CONTRACT ACT, 1872

A contract is an exchange of promises between two or more parties to do or

refrain from doing an act which is enforceable in a court of law. Section 2(h) defines

a contract as an agreement enforceable by law.

Contract= Agreement + Enforceability at law

Section2 (e) defines every promise and every set of promise forming consideration

for each other as an agreement.

Agreement= Offer+ Acceptance

And,

Agreement=Social agreement + Legal agreement

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Essential Elements of

Merger & Acquisition

Offer and Acceptance

Legal Relationship

Lawful Consideration

Competency Capacity

Free ConsentLegality of object

Certainty of object

Possibility of performance

Legal Formalities


MERGER

Merger is defined as combination of two or more companies into a single company

where one survives and the others lose their corporate existence. The survivor

acquires all the assets as well as liabilities of the merged company or companies.

Generally, the surviving company is the buyer, which retains its identity, and the

extinguished company is the seller.

Merger is also defined as amalgamation. Merger is the fusion of two or more

existing companies. All assets, liabilities and the stock of one company stand

transferred to Transferee Company in consideration of payment in the form of:

Equity shares in the transferee company,

Debentures in the transferee company,

Cash, or

A mix of the above modes.

ACQUISITON

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Acquisition in general sense is acquiring the ownership in the property. In the

context of business combinations, an acquisition is the purchase by one company of

a controlling interest in the share capital of another existing company.

Methods of Acquisition:

An acquisition may be affected by:

(f) agreement with the persons holding majority interest in the company

management like members of the board or major shareholders commanding

majority of voting power;

(g) purchase of shares in open market;

(h) to make takeover offer to the general body of shareholders;

(i) purchase of new shares by private treaty;

Acquisition of share capital through the following forms of considerations viz. means

of cash, issuance of loan capital, or insurance of share capital

ACQUISITION PROCESS

The acquisition process can be divided into a planning stage and an implementation

stage. The planning stage consists of the development of the business and the

acquisition plans. The implementation stage consists of the search, screening,

contacting the target, negotiation, integration. Process of acquisition can be in the

following steps:

1. Developing the business plan

A merger or acquisition decision is a strategic choice. The acquisition strategy

should fit the company’s strategic goals of increasing the cash flows and reduce

risk.

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Business plan communicates a mission or a vision for the firm and a strategy for

achieving that mission.

Business plan consists of the following activities:

Determining where to compete i.e. the industry or the market in which the

firm desires to compete.

Determining how to compete. An external analysis can be made to determine

how the firm can most effectively compete in its chosen market.

Self assessment of the firm by conducting an internal analysis of the firm’s

strengths and weaknesses relative to the competition.

Defining the mission statement by summarizing where and how the firm has

chosen to compete

Setting objectives by developing competitive measures of performance.

Selecting the most likely strategy to achieve the objectives within a

reasonable time period subject to the constraints in the self assessment.

The strategic planning process identifies the company’s competitive position and

sets objectives to exploit its relative strengths while minimizing the effects of its

weaknesses.

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2. The Search Process

The search for the potential acquisition takes place in two stages:-

It involves establishing a primary screening process. The primary criteria

based on which the search process is based include factors like the industry,

size of the transaction and the geographic location. The size of the

transaction is best defined in terms of the maximum purchase price of a firm

is willing to pay.

This involves developing the search strategy. It uses computerized database

and directory services to identify the prospective candidates.

The screening process the screening process starts with the reduction of the initial

list of potential candidates identified by using the primary criteria such as the size

and the type of industry.

First contact it involves meeting the acquisition candidate and putting forward the

proposal of acquisition. It depends on the size of the company and whether it is

publicly or privately held.

3. Preliminary legal documents

Confidentiality agreement

Letter of intent

4. Negotiation

Process consists of many activities conducted simultaneously by various members

of the acquisition team. The actual purchase consideration is determined during this

phase.

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Defining the purchase price: The purchase consideration can be defined in

The total consideration

Total purchase price

The net purchase price

5. Structuring the deal

It involves meeting the needs of both parties by dealing with issues of risk and

reward by legal, tax and accounting structures.

Due diligence required by law

According to Cadbury report, the due diligence report is required for

acquisitions because the full board of directors of the purchasing company

should review significant acquisitions.

In India, a merchant banker has to conduct due diligence to ensure the

acquirer’s financial position and chance of implementation of terms of

merger condition by the parties by giving a due diligence certificate to the

SEBI.

In a merger, both the parties will conduct due diligence. Due diligence can

be conducted from different perspectives.

Financial – historical records, review of management and systems.

Legal- various contractual acts in the country

Commercial –market conditions

Tax- existing tax levels, liabilities and arrangements.

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Management –mgmt quality, organizational structure

6. Closing the Deal

Closing is the final legal procedure where the company changes hands. It consists of

all necessary shareholder, regulatory and third party. All the necessary approvals

are attained at this stage.

Conditions for closing

Certain pre conditions set in the definitive agreement have to meet before the close

of the contract. The pre conditions include the assumption that the seller would

abide by the representations and warranties and will live up to the obligations.

Documents required completing the transaction of a merger or an

acquisition is:-

Loan agreements, trademarks and trade names

Supplier and customer contracts

Distributor and sales representative agreements

Insurance policies and claim pending

Articles of incorporation, bylaws and corporate seals.

Employee incentive programs

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TATA GETS JAGUAR AND ROVER UNDER ITS PAW!

ABSTRACT

Creating history, India’s top corporate Tata’s on Wednesday acquired luxury auto

brands—Jaguar and Land Rover—from Ford Motors for $ 2.3 billion, stamping their

authority as a takeover tycoon.

Beating compatriot Mahindra and Mahindra for the prestigious brands on 2nd June

2008 announced the deal they signed with Ford, which on its part would chip in

$600 million towards JLR’S pension plan.

“We are very pleased at the prospect of Jaguar and Land Rover being a significant

part of our automotive business”, Group Chairman Ratan Tata said after making the

deal public.

Tata Motors' acquisition of two iconic British brands - Jaguar and Land Rover - was

finally completed. Well, it is true that their immediate previous owners were

American, but the flavor of the two companies continues to be very Brit. Tata has

acquired the two companies for about half the price that Ford paid their original

owners when the latter acquired them in 1989. Though that sounds like a good deal,

it is not going to be all rosy for Tata Motors after the acquisition. The real work

starts now for this global Indian, trying to pull together the two brands and making

them more profitable while still being weighed down by their historical issues.

