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MERGERS AND ACQUISITIONS
CHANGING FACE OF INDIAN BUSINESS
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MERGERS & ACQUISITIONS?MERGERS & ACQUISITIONS?
y Merger: When two or more companies or firms join
to become one entity. It involves absorption of one
company by another or amalgamation of twocompanies to form a new company .
y Acquisition: Acquiring control of a corporation,
called a target, by stock purchase or exchange,either hostile or friendly.Also calledTakeover.
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WHY M&A?WHY M&A?
Cost Efficiency through economies of scale.
Increased value generation.
Increase in market share.
Tax gains and revenue enhancement through market
share gain.
Beneficial to the companies weathering through the
tough times.
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M& A: BENEFITSM& A: BENEFITS
y When a firm :
y Wants to enter a new market.
y
Wants to introduce new products through researchand development.
y Wants achieve administrative benefits.
y To increased market share.
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M& A: BENEFITSM& A: BENEFITS
y To lower cost of operation and/or production.
y
To gain higher competitiveness.
y For industry know how and positioning.
y For Financial leveraging.
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DEALDEAL CYCLECYCLE
GrowthStrategy
PotentialTargets
DueDiligence
Cultural
Integration
CreatingSingle entity
Develop &Sustain
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DUE DILIGENCEDUE DILIGENCE
y Complicated process should be given majoremphasis.
y Helps in understanding the inner working of the
seller·s company.
y Due diligence is divided into 4 sub sections.
x Financial
x Business
x Legal
x Tax
y A through examination of the firm.
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M&A SNAPSHOTM&A SNAPSHOT
Volume Value Avg. Deal Size
·06 ¶07 ¶08 ·06 ¶07 ¶08 ·06 ·07 ·08
Inbound 76 112 86 5.4 15.5 12.5 71.05 138.40 145.89
Outbound 190 243 196 9.9 32.7 13.2 52.18 134.81 67.31
Total Cross border 266 355 282 15.3 48.2 25.7 57.57 135.94 91.27
Domestic 214 321 172 4.9 2.8 5.2 23.32 8.89 30.30
Total M&A 480 676 454 20.2 51 30.9 42.30 75.61 68.17
PE 302 405 312 7.8 19.3 10.5 26.02 46.99 33.93
Total 782 1081 766 28 70.3 41.4 36.02 64.89 54.23
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M&A SNAPSHOTM&A SNAPSHOT
Total value of M&A and PE investment declined by
49% in 2009.
M&A deals declined by 41% in 2009.
63% decrease in volume of Q1in 2009 as compared to
2008.
30% decrease in terms of value.
Domestic deals were greater than cross border
counterparts.
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KEY M&A DEALS(2008)KEY M&A DEALS(2008)Acquirer Target Sector Price (US$
Mns)
% Stake
Daiichi Sankyo
Co.
Ranbaxy
Laboratories
Ltd.
Pharma 4506.31 60.63%
Oil & Natural
Gas CorpVidesh Ltd
Imperial Energy
PLC
Oil & Gas 800.00 100.00%
NTT
DOCOMO.
INC.
Tata
Teleservices
Ltd
Telecom 2700.00 26%
HDFC Bank
Ltd.
Centurion
Bank of Punjab
BFSI 2377.50 100%
GMR
Infrastructure
Ltd
InterGen NV Power and
Energy
1100.00 50%
HCL
Technologies
Axon Group
plc
IT & ITES 749.70 100%
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KEY M&A DEALS(2009)KEY M&A DEALS(2009)
Acquirer Target Sector Price (US$
Mns)
% Stake
Reliance
Industries
Reliance
Petroleum
Oil and Gas 1888.89 NA
Quippo
TelecomInfrastructure
Ltd.
Wireless Tata
TelecomInfrastructure
Ltd.
Telecom 533.33 49.00%
Sesa Goa Ltd. VS Dempo &
Co. Private
Ltd.
Metals and
Ores
388.89 100%
Tech Mahindra
Ltd.
Satyam
Computer
Services Ltd.
IT & ITES 351.00 31%
Fire Capital
Fund
Fire Arcor
Infrastructure
Pvt. Ltd.
Real Estate &
Infrastructure
Management
250.00 75%
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KEY M&A DEALS (2010)KEY M&A DEALS (2010)
Acquirer Target Sector Price (US$ Bns)
Bharti Airtel Zain African
operation
Telecom 10.7
GTL Infrastructure AIRCEL Telecom
Infrastructure
1.8
Fortis Healthcare Parkway Holdings Healthcare .685
Essar Group Trinity Coal
Corporation
Mining .600
Telenor ASA Unitech wireless telecom .433
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FINANCIAL BUYERSFINANCIAL BUYERS
Private equity firms ( financial sponsors)
Venture capital firms
Hedge funds
Family investment offices
Ultra high net worth individuals (UHNWs)
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PRIVATE EQUITY FUNDPRIVATE EQUITY FUND
MANAGEMENT CYCLE:MANAGEMENT CYCLE:
Fund raisingfor limitedpartners
Portfolioacquisition
searchInvestment Growth Divestment
Dispersal of funds tolimited
partners
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STRATEGIC VS. FINANCIALSTRATEGIC VS. FINANCIAL
BUYERSBUYERSStrategic buyers Financial buyers
Evaluation of business Focus heavily on
synergies and integration
capabilities
Standalone cash
generating capabilities and
capacity for earnings
growth
Determining investmentmerits of industry
Less time on macro viewof industry and more
time on micro view of
company
More time on macroview of industry and less
time on micro view of
company
Strength of back office
infrastructure
Focus less Focus more
Impact of investment
horizon
Less sensitive to business
cycle risk
More sensitive to
business cycle risk
Transaction efficiency Process takes longer time Execute deals in a timely
fashion
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KEY PE DEALS (2008)KEY PE DEALS (2008)
Investor Investee Sector Stake % Price (US$Mns)
Providence
Equity
Partners
Aditya Birla
Telecom
Telecom 20 640.00
SymphonyCapital DLF Assets Real Estate &Infrastructure
Management
N.A. 450.00
MPC Synergy Phoenix Mills
Ltd.
Real Estate &
Infrastructure
Management
N.A. 325.00
Orient Global
Tamarind Fund
Pvt. Ltd.
Cairn India
Ltd.
Power &
Energy
3 278.69
DE Shaw Mack Star
Marketing
Real Estate &
Infrastructure
Management
N.A. 250.00
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REFERENCESREFERENCES
y PwC study on Strategic deals and mergers of
productivity to drive M&A in 2010.
y
http://equityez.com/portfolio/stages-of-the-private-equity-fund-management-cycle/
y Study by KPMG Indian-M&A-Landscape-2009.
y Study by Evalueserve - Greenfield Business Sentiments
Survey on Indian M&A - post editorial.
y Deal Tracker Annual Issue 2008.
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REFERENCESREFERENCES
y Assocham Financial Pulse study ́ M&A in India:
Retrospect & Prospectsµ April 2009.
y Study by Grant Thornton ́ Marketing Services
Merger and Acquisitionsµ Summer 2010.
y ´Global Private Equity Report 2010µ by Bain &
Company.