Study Report on Mergers and Acquisitions - Strategic Alliance

Description
The wave of liberalization and globalization has resulted in blurring of the National boundaries, elimination of barriers to marketplaces and as a consequence There has been free flow of technology.

A
Study On
STUDY REPORT ON MERGERS AND ACQUISITIONS - STRATEGIC
ALLIANCE
IN
XXXX FINANCE LTD
DECLARATION
I here by declare that the project work entitled “STUDY ON ME!ES"A#$USITIONS%
STATE!I# A&&IAN#E' IN “XXX FINANCE LTD'( XXX( i) an ori*inal work carried
out by +e a,ailin* the *uidance o- +y project *uide. And it ha) been )ub+itted to XXXX( in
partial -ul-ill+ent -or the award o- the de*ree o- MASTER OF BUSINESS
ADMINISTRATION (M.B.A) o- O)+ania Uni,er)ity.
It ha) not been )ub+itted to any other Uni,er)ity or In)titution -or
the award o- De*ree/Diplo+a to the be)t o- +y knowled*e.
PLACE:
DATE:

Your0 )incerely(

1
INDEX Page
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LIST OF TABLE
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LIST OF EX>IBITS:
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E5hibit 36 pro+inent takeo,er) 78
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7
INTRODUCTION
The wa,e o- liberali;ation and *lobali;ation ha) re)ulted in blurrin* o- the National
boundarie)( eli+ination o- barrier) to +arketplace) and a) a con)e<uence There ha) been
-ree -low o- technolo*y. #apital and +arket -orce) acro)) border). In )i+pler ter+) it
i+plie) a +ore *lobally 2 ali*ned( ,olatile and re)pon)i,e Econo+y. The +o+entu+ o-
chan*e ha) been )tron* enou*h -or +any do+e)tic =layer). >orkin* in a protected
econo+y( to con)ider their co+petiti,e po)ture). The )udden )hi-t -ro+ a protected
en,iron+ent to the )tark reality o- a *lobally co+petiti,e +arket place ha) hit the+
,ery hard. The thinnin* pro-it +ar*in)( =ri,ile*e) o- )i;e( technolo*y and e5tre+ely
deep pocket)( ha,e +ade )ur,i,al the ?ey word -or the do+e)tic player).
Indian corporate )ector i) no e5ception. Yet lon* be-ore the corporate raider) O- we)t
)tarted in-iltratin*( Indian bu)ine)) had be*un conte+platin* a counter O--en)i,e. One )uch
potent )ur,i,al( a) well a)( *rowth )trate*y wa) -ound to be Mergers and Acquisitions.
=articularly the la)t one%decade ha) been dedicated to Mer*er) and Ac<ui)ition) a) ,ehicle o-
reducin* the re)pon)e ti+e to co+petitor) Mo,e) and thu) *eneratin* the +uch needed
critical( +a))( <uickly.
@
COMPANY PROFILE
India i) on the thre)hold o- enterin* a new econo+ic era. An era o- -a)t pace) econo+ic
*rowth. >ith ,ariou) new co++ercial opportunitie) openin* up. The)e new indu)trie)
and bu)ine)) ,enture) are o-ten *lobal. Multi national( collaboration)( joint ,enture)(
technolo*y tran)-er) are the new bu;; word). E)tabli)hin* and de,elopin* the)e *enre) o-
co+panie) i) a co+plicated proce)). In today0) )cenar@io o- -renetic acti,ity( the need -or
<uality -inancial )er,ice) i) acute.
To cry)talli;e the)e project) a -inancial co+pany that under)tand) the indi,idual need) i)
re<uired. Thu) the need -or AAA BINAN#E &IMITED i) it pro,idin* corporate -inance
or in +ana*e+ent o- i))ue) or in dealin* with the )ecuritie) +arket. And with the increa)e
in he nu+ber o- co+panie) o--erin* ,ariou) -inancial )er,ice)( the need -or co+plete
-inancial )er,ice) o--ered under one roo- ha) beco+e ine,itable( to keep pace with the
ri)in* co+petition. U)ha kiran -inance li+ited i) co++itted to pro,idin* total -inancial
)er,ice) under a )in*le roo-.