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Jaguar and Land Rover are both special, super premium brands that have a huge

fan following. The ownership of the two brands has changed hands, but the brands

themselves will remain untarnished. And Tata Motors itself has just become more

global. Calls to separate the passenger car business from the rest of the company

will only get shriller now.

Tata Motors is now officially the proud parent of the Jaguar, and its sister Land

Rover. The deal is a fulfillment of Mr. Tata’s personal vision and is intended to

catapult Tata Motors, the owner of the cute li’l Nano, into the global big league of

auto majors. It will also reinforce the global perception of India Inc as a leader in

international business, and not just in IT.

Yet, the final lap of Group Tata’s long-drawn-out bid to acquire Jaguar-Land Rover

(JLR) from Ford for $2.3 billion in cash was a bit of an anti-climax. Compared with

the Corus deal, this was almost hush-hush. In open-for-business Britain, the

headlines are already calling the Tata’s the ‘Corus owners’, and not the ‘Indian auto

company’.

The key challenge for the new owner of Jaguar and Land Rover will be to grow and

maintain sales of the two brands in a global downturn and credit crunch.

Tata Motors will have to commit significant managerial and financial resources to

engineer a turnaround. It will have to significantly step up its R&D budget as well as

increase operating expenditure and capital expenditure to meet JLR’s requirements.

Auto analysts tracking the development say the acquisition was just the first step;

the real challenge lies in running JLR. The acquisition cost of $2.3 billion is financed

by a bridge loan, which will be raised through a syndicate of banks. The bridge

money will be replaced by a combination of long-term debt and equity at an

appropriate time. The company will raise funds to finance its equity contribution by

selling a portion of its stake in some of its subsidiaries in the next few months.

Largest cross-border auto takeover

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SOURCES indicate that initially two joint ventures with Hitachi for axles and

transmission—HVAL and HVTL—and auto component maker TACO are some of the

subsidiary companies Tata Motors is looking to divest.

Citigroup and JPMorgan are the lead advisors to the deal, which is the largest cross-

border auto acquisition by an Indian company. The deal is expected to close by the

end of June 2008, subject to regulatory approvals and the achievement of financial

closure. The transaction is significant for a number of reasons. Coming as it does

amidst a global freeze in credit markets; it shows that top-notch Indian companies

have the ability to raise large amounts of money at reasonably low rates of interest.

Besides the two US banks, the bridge loan is being underwritten by a consortium of

eight banks — State Bank of India, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, ING,

Mizuho and Standard Chartered. The loan has been structured in the form of step-

up financing: for the first six months, the interest charge would be Libor (London

Inter-Bank Offered Rate) plus 70 basis points and for the next six months, it would

be 140 basis points over the benchmark rate. The six-month Libor is currently at

2.63%. The bridge loan is being raised by a special purpose vehicle — Tata Motors

UK, which will own these two brands, banking sources said. Tata Motors UK is 100%

owned by Tata Motors.

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THE COMPANY PROFILE :

TATA

Tata Motors Limited is India’s largest automobile company, with revenues of

Rs. 35651.48 crores (USD 8.8 billion) in 2007-08. 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. The company is the world’s fourth largest truck manufacturer,

and the world’s second largest bus manufacturer.

The company’s 23,000 employees are guided by the vision to be “best in the

manner in which we operate best in the products we deliver and best in our

value system and ethics.”

Established in 1945, Tata Motors’ presence indeed cuts across the length

and breadth of India. Over 4 million Tata vehicles ply on Indian roads, since

the first rolled out in 1954. The company’s manufacturing base in India is

spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar

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Pradesh) and Pantnagar (Uttarakhand). Following a strategic alliance with

Fiat in 2005, it has set up an industrial joint venture with Fiat Group

Automobiles at Ranjangaon (Maharashtra) to produce both Fiat and Tata cars

and Fiat powertrains. The company is establishing two new plants at

Dharwad (Karnataka) and Sanand (Gujarat). The company’s dealership,

sales, services and spare parts network comprises over 3500 touch points;

Tata Motors also distributes and markets Fiat branded cars in India.

Tata Motors, the first company from India’s engineering sector to be listed in

the New York Stock Exchange (September 2004), has also emerged as an

international automobile company. Through subsidiaries and associate

companies, Tata Motors has operations in the UK, South Korea, Thailand and

Spain. Among them is Jaguar Land Rover, a business comprising the two

iconic British brands that was acquired in 2008. In 2004, it acquired the

Daewoo Commercial Vehicles Company, South Korea’s second largest truck

maker. The rechristened Tata Daewoo Commercial Vehicles Company has

launched several new products in the Korean market, while also exporting

these products to several international markets. Today two-thirds of heavy

commercial vehicle exports out of South Korea are from Tata Daewoo. In

2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a reputed

Spanish bus and coach manufacturer, with an option to acquire the

remaining stake as well. Hispano’s presence is being expanded in other

markets. In 2006, it formed a joint venture with the Brazil-based Marcopolo,

a global leader in body-building for buses and coaches to manufacture fully-

built buses and coaches for India and select international markets. In 2006,

Tata Motors entered into joint venture with Thonburi Automotive Assembly

Plant Company of Thailand to manufacture and market the company’s

pickup vehicles in Thailand. The new plant of Tata Motors (Thailand) has

begun production of the Xenon pickup truck, with the Xenon having

been launched in Thailand at the Bangkok Motor Show 2008.

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Tata Motors is also expanding its international footprint, established through

exports since 1961. The company’s commercial and passenger vehicles are

already being marketed in several countries in Europe, Africa, the Middle

East, South East Asia, South Asia and South America. It has franchisee/joint

venture assembly operations in Kenya, Bangladesh, Ukraine, Russia and

Senegal.

The foundation of the company’s growth over the last 50 years is a deep

understanding of economic stimuli and customer needs, and the ability to

translate them into customer-desired offerings through leading edge R&D.

