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b usiness c ombination

b usiness c ombination. Why Business Combination? Forms Of Business Combination. Mergers Amalgamation Acquisitions Takeovers. b usiness c ombination. AI & IA TO MERGE IN APRIL TATA LIKELY TO REVISE CORUS TAKEOVER OFFER AMTEK AUTO RENEW BID TO ACQUIRE UK COMPANY

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b usiness c ombination

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  1. business combination

  2. Why Business Combination? Forms Of Business Combination

  3. Mergers • Amalgamation • Acquisitions • Takeovers business combination

  4. AI & IA TO MERGE IN APRIL • TATA LIKELY TO REVISE CORUS TAKEOVER OFFER • AMTEK AUTO RENEW BID TO ACQUIRE UK COMPANY • TATA GROUP IN RACE FOR DAEWOO ROMANIA • GE SNAPS UP SMITHS AEROSPACE FOR $4.8 BILLION • HINDUJAS ENTER RACE FOR HUTCH’S HTL STAKE • IDBI BUYS 10% STAKE IN BAG FILMS RADIO UNIT • US AIRWAYS RAISES BID FOR DELTA

  5. When two or more companies combines into one company • may merge with existing co, • form new company…… • in India merger is called Amalgamation Merger

  6. Merging Companies are called Amalgamating Companies Merger New Company is called Amalgamated Company

  7. Merger Through Absorption Merger MERGER THROUGH CONSOLIDATION

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

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

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

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

  12. Acquisition An Acquisition may be an act of acquiring effective control by one company over assets or management of another company without any combination of companies…….. Companies may remain independent, separate But there may be change in control of Companies……..

  13. Acquisition • Obtaining Control over management of a Company • MRTP ACT-at least 25% voting right of a Company • Investment of more than 10% share into a company Require approval of Shareholders & C Govt.

  14. Dabur Pharma to acquire Thai company Aditya Birla Group to acquire Trinethra China’s largest Bank to take over Indonesian Bank

  15. WE ARE LOOKING TO ACQUIRE HOSPITALS We are leading business house with a reputed presence in In health care sector in the country We are likely to acquire medium to large sized hospitals in Metros, state capitals & tier 1 cities. They could be on out right purchase or long term lease. We are also open to Joint Ventures Pl. send proposals & contact details to indianhealth@gmail.com

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

  17. Mittal -Arcelor Case Mittal Steel bids for Arcelor-27.1.06 Mittal after Arcelor’s Cash -2.2.06 Mittal and Arcelor seek Support-6.2.06 Arcelor investors favour mittal but want more-15.2 Arecelor offer sweet,hostality wanning-mittal 16.2 Arecelor declared higher dividend than mittal-16.2 Mittal Steel Launched formal take over-19.5 Mittal raised bid before share holders meet-19.5 A,lor to merge with Russian Company Severstal 26.5 Mittal –Arcelor start talks -9.6 Arecelor rejects mittal bid-12.6

  18. Mittal -Arcelor Case • Mital woos Arcelor with 70% growth-13.6 • Mittal may hike offer-21.6 • Mittal Arcelor close to friendly deal-23.6 • Mittal wins over more shareholders23.6 • Arcelor gives in to Mittal-26.6 • Did Mittal Yield too much-29.6 • Arcelor,s largest S,holder reject Severstal - 30.6 • Mittal Steel claims 92% shares of Arcelor -27.7 • Mittal steel announces post merger plan-8.8 • Merged Arcelor-Mittal named Mike Repley • As CEO OF US operations

  19. Tactics to Defend Takeover…..Merger • Divestiture • Crown Jewels • Poison Pill • Greenmail • White Knight • Golden parachutes

  20. FORMS OF MERGER Horizontal Merger Vertical Merger Conglomerate Merger

  21. Merger Objectives • Faster Growth • Improving Profitability • Managerial Effectiveness • Gaining Market Power • Leadership • Cost Reduction

  22. Are there any alternatives to Mergers or acquisitions?

  23. Joint Venture • Strategic Alliance • Eliminating Inefficient Operations • Productivity Improvement • Hiring Capable Managers Merger Alternatives

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  39. Few Mergers, Acquisitions, Take over • New Bank Of India merged with Punjab National Bank • Global Trust Bank Taken over by OBC • Western United Bank taken over by IDBI • International Data Management By HCL Ltd • Chhabrias took over Shaw Wallace, Dunlop • Ashok Leyland By Hindujas • Spensers By Goenkas • VSNL by Tata • Tata Tea Ltd Acquired Consolidated Coffee Company • Tomco with HLL • Tata Fertilizers Merged With Tata Chemicals • Sundaram Clayton Merged With TVS-suzuki Ltd • MITTAL STEEL'S ACQUISITION OF ARCELOR

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