AAAA BINAN#E &IMITED i) an e5i)tin* pro-it +akin* co+pany. It i) an inte*rated
-inance co+pany e)tabli)hed e))entially a) a -und ba)ed -inancial )er,ice or*ani;ation a)
di,er)i-ied it ran*e o- acti,itie) -ro+ -und ba)ed to non -und ba)ed acti,itie) and -urther
)tepped up and e5panded the -und ba)ed acti,itie) and other -inancial )er,ice). It i) a
pro-e))ionally +ana*ed co+pany co+pri)in* chartered accountant)( #o+pany
Secretarie)( MCA)( #o)t Accountant) and )o-tware pro-e))ional). >ith an in-ra)tructure
that +atche) with the international )tandard) and practice)( )ta-- )upport and )tron*
network( the co+pany e--iciently cater) -inancial )er,ice) to it) di,er)e clientele.
The Coard o- Director) o- the co+pany co+pri)e) e+inent and e5perienced
pro-e))ional) who ha,e *ot abundant e5perience by ,irtue o- their a))ociation earlier with
public )ector undertakin*) and +ultinational under takin*). Shri AAAA the chie-
pro+oter i) a +e+ber o- the In)titute o- #hartered Accountant) o- India( the I#>A o-
India and I#S o- India. De wa) a))ociated with the -inancial in)titute -or about E year)
and i) well ,er)ed in all a)pect) o- ter+ lendin*( project -inancin*( and project ad,i)ory
)er,ice). Many &eadin* indu)trial con*lo+erated ha) u)ed the )er,ice) particularly in the
area) o- -inance( ta5ation( and )ecretarial and public i))ue) related +atter). De i) al)o a
+e+ber o- the Dyderabad Stock E5chan*e &i+ited.
8
The co+pany cater) +ainly to the re<uire+ent) o- corporate client) in the
,ariety o- acti,itie) that include the -ollowin*6
? &ea)in* and Dire purcha)e -inance
? Inter corporate depo)it)
? Cill Di)countin*
? &oan) Syndication
? =lace+ent o- #o++ercial paper)
? Mer*er)( A+al*a+ation) and Ac<ui)ition)
? =roject #oun)elin* and Ad,i)ory Ser,ice)
? =roject Apprai)al)
? Under writin*)
? Merchant Cankin*
? I))ue Mana*e+ent
? =lace+ent o- Securitie)
? Marketin* o- =ublic i))ue
? Crou*ht out deal)
? =lace+ent o- )hare to NI)/O#C)( Bi)( and BII)
? Bund Mana*e+ent
? E<uity ea))ert Analy)i)
? In,e)t+ent Cankin*
? Stock Crokin* and #o++oditie) tradin*
? Foint Genture)
9
OBDECTIAES OF T>E STUDY:
The )tudy i) an atte+pt to analy)e the +er*er) and ac<ui)ition takin* place in
So+e )elect indu)trie). Bor thi) purpo)e( the -ollowin* )ector) are identi-ied( in -our di--erent
)ection).
A. BANEING INDUSTRY:
I. Thi) )tudy atte+pt) to a))et) the )ucce)) the )ucce))-ulne)) o- M " A
)trate*y in bankin* indu)try.
II. It analy)e) the i+plication) o- takeo,er) -ro+ the -inancial point) o- ,iew.
III. The +ain objecti,e o- thi) )tudy i) to analy)e and co+pare the -inancial
=er-or+ance o- +er*er bank) be-ore and a-ter +er*er.
IG. The +er*er o- !TC with OC# and their )yner*ie) i) -ocu)ed in thi) )tudy.
B. P>ARMACEUTICAL INDUSTRY:
In thi) )ection( the e--ect) o- the M " A are identi-ied. A re,iew on M " A
In Indian =har+aceutical Indu)try and !lobal =har+a #o+pany +er*er) and
pre)ented.