With over 2,500 engineers and scientists, the company’s Engineering

Research Centre, established in 1966, and has enabled pioneering

technologies and products. The company today has R&D centers in Pune,

Jamshedpur, Lucknow, in India, and in South Korea, Spain, and the UK. It was

Tata Motors, which developed the first indigenously developed Light

Commercial Vehicle, India’s first Sports Utility Vehicle and, in 1998, the Tata

Indica, India’s first fully indigenous passenger car. Within two years of

launch, Tata Indica became India’s largest selling car in its segment. In 2005,

Tata Motors created a new segment by launching the Tata Ace, India’s first

indigenously developed mini-truck

In January 2008, Tata Motors unveiled its People’s Car, the Tata Nano, which

India and the world have been looking forward to. A development, which

signifies a first for the global automobile industry, the Nano brings the

comfort and safety of a car within the reach of thousands of families. When

launched in India later in 2008, the car will be available in both standard and

deluxe versions. The standard version has been priced at Rs.100,000

(excluding VAT and transportation cost).

Designed with a family in mind, it has a roomy passenger compartment with

generous leg space and head room. It can comfortably seat four persons. Its

mono-volume design will set a new benchmark among small cars. Its safety

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performance exceeds regulatory requirements in India. Its tailpipe emission

performance too exceeds regulatory requirements. In terms of overall

pollutants, it has a lower pollution level than two-wheelers being

manufactured in India today. The lean design strategy has helped minimize

weight, which helps maximize performance per unit of energy consumed and

delivers high fuel efficiency. The high fuel efficiency also ensures that the car

has low carbon dioxide emissions, thereby providing the twin benefits of an

affordable transportation solution with a low carbon footprint.

The years to come will see the introduction of several other innovative

vehicles, all rooted in emerging customer needs. Besides product

development, R&D is also focusing on environment-friendly technologies in

emissions and alternative fuels.

Through its subsidiaries, the company is engaged in engineering and

automotive solutions, construction equipment manufacturing, automotive

vehicle components manufacturing and supply chain activities, machine

tools and factory automation solutions, high-precision tooling and plastic and

electronic components for automotive and computer applications, and

automotive retailing and service operations.

True to the tradition of the Tata Group, Tata Motors is committed in letter

and spirit to Corporate Social Responsibility. It is a signatory to the United

Nations Global Compact, and is engaged in community and social initiatives

on labor and environment standards in compliance with the principles of the

Global Compact. In accordance with this, it plays an active role in community

development, serving rural communities adjacent to its manufacturing

locations.

With the foundation of its rich heritage, Tata Motors today is etching a

refulgent future.

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Tata Code of Conduct

This comprehensive document serves as the ethical road map for Tata

employees and companies, and provides the guidelines by which the group

conducts its businesses.

Clause: 1

National interest

The Tata group is committed to benefit the economic development of the

countries in which it operates. No Tata company shall undertake any project

or activity to the detriment of the wider interests of the communities in

which it operates.

A Tata company’s management practices and business conduct shall benefit

the country, localities and communities in which it operates, to the extent

possible and affordable, and shall be in accordance with the laws of the land.

A Tata company, in the course of its business activities, shall respect the

culture, customs and traditions of each country and region in which it

operates. It shall conform to trade procedures, including licensing,

documentation and other necessary formalities, as applicable.

Clause: 2

Financial reporting and records

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A Tata company shall prepare and maintain its accounts fairly and accurately

and in accordance with the accounting and financial reporting standards

which represent the generally accepted guidelines, principles, standards,

laws and regulations of the country in which the company conducts its

business affairs.

Internal accounting and audit procedures shall reflect, fairly and accurately,

all of the company’s business transactions and disposition of assets, and

shall have internal controls to provide assurance to the company’s board and

shareholders that the transactions are accurate and legitimate. All required

information shall be accessible to company auditors and other authorized

parties and government agencies. There shall be no willful omissions of any

company transactions from the books and records, no advance-income

recognition and no hidden bank account and funds.

Any willful, material misrepresentation of and / or misinformation on the

financial accounts and reports shall be regarded as a violation of the Code,

apart from inviting appropriate civil or criminal action under the relevant

laws. No employee shall make, authorize, abet or collude in an improper

payment, unlawful commission or bribing.

Clause: 3

Competition

A Tata company shall fully support the development and operation of

competitive open markets and shall promote the liberalization of trade and

investment in each country and market in which it operates. Specifically, no

Tata company or employee shall engage in restrictive trade practices, abuse

of market dominance or similar unfair trade activities.

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A Tata company or employee shall market the company’s products and

services on their own merits and shall not make unfair and misleading

statements about competitors’ products and services. Any collection of

competitive information shall be made only in the normal course of business

and shall be obtained only through legally permitted sources and means.

Clause: 4

Equal opportunities employer

A Tata company shall provide equal opportunities to all its employees and all

qualified applicants for employment without regard to their race, caste,

religion, color, ancestry, marital status, gender, sexual orientation, age,

nationality, ethnic origin or disability.

Human resource policies shall promote diversity and equality in the

workplace, as well as compliance with all local labour laws, while

encouraging the adoption of international best practices.

Employees of a Tata company shall be treated with dignity and in

accordance with the Tata policy of maintaining a work environment free of

all forms of harassment, whether physical, verbal or psychological. Employee

policies and practices shall be administered in a manner consistent with

applicable laws and other provisions of this Code, respect for the right to

privacy and the right to be heard, and that in all matters equal opportunity is

provided to those eligible and decisions are based on merit.

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Clause: 5

Gifts and donations

A Tata company and its employees shall neither receive nor offer or make,

directly or indirectly, any illegal payments, remuneration, gifts, donations or

comparable benefits that are intended, or perceived, to obtain uncompetitive

favors for the conduct of its business. The company shall cooperate with

governmental authorities in efforts to eliminate all forms of bribery, fraud

and corruption.

However, a Tata company and its employees may, with full disclosure,

accept and offer nominal gifts, provided such gifts are customarily given and

are of a commemorative nature. Each company shall have a policy to clarify

its rules and regulations on gifts and entertainment, to be used for the

guidance of its employees.

Clause: 6

Government agencies

A Tata company and its employees shall not, unless mandated under

applicable laws, offer or give any company funds or property as donation to

any government agency or its representative, directly or through

intermediaries, in order to obtain any favorable performance of official

duties. A Tata company shall comply with government procurement

regulations and shall be transparent in all its dealings with government

agencies.