C. STEEL INDUSTRY:
Thi) )ection hi*hli*ht) a re,iew on Mittal Arcelor co+bine. It include) the
)trate*ic )yner*ie)( i+pact that the +er*ed entity will ha,e on the )teel
indu)try and other a)pect) o- the propo)ed deal.
D. CEMENT INDUSTRY:
The ce+ent )ection re,eal) the M " A acti,itie) bein* out in thi) )ector. It
Al)o pre)ent a carried re,iew on Dolci+0) ac<ui)ition o- !ujarat A+buja
#e+ent &td H!A#&I and it) i+plication) -or the indu)try.
J
IMPORTANCE OF T>E STUDY6
Mer*er) and Ac<ui)ition) ha,e *ained i+portance in recent ti+e).
Cu)ine)) con)olidation by lar*e indu)trial hou)e). #on)olidation o- bu)ine)) by
+ultinational) operatin* in India( increa)in* co+petition a*ain)t do+e)tic
co+panie) co+petition a*ain)t i+port) ha,e all co+bined to )uper M " A
acti,itie) in India.
SCOPE OF T>E STUDY:
The )cope o- the )tudy i) re)tricted to only )ector) which are the bankin*
indu)try( phar+aceutical indu)try( )teel indu)try and the ce+ent indu)try. A -ocu)
on +er*er) o- !TC with OC# and a re,iew on Mittal 2 Arcelor co+bine and
Dolcin)0) ac<ui)ition deal !A#& i) pre)ented.
STATEMENTS OF T>E PROBLEM (BANEING INDUSTRY)
It i) co++on knowled*e that dra+atic e,ent) like +er*er)( takeo,er) an
e)tructurin* o- corporate )ector) occupy the pa*e) o- bu)ine)) new)paper) al+o)t
daily. Burther they ha,e beco+e the -ocu) o- public and corporate policy i))ue). Thi)
i) an area o- potential *ood and propo)ed e,aluation) )tudy on +er*er) and
ac<ui)ition). Thi) )tudy atte+pt) to a))e) the )ucce))-ulne)) o- M " A )trate*y in
bankin* indu)try. It analy)e) the i+plication -ro+ the -inancial point o- ,iew.
MET>ODOLOGY OF T>E STUDY:
The )tudy i) intended to e5a+ine the per-or+ance o- +er*ed bank) in ter+)
o- it) *rowth o- total a))et)( pro-it)( re,enue)( in,e)t+ent and depo)it). The
per-or+ance o- +er*ed bank) i) co+pared takin* -our year) o- pre%+er*er and -our
year o- po)t % +er*er a) the ti+e -ra+e. The year o- +er*er uni-or+ly included in the
po)t % +er*er period o- all )a+ple bank). A rando+ )a+ple o- )e,en bankin* unit)
wa) drawn -ro+ the li)t o- 3: bankin* unit)( which ha,e under*one +er*er) and
ac<ui)ition. A )a+ple o- 44K o- +er*ed bank) H9I -ro+ total +er*ed bank) H3:I wa)
E
drawn. >hile drawin* the )a+ple bank) -or thi) )tudy( the a,ailability o- -inancial
data )uch a) -inancial )tate+ent( hi)tory o- the co+panie) etc wa) taken into account.
DATA COLLECTION OF T>E STUDY:
The pre)ent )tudy +ainly depend) on the )econdary data. The )econdary
data were collected -or -our year) be-ore and -our year) a-ter the +er*er. The re<uired
data were obtained -ro+ the =rowe)) #orporation Databa)e So-tware o- #MIE.
#hennai and a ho)t o- )e,eral new)paper)( +a*a;ine)( journal) and web)ite) and
co+pilation -ro+ report) publi)hed in ,ariou) new)paper) at di--erent ti+e).
T&&17 (7e' 0&" A%a1/7*7 (Ba%?*%g I%'(7!"/)
Thi) )tudy ha) analy;ed the *rowth o- total a))et)( pro-it)( re,enue)( in,e)t+ent
And depo)it) o- +er*ed bank) be-ore and a-ter the +er*er. In order to e,aluate the
per-or+ance( )tati)tical tool) like +ean( )tandard de,iation and tLte)t ha,e been u)ed.