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Clause: 7

Political Non-alignment

A Tata company shall be committed to and support the constitution and

governance systems of the country in which it operates.

A Tata company shall not support any specific political party or candidate for

political office. The company’s conduct shall preclude any activity that could

be interpreted as mutual dependence / favour with any political body or

person, and shall not offer or give any company funds or property as

donations to any political party, candidate or campaign.

Clause: 8

Health, safety and environment

A Tata company shall strive to provide a safe, healthy, clean and ergonomic

working environment for its people. It shall prevent the wasteful use of

natural resources and be committed to improving the environment,

particularly with regard to the emission of greenhouse gases, and shall

Endeavour to offset the effect of climate change in all spheres of its

activities.

A Tata company, in the process of production and sale of its products and

services, shall strive for economic, social and environmental sustainability.

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Clause: 9

Quality of products and services

A Tata company shall be committed to supply goods and services of world

class quality standards, backed by after-sales services consistent with the

requirements of its customers, while striving for their total satisfaction. The

quality standards of the company’s goods and services shall meet applicable

national and international standards.

A Tata company shall display adequate health and safety labels, caveats and

other necessary information on its product packaging.

Clause: 10

Corporate citizenship

A Tata company shall be committed to good corporate citizenship, not only

in the compliance of all relevant laws and regulations but also by actively

assisting in the improvement of quality of life of the people in the

communities in which it operates. The company shall encourage volunteering

by its employees and collaboration with community groups.

Tata companies are also encouraged to develop systematic processes and

conduct management reviews, as stated in the Tata ‘corporate sustainability

protocol’, from time to time so as to set strategic direction for social

development activity.

The company shall not treat these activities as optional, but should strive to

incorporate them as an integral part of its business plan.

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Clause:11

Cooperation of Tata companies

A Tata company shall cooperate with other Tata companies including

applicable joint ventures, by sharing knowledge and physical, human and

management resources, and by making efforts to resolve disputes amicably,

as long as this does not adversely affect its business interests and

shareholder value.

In the procurement of products and services, a Tata company shall give

preference to other Tata companies, as long as they can provide these on

competitive terms relative to third parties.

Clause: 12

Public representation of the company and the group

The Tata group honors the information requirements of the public and its

stakeholders. In all its public appearances, with respect to disclosing

company and business information to public constituencies such as the

media, the financial community, employees, shareholders, agents,

franchisees, dealers, distributors and importers, a Tata company or the Tata

group shall be represented only by specifically authorized directors and

employees. It shall be the sole responsibility of these authorized

representatives to disclose information about the company or the group.

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Clause: 13

Third party representation

Parties which have business dealings with the Tata group but are not

members of the group, such as consultants, agents, sales representatives,

distributors, channel partners, contractors and suppliers, shall not be

authorized to represent a Tata company without the written permission of

the Tata company, and / or if their business conduct and ethics are known to

be inconsistent with the Code.

Third parties and their employees are expected to abide by the Code in their

interaction with, and on behalf of, a Tata company. Tata companies are

encouraged to sign a non-disclosure agreement with third parties to support

confidentiality of information.

Clause: 14

Use of the Tata brand

The use of the Tata name and trademark shall be governed by manuals,

codes and agreements to be issued by Tata Sons. The use of the Tata brand

is defined in and regulated by the Tata Brand Equity and Business Promotion

Agreement. No third party or joint venture shall use the Tata brand to further

its interests without specific authorization.

Clause:15

Group policies

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A Tata company shall recommend to its board of directors the adoption of

policies and guidelines periodically formulated by Tata Sons.

Clause: 16

Shareholders

A Tata company shall be committed to enhancing shareholder value and

complying with all regulations and laws that govern shareholder rights. The

board of directors of a Tata company shall duly and fairly inform its

shareholders about all relevant aspects of the company’s business, and

disclose such information in accordance with relevant regulations and

agreements.

Clause:17

Ethical conduct

Every employee of a Tata company, including full-time directors and the

chief executive, shall exhibit culturally appropriate deportment in the

countries they operate in, and deal on behalf of the company with

professionalism, honesty and integrity, while conforming to high moral and

ethical standards. Such conduct shall be fair and transparent and be

perceived to be so by third parties.

Every employee of a Tata company shall preserve the human rights of every

individual and the community, and shall strive to honor commitments.

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Every employee shall be responsible for the implementation of and

compliance with the Code in his / her environment. Failure to adhere to the

Code could attract severe consequences, including termination of

employment.

Clause: 18

Regulatory compliance

Employees of a Tata company, in their business conduct, shall comply with

all applicable laws and regulations, in letter and spirit, in all the territories in

which they operate. If the ethical and professional standards of applicable

laws and regulations are below that of the Code, then the standards of the

Code shall prevail.

Clause: 19

Concurrent employment

Consistent with applicable laws, an employee of a Tata company shall not,

without the requisite, officially written approval of the company, accept

employment or a position of responsibility (such as a consultant or a

director) with any other company, nor provide freelance services to anyone,

with or without remuneration. In the case of a full-time director or the chief

executive, such approval must be obtained from the board of directors of the

company.

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Clause: 20

Conflict of interest

An employee or director of a Tata company shall always act in the interest of

the company, and ensure that any business or personal association which he

/ she may have does not involve a conflict of interest with the operations of

the company and his / her role therein.

Independent directors of a Tata company shall comply with applicable laws

and regulations of all the relevant regulatory and other authorities. As good

governance practice they shall safeguard the confidentiality of all

information received by them by virtue of their position, but they need not

be bound by all other conflicts that are applicable to employees or executive

directors, as indicated below.

An employee, including the executive director (other than independent

director) of a Tata company, shall not accept a position of responsibility in

any other non-Tata company or not-for-profit organization without specific

sanction.

The above shall not apply to (whether for remuneration or otherwise):

a) Nominations to the boards of Tata companies, joint ventures or associate

companies.

b) Memberships / positions of responsibility in educational / professional

bodies, wherein such association will benefit the employee / Tata Company.

c) Nominations / memberships in government committees / bodies or

organizations.

d) Exceptional circumstances, as determined by the competent authority.

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Competent authority, in the case of all employees, shall be the chief

executive, who in turn shall report such exceptional cases to the board of

directors on a quarterly basis. In case of the chief executive and executive

directors, the Group Corporate Centre shall be the competent authority.

An employee or a director of a Tata company shall not engage in any

business, relationship or activity which might conflict with the interest of his /

her company or the Tata group. A conflict of interest, actual or potential,

may arise where, directly or indirectly…

a) An employee of a Tata company engages in a business, relationship or

activity with anyone who is party to a transaction with his / her company.

b) An employee is in a position to derive an improper benefit, personally or

to any of his / her relatives, by making or influencing decisions relating to

any transaction.

c) An independent judgment of the company’s or groups best interest cannot

be exercised.

The main areas of such actual or potential conflicts of interest shall include

the following:

a) An employee or a full-time director of a Tata company conducting

business on behalf of his / her company or being in a position to influence a

decision with regard to his / her company’s business with a supplier or

customer where his / her relative is a principal officer or representative,

resulting in a benefit to him / her or his / her relative.

b) Award of benefits such as increase in salary or other remuneration,

posting, promotion or recruitment of a relative of an employee of a Tata

company, where such an individual is in a position to influence decisions with

regard to such benefits.

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c) The interest of the company or the group can be compromised or

defeated.

Notwithstanding such or any other instance of conflict of interest that exist

due to historical reasons, adequate and full disclosure by interested

employees shall be made to the company’s management. It is also

incumbent upon every employee to make a full disclosure of any interest

which the employee or the employee’s immediate family, including parents,

spouse and children, may have in a family business or a company or firm

that is a competitor, supplier, customer or distributor of or has other

business dealings with his / her company.

Upon a decision being taken in the matter, the employee concerned shall be

required to take necessary action, as advised, to resolve / avoid the conflict.

If an employee fails to make the required disclosure and the management of

its own accord becomes aware of an instance of conflict of interest that

ought to have been disclosed by the employee, the management shall take a

serious view of the matter and consider suitable disciplinary action against

the employee.

Clause: 21

Securities transactions and confidential information

An employee of a Tata company and his / her immediate family shall not

derive any benefit or counsel, or assist others to derive any benefit, from

access to and possession of information about the company or group or its

clients or suppliers that is not in the public domain and, thus, constitutes

unpublished, price-sensitive insider information.

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An employee of a Tata company shall not use or proliferate information that

is not available to the investing public, and which therefore constitutes

insider information, for making or giving advice on investment decisions

about the securities of the respective Tata company, group, client or supplier

on which such insider information has been obtained.

Such insider information might include (without limitation) the following:

Acquisition and divestiture of businesses or business units.

Financial information such as profits, earnings and dividends.

Announcement of new product introductions or developments.

Asset revaluations.

Investment decisions / plans.

Restructuring plans.

Major supply and delivery agreements.

Raising of finances.

An employee of a Tata company shall also respect and observe the

confidentiality of information pertaining to other companies, their patents,

intellectual property rights, trademarks and inventions; and strictly observe a

practice of non-disclosure.

Clause: 22

Protecting company assets

The assets of a Tata company shall not be misused; they shall be employed

primarily and judiciously for the purpose of conducting the business for

which they are duly authorized. These include tangible assets such as

equipment and machinery, systems, facilities, materials and resources, as

well as intangible assets such as information technology and systems,

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proprietary information, intellectual property, and relationships with

customers and suppliers.

Clause: 23

Citizenship

The involvement of a Tata employee in civic or public affairs shall be with

express approval from the chief executive of his / her company, subject to

this involvement having no adverse impact on the business affairs of the

company or the Tata group.

Clause: 24

Integrity of data furnished

Every employee of a Tata company shall ensure, at all times, the integrity of

data or information furnished by him/her to the company. He/she shall be

entirely responsible in ensuring that the confidentiality of all data is retained

and in no circumstance transferred to any outside person/party in the course

of normal operations without express guidelines from or, the approval of the

management.

Clause: 25

Reporting concerns

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Every employee of a Tata company shall promptly report to the

management, and / or third-party ethics helpline, when she / he becomes

aware of any actual or possible violation of the Code or an event of

misconduct, act of misdemeanor or act not in the company’s interest. Such

reporting shall be made available to suppliers and partners, too.

Any Tata employee can choose to make a protected disclosure under the

whistleblower policy of the company, providing for reporting to the

chairperson of the audit committee or the board of directors or specified

authority. Such a protected disclosure shall be forwarded, when there is

reasonable evidence to conclude that a violation is possible or has taken

place, with a covering letter, which shall bear the identity of the

whistleblower.

The company shall ensure protection to the whistleblower and any attempts

to intimidate him / her would be treated as a violation of the Code.

The TATA - Values and purpose

Purpose

At the Tata group our purpose is to improve the quality of life of the

communities we serve. We do this through leadership in sectors of economic

significance, to which the group brings a unique set of capabilities. This

requires us to grow aggressively in focused areas of business.

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Our heritage of returning to society what we earn evokes trust among

consumers, employees, shareholders and the community. This heritage is

being continuously enriched by the formalization of the high standards of

behavior expected from our employees and companies.

The Tata name is a unique asset representing leadership with trust.

Leveraging this asset to enhance group synergy and becoming globally

competitive is our chosen route to sustained growth and long-term success.

Core values

The Tata group has always been a values-driven organization. These values

continue to direct the group's growth and businesses. The five core Tata

values underpinning the way we do business are:

Integrity: We must conduct our business fairly, with honesty and

transparency. Everything we do must stand the test of public scrutiny.

Understanding: We must be caring, show respect, compassion and

humanity for our colleagues and customers around the world, and

always work for the benefit of the communities we serve.

Excellence: We must constantly strive to achieve the highest possible

standards in our day-to-day work and in the quality of the goods and

services we provide.

Unity: We must work cohesively with our colleagues across the group

and with our customers and partners around the world, building strong

relationships based on tolerance, understanding and mutual

cooperation.

Responsibility: We must continue to be responsible, sensitive to the

countries, communities and environments in which we work, always

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ensuring that what comes from the people goes back to the people

many times over.