The *rowth rate) o- )a+ple bank) -or all ,ariable) H+ean ,alue) o- ,ariable) be-ore
and a-ter +er*erI ha,e been analy;ed.
L*.*!a!*&%7 &0 !he 7!('/:
$. The )tudy i) con-ined to only )elect indu)trie) )uch a) bankin*(
=har+aceutical( )teel and ce+ent indu)trie).
-. The pre)ent )tudy depend) +ainly on the )econdary data.
3. The )econdary data collected -or analy)i) o- bankin* indu)try were
&i+ited -or -our year) and -our year) a-ter the +er*er. Bour year) i)
&i+ited con)idered to be a )hort period -or e,aluation.
9. A rando+ )a+ple o- )e,en bankin* unit) wa) drawn -ro+ the li)t o-
3: bankin* unit). So they tend to po))e)) the li+itation) o- rando+
Sa+ple.
<. Since the )tudy in,ol,e) )tati)tical tool) like +ean( )tandard de,iation(
1:
tLte)t( the weakne)) and li+itation) o- the)e )tati)tical tool) are
applicable.
@. The conclu)ion) and )u**e)tion) are on the ba)i) o- the theoretical
A)pect) which +ay not be po))ible in practical )ide.

Dowe,er( with the)e li+itation)( the )tudy i) not handicapped in any way.
>ith a,ailable data i) taken to co,er all a)pect) o- the re<uired objecti,e).
O"ga%*Fa!*&% &0 !he 7!('/:
The pre)ent )tudy ha) been cla))i-ied into -our chapter) a) per con,enience
and a,ailability o- data. They are a) -ollow)6
$. Introduction
-. =ro-ile o- the or*ani;ation
3. Mer*er) and Ac<ui)ition) 2 Analy)i)
9. #onclu)ion) and Su**e)tion)
The -ir)t chapter deal) with Introduction o- the )tudy. It include) theoretical
a)pect) o- de-inition rea)on) -or Mer*er) and A+al*a+ation)( accountin*
a)pect)( I))ue) and #oncern) o- Mer*er) and Ac<ui)ition) o- Indian
co+panie). A re,iew o- literature i) al)o pre)ented. Other a)pect) included are
objecti,e)( i+portance( )cope o- the )tudy etc.
The )econd chapter pre)ent) a brie- pro-ile o- the or*ani;ation % The
AAAA Binance &i+ited. The third chapter i) the core o- the pre)ent project the
co++on pit-all) and re+edie) in M " A are pre)ented. It i) cla))i-ied into -our
)ection) -or con,enience )ake. Section A deal) with an e,aluation o- the M " A in
the bankin* indu)try. Section C( # and D deal) with the M " A in
phar+aceutical( )teel and ce+ent )ector) re)pecti,ely.
11
T>E BASICS OF MERGERS AND ACQUISITIONS
The Ma*% I'ea:
One plu) one +ake) three6 thi) e<uation i) the )pecial alche+y o- a +er*er or
Ac<ui)ition. The key principle behind buyin* a co+pany i) to create )hareholder
Galue o,er and abo,e that o- the )u+ o- the two co+panie). Two co+panie) to*ether
are +ore ,aluable than two )eparate co+panie) 2 at lea)t( that0) the rea)onin* behind
Mer*er) and Ac<ui)ition).
Thi) rationale i) particularly allurin* to co+panie) when ti+e) are tou*h. Stron*
co+panie) will act to buy other co+panie) to create a +ore co+petiti,e( co)t%E--icient
co+pany. The co+panie) will co+e to*ether hopin* to *ain a *reater +arket Share or
achie,e *reater e--iciency. Cecau)e o- the)e potential bene-it)( tar*et #o+panie) will o-ten
a*ree to be purcha)ed when they know cannot )ur,i,e alone.