Company Profile:

The Ford Motor Company (NYSE: F) is an American multinational corporation

and the world's fourth largest automaker based on worldwide vehicle sales,

following Toyota, General Motors, and Volkswagen. Based in Dearborn,

Michigan, a suburb of Detroit, the automaker was founded by Henry Ford and

incorporated on June 16, 1903. In addition to the Ford, Lincoln, and Mercury

brands, Ford also owns Volvo Cars of Sweden, and a small stake in Mazda of

Japan and Aston Martin of England. Ford's former UK subsidiaries Jaguar and

Land Rover were sold to Tata Motors of India in March 2008.

In 2007, Ford fell from the second-ranked automaker to the third-ranked

automaker in US sales for the first time in 56 years, behind General Motors

and Toyota. Based on 2007 global sales, Ford fell to the fourth-ranked spot

behind Volkswagen. Ford is the seventh-ranked overall American-based

company in the 2007 Fortune 500 list, based on global revenues in 2007 of

$172.5 billion. In 2007, Ford produced 6.553 million automobiles and

employed about 245,000 employees at around 100 plants and facilities

worldwide. Also in 2007, Ford received more initial quality survey awards

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http://en.wikipedia.org/wiki/Fortune_500

http://en.wikipedia.org/wiki/Toyota

http://en.wikipedia.org/wiki/General_Motors

http://en.wikipedia.org/wiki/India

http://en.wikipedia.org/wiki/Tata_Motors

http://en.wikipedia.org/wiki/Land_Rover

http://en.wikipedia.org/wiki/Jaguar_Cars

http://en.wikipedia.org/wiki/England

http://en.wikipedia.org/wiki/Aston_Martin

http://en.wikipedia.org/wiki/Japan

http://en.wikipedia.org/wiki/Mazda

http://en.wikipedia.org/wiki/Sweden

http://en.wikipedia.org/wiki/Volvo_Cars

http://en.wikipedia.org/wiki/Mercury_(automobile)

http://en.wikipedia.org/wiki/Lincoln_(automobile)

http://en.wikipedia.org/wiki/List_of_Ford_vehicles

http://en.wikipedia.org/wiki/Henry_Ford

http://en.wikipedia.org/wiki/Detroit

http://en.wikipedia.org/wiki/Dearborn,_Michigan

http://en.wikipedia.org/wiki/Dearborn,_Michigan

http://en.wikipedia.org/wiki/Volkswagen_Group

http://en.wikipedia.org/wiki/General_Motors

http://en.wikipedia.org/wiki/Toyota

http://en.wikipedia.org/wiki/Worldwide_vehicle_sales

http://en.wikipedia.org/wiki/List_of_automobile_manufacturers#World_Motor_Vehicle_Production_by_Manufacturer

http://en.wikipedia.org/wiki/Multinational_corporation

http://en.wikipedia.org/wiki/United_States

http://www.nyse.com/about/listed/f.html

http://en.wikipedia.org/wiki/New_York_Stock_Exchange


from J. D. Power and Associates than any other automaker. Five of Ford's

vehicles ranked at the top of their categories and fourteen vehicles ranked in

the top three.

Ford introduced methods for large-scale manufacturing of cars and large-

scale management of an industrial workforce using elaborately engineered

manufacturing sequences typified by moving assembly lines. Henry Ford's

methods came to be known around the world as Fordism by 1914.

Corporate governance:

Members of the board as of early 2007 are: Chief Sir John Bond, Richard

Manoogian, Stephen Butler, Ellen Marram, Kimberly Casiano, Alan Mulally

(President and CEO), Edsel Ford II, Homer Neal, William Clay Ford Jr., Jorma

Ollila, Irvine Hockaday Jr., John L. Thornton and William Clay Ford (Director

Emeritus).[7]

The main corporate officers are: Lewis Booth (Executive Vice President,

Chairman (PAG) and Ford of Europe), Mark Fields (Executive Vice President,

President of The Americas), Donat Leclair (Executive Vice President and

CFO), Mark A. Schulz (Executive Vice President, President of International

Operations) and Michael E. Bannister (Group Vice President; Chairman & CEO

Ford Motor Credit). Paul Mascarenas (Vice President of Engineering, the

Americas Product Development).

Our Progress

We get it. We need a new way of doing business. You'll be glad to know Ford

has been making great progress … we're sure you will agree.

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http://en.wikipedia.org/wiki/Chief_Financial_Officer

http://en.wikipedia.org/wiki/Donat_Leclair

http://en.wikipedia.org/wiki/The_Americas

http://en.wikipedia.org/wiki/Mark_Fields_(businessman)

http://en.wikipedia.org/wiki/Premier_Automotive_Group

http://en.wikipedia.org/wiki/Chairman

http://en.wikipedia.org/wiki/Lewis_Booth

http://en.wikipedia.org/wiki/Ford_Motor_Company#cite_note-fmci-6

http://en.wikipedia.org/wiki/William_Clay_Ford

http://en.wikipedia.org/wiki/John_L._Thornton

http://en.wikipedia.org/wiki/Jorma_Ollila

http://en.wikipedia.org/wiki/Jorma_Ollila

http://en.wikipedia.org/wiki/Edsel_Ford_II

http://en.wikipedia.org/wiki/Alan_Mulally

http://en.wikipedia.org/wiki/Kimberly_Casiano

http://en.wikipedia.org/wiki/Richard_Manoogian

http://en.wikipedia.org/wiki/Richard_Manoogian

http://en.wikipedia.org/wiki/Fordism

http://en.wikipedia.org/wiki/Henry_Ford

http://en.wikipedia.org/wiki/Assembly_line

http://en.wikipedia.org/wiki/J._D._Power_and_Associates


Ford Motor Company, Honda Motors and Toyota Motors quality ratings are in

a dead heat.

Our cars, trucks and SUVs deliver fuel economy that's competitive with that

of all other automakers.

EVENTS OF THE TATA-FORD DEAL

1. FORD STARTS FACING PROBLEM WITH PENSION COSTS AND

FALLING SALES IN NORTH AMERICA.

Ford has been forced to sell two company’s based at Solihill and Castle

Bromwich in the West Midlands and Halewood on Merseyside in order to

concentrate on it’s loss-making core US car business, which it hopes to turn

around in the next two years. The largest loss of a $127 billion, overseen by

Allan Mullay, who took over as a Chief Executive Officer in the same year,

decided to sell its iconic Aston Martin Brand to a U.K based investment

consortium in a deal worth $955.2 million in 2007. Ford mission became to

integrate the Ford brand globally, and create a strong Ford motor company

that delivers profitable growth to all.

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2. FORD INDICATES THAT IT MIGHT LOOK FOR BUYERS FOR JAGUAR

AND LAND ROVER MARQUES

After the losses drained out cash and resources out of the Ford Company,

Ford Motor gave a lucid indication for buyers of its two other brands- Jaguar

and Land Rover, as luxury car sales went down across the globe. Jaguar sales

dropped 33% in the US and Europe in the first two months of the year while

Land Rover sales fell 13% in the US and 7.7% in Europe during the period.

Ford bought Jaguar for $2.5 billion in 1989 and Land Rover for $2.7 billion in

2000. But it has been struggling and wants to focus on its main brands. It

has now sold the marques for less than what it paid then.

3. TATA CONFIRMS THE NEWS TO PARTICIPATE IN THE BID

The head of India's Tata conglomerate confirmed Friday that his group was

interested in bidding for luxury UK car brands Jaguar and Land Rover, in an

interview with an Indian news channel. Tata Motors, India's biggest car

company, has appointed advisors to evaluate a bid and signed a

confidentiality agreement with Ford to access financial details of the two

brands which have a combined British workforce of 19,000, the Business

Standard daily quoted unnamed sources as saying last month. The move

would be in keeping with Tata group's growing appetite for overseas

acquisitions.

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4. MAHINDRA-MAHINDRA FAILED TO MAKE IN TO BID

Mahindra & Mahindra has pulled out of the race to acquire iconic British

brands Jaguar and Land Rover, which have been put on the block by Ford,

citing complexities in the way the deal was structured. The development

strengthened the case for Tata Motors, which is now pitted against private

equity firm One Equity Partners that has roped in former Ford boss Jacques

Nasser as an advisor. Sources close to the negotiations said M&M — though

a serious contender in the beginning — decided against pursuing the deal as

there were concerns related to Intellectual Property Rights (IPR) associated

with the two brands. "The whole deal was considered to be very complex,

prompting the company not to pursue it," a source said. M&M thought that it

would have to go back to Ford on many crucial issues related to use of

technology even after bagging the two brands. Crucial IPRs related to the

brands are locked in with the US auto major, making it difficult for the

eventual winner to "derive full benefits unhindered and Ford's continuing

involvement was a crucial concern".

5. FORD ANNOUNCES TATA AS “PREFERRED BUYER”.

On 1 January 2008, Ford made a formal announcement which declared Tata

as the preferred bidder. Tata Motors also received endorsements from the

Transport and General Worker's Union (TGWU)-Amicus combine as well as

from Ford. According to the rules of the auction process, this announcement

would not automatically disqualify any other potential suitor. However, Ford

(as well as representatives of Unite) would now be able to enter into more

focused and detailed discussions with Tata to iron out issues ranging from

labour concerns (job security and pensions), technology (IT systems and

engine production) and intellectual property as well as the final sale price.

Ford would also open its books for a more comprehensive diligence by Tata.

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http://timesofindia.indiatimes.com/MM_out_of_Jaguar_Land_Rover_race/articleshow/2646028.cms

http://en.wikipedia.org/wiki/Unite_(trade_union)

http://en.wikipedia.org/wiki/Unite_(trade_union)

http://en.wikipedia.org/wiki/Amicus

http://en.wikipedia.org/wiki/Tata_Motors

http://en.wikipedia.org/wiki/2008

http://en.wikipedia.org/wiki/January_1


On 18 March 2008, Reuters reported that American bankers Citigroup and JP

Morgan shall be due underwriting a loan of USD 3 billion in order to finance

the deal.

6. EUROPEAN COMMISION CLEARS ACQUISITION OF JAGUAR AND

LAND ROVER BY INDIAN COMPANY, TATA MOTORS.

On 26th April 2008, The European Commission (EC), the executive panel of

the 27-member European Union, cleared the acquisition of the Jaguar and

Land Rover business (JLR) of US-based Ford Motor Company by India's Tata

Motors Ltd the EC announced in Brussels. That it has granted clearance

under the EU Merger Regulation Procedure.

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http://en.wikipedia.org/wiki/1000000000_(number)

http://en.wikipedia.org/wiki/JPMorgan_Chase

http://en.wikipedia.org/wiki/JPMorgan_Chase

http://en.wikipedia.org/wiki/Citigroup

http://en.wikipedia.org/wiki/Reuters


http://en.wikipedia.org/wiki/March_18


THE DEAL

The definitive agreement was agreed by Tata Motor’s Ltd., on 26 th March

2008 to acquire luxury British marquees, Jaguar and Land Rover.

The all-cash deal, which was agreed in March, includes all necessary

intellectual property rights, manufacturing plants, two advanced design

centers in the UK and a worldwide network of sales companies. Included in

the deal were the rights to three other British brands, Jaguar's own Daimler,

as well as two dormant brands Lanchester and Rover. On 2 June 2008 the

sale to Tata was completed by both parties

TRANSITION SUPPORT

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http://en.wikipedia.org/wiki/Lanchester_Motor_Company

http://en.wikipedia.org/wiki/Daimler_Motor_Company


Other areas of transition support from Ford include IT, accounting and access

to test facilities. The companies will also cooperate in areas such as design

and development through sharing of platforms and joint development of

hybrid technologies and power train engineering, Tata Motors said.

TIMELINE OF THE HISTORIC DEAL

2005 Ford starts facing problems with pension and health

care costs and falling sales in North America.

Starts reporting losses from the second quarter

2006 Alan Mullaly takes over as chief executive and

oversees a $12.7 billion loss, the largest in the

company's history Ford decides to sell its Aston

Martin brand

May, 2007 Ford closes the Aston Martin sale for $848 million

June, 2007 Ford indicates that it might look at buyers for Jaguar

and Land Rover marquees

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July, 2007

Ford receives preliminary bids for the brands. Reports

say that TPG Inc., Cerberus Capital Management Lp.

Ripplewood Holdings, One Equity Partners Llc are in

the fray, along with Tata Motors

Ltd and Mahindra & Mahindra

August,

2007

Ratan Tata, chairman of Tata Motors Ltd, confirms

that his company was bidding for the premium car

Makers

November,

2007

Investment bankers say that Apollo Alternative Assets

is teaming up with Mahindra & Mahindra

Reports say that Ford has shortlisted three bidders—

Tata, Mahindra and One Equity—for further

negotiations with its trade unions Unite, the trade

union representing Land Rover and Jaguar workers,

says it supports Tata Motors' bid

December, The three bidders submit their bid

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2007

January ,

2008

Ford names Tata as "preferred buyer"

March, 2008

Tata, Ford sign deal

June, 2008 Deal finally completed by both the parties.

STUDENT’S ANALYSIS

OFFER AND ACCEPTANCE

Offer and acceptance: there must be two parties to an agreement, i.e.,

one party making the offer and the other party accepting it. The terms of

the offer must be definite and the acceptance of the offer must be

absolute and unconditional. The acceptance must also be according to the

mode prescribed and must be communicated to the offeror.

The deal was offered by Tata and finally accepted on 2nd June 2008 by

William Clay Ford (Chairman of Ford) and Allan Mulally (CEO of Ford)

OFFER BY TATA à ACCEPTANCE BY FORD

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LEGAL RELATIONSHIP

Intention to create legal relationship: When the two parties enter into an

agreement, their intention must be to create a legal relationship between

them. If there is no such intention on the part of the parties, there is no

contract between them.

Both the parties have the intention to create legal Relationship between

them and were agreed to legalize the deal in written

LAWFUL CONSIDERATION

1. Lawful consideration: An agreement to be enforceable by law must be

supported by consideration. ‘Consideration’ means an advantage or

benefit moving from one party to another. It is the essence of a

bargain. In simple words, it means ‘something in return’. The

agreement is legally enforceable only when both the parties give

something and get something in return. Consideration need not

necessarily be in cash or kind. It may be an act, abstinence, or promise

to do or not to do something. It may be past, present or future. But it

must be real and lawful.

Consideration is lawful in the deal. Mr. Ratan Tata (Chairman of Tata) gets

the Ford Company as his consideration.

CAPACITY OR COMPETENCY OF PARTIES

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Capacity of parties- competency: The parties to the agreement must be

capable of entering into a valid contract. Every person is competent to

contract if he (a) is the age of majority, (b) is of sound mind, and (c) is not

disqualified from contracting by any law to which he is subject.

There are three conditions that are required for a party to become

competent to contract were fulfilled:-

-Both the parties attains the age of majority at the time of contract.

-Both the parties are of sound mind

-Both Tata and Ford were not disqualified by any law from signing any

contract.

FREE CONSENT

Free and genuine consent: It is essential to the creation of every contract

that there must be free and genuine consent of the parties to the

agreement. The consent of the parties is said to be free when they are of

the same mind on all the material terms of the contract. The parties are

said to be of the same mind when they agree about the subject matter of

the contract in the same sense and at the same time. There is absence of

free consent if the agreement is induced by coercion, undue influence,

fraud, misinterpretation, etc.

In this case the consent of both the parties are free i.e. It is not caused by-

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• Coercion

• Undue Influence

• Fraud

• Misrepresentation

• Mistake

Thus the contract is genuine.

LEGALITY OF OBJECT

Lawful object: The object of the agreement must be lawful. In other words, it

means that the object must not be (a) illegal, (b) immoral, or (c) opposed to

public policy. If an agreement suffers from any legal flaw, it would not be

enforceable by law.

In Tata Ford deal nothing was illegal, immoral or opposed to public policy

hence legality of object criteria also got fulfilled.

POSSIBILITY OF PERFORMANCE

Certainty and possibility of performance: The agreement must be certain

and not vague or indefinite. If it is vague and it is not possible to ascertain

its meaning, it cannot be enforced. The term of the agreement must also

be such as are capable of performance. Agreement to do an act

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impossible in itself cannot be enforced.

In this deal both the parties were perform their respective promises so the

deal is successful.

LEGAL FORMALITIES

Legal formalities: A contract may be made by words spoken or written. As

regards the legal effects, there is no difference between a contract by

writing and a contract made by word of mouth. It is in the interest of the

parties that the contract should be in the writing. There are some other

formalities also which have to be complied with in order to make an

agreement legally enforceable. In some cases, the document in which the

contract is incorporated is to be stamped. In some other cases, a contract,

besides being a written one, has to be registered. Thus, where there is a

statutory requirement that a contract should be made in writing or should

be made in the presence of witnesses or registered, the required

statutory formalities must be compiled with.

In this deal all the legal formalities like registration etc. are fulfilled hence

the deal is successful.

Thus, all the elements which are essential for an agreement to become a

contract are present.

Conclusions

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The following conclusions have been drawn from the study:

1. Post- liberalization, most Indian business houses are undergoing major

structural changes, the level of restructuring activity is increasing

rapidly and the consolidations through M&A have reached every

corporate boardroom.

2. Most of the mergers that took place in India during the last decade

seemed to have followed the consequence of mergers in India

corroborate the conclusions of research work in U.S. with most of the

M&A are taking place in India to improve the size to withstand

international competition which they have been exposed to in the Post-

liberalization regime.

3. The M&A activity is undertaken with the objective of financial

restructuring and to avail of the benefits of financial restructuring.

Nowadays, before financial restructuring, it has become a pre-requisite

that companies need to merge or acquire. Moreover, financial

restructuring becomes easier because of M&A. the small companies

cannot approach international markets without becoming big i.e.

without merging or acquiring.

4. Market capitalalisation of a company sometimes is found to be going

up or down without any corresponding change in the EVA and MVA

since the stock may be strong because of the general bullish scenario

in the market, s is observed in most of the cases in our study.

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BIBLIOGRAPHY

Books: - Merger, Acquisition and corporate restructuring in India (Rachna

Jawa)

Financial services 3rd edition (M.Y.khan)

Website: www.google.com

www.wikipedia.com

www.icicidirect.com

www.mergersindia.com

www.mergerdigest.com

www.deustchbank.com

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http://www.mergerdigest.com/

Merger& Acquistion Process in India With JLR TATA Merger Case Study

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