DEFINING MERGERS AND ACQUISITIONS
The phra)e Mergers and Acquisitions or M & A re-er) to the a)pect o- corporate
Binance )trate*y and +ana*e+ent dealin* with the +er*in* and ac<uirin* o- di--erent
#o+panie) a) well a) other a))et). U)ually +er*er) occur in a -riendly )ettin* where
E5ecuti,e) -ro+ the re)pecti,e co+panie) participate in a due dili*ence proce)) to En)ure a
)ucce))-ul co+bination o- all part). On other occa)ion)( ac<ui)ition) can happen throu*h
ho)tile take o,er by purcha)in* the +ajority o- out)tandin* )hare) o- a co+pany in the open
)tock +arket.
Merger can be de-ined a) a proce)). Thi) in,ol,e) a tran)action that co+bine) two
Bir+) into one new -ir+. An Acquisition i) the purcha)e o- one -ir+ by another -ir+. !rowth
i) an e))ential in*redient to the )ucce)). !rowth can be either internal or e5ternal. Internal
*rowth i) when co+pany ac<uire) )peci-ic a))et) and -inance) the+ by the retention o-
earnin*. E5ternal *rowth in,ol,e) the ac<ui)ition o- another #o+pany. In principle( *rowth
by ac<uirin* another co+pany i) little di--erent -ro+ !rowth by ac<uirin* )peci-ic a))et).
A +er*er re-er) to a co+bination o- two or +ore co+panie) into one co+pany. It +ay
in,ol,e ab)orption or con)olidation. In ab)orption( one co+pany ac<uire) another co+pany.
13
E5a+ple6 A)hok &eyland &td ab)orbed Ductnon #a)tin*) &td. In a con)olidation( two or
+ore co+panie) co+bine to -or+ a new co+pany. E5a+ple6 Dindu)tan #o. &td and Indian
epro*raphic) &td. #o+bined to -or+ D#& &i+ited.
In India( +er*er) called a+al*a+ation) in le*al i+portance are u)ually o- the Ab)orption
,ariety. The ac<uirin* co+pany Hal)o re-erred to a) the a+al*a+ated #o+pany or the
+er*ed co+panyI ac<uire) the a))et) and liabilitie) o- the ac<uired #o+pany Hal)o re-erred
to a) the a+al*a+atin* co+pany or the +er*in* co+pany or The tar*et co+panyI.
Typically( the )hareholder) o- the a+al*a+atin* co+pany in E5chan*e -or their )hare) in the
a+al*a+atin* co+pany.
A takeo,er *enerally in,ol,e) the ac<ui)ition) o- a certain block o- e<uity capital O- a
co+pany which enable) the ac<uire) to e5erci)e control o,er the a--air) o- the #o+pany. In
theory( the ac<uirer +u)t buy +ore than @: percent o- the paid%up E<uity o- the ac<uired
co+pany to enjoy co+plete control. In practice( howe,er( E--ecti,e control can be e5erci)ed
with a )+aller holdin*( u)ually between 3: and 7: percent( becau)e the re+ainin*
)hareholder)( )cattered and ill%or*ani;ed. Are not likely to challen*e the control o- the
ac<uirer.
DISTINCTION BETGEEN MERGERS AND ACQUISITIONS:

Althou*h they are o-ten uttered in the )a+e breathe and u)ed a) thou*h they were
)ynony+ou)( the ter+) “+er*er' and “ac<ui)ition' +ean )li*htly di--erent Thin*).
>hen a co+pany take) o,er another one and clearly beco+e) the new owner( the
purcha)e i) called an Ac<ui)ition. Bro+ a le*al point o- ,iew( the tar*et co+pany cea)e) to
e5i)t and the buyer “)wallow' the bu)ine))( and )tock o- the buyer #ontinue) to be traded.
In the pure )en)e o- the ter+ A +er*er happen) when two -ir+)( o-ten about the Sa+e
)i;e( a*ree to *o -orward a) a new )in*le co+pany rather than re+ain )eparately Owned and
operated. Thi) kind o- action i) +ore preci)ely re-erred to a) a “+er*er o- E<ual)'. Coth
co+panie) )tock are )urrendered( and new co+pany )tock i) i))ued in It) place. Bor e5a+ple(
both Dai+ler #hry)ler wa) created.
14
In practice( howe,er( actual +er*er) o- e<ual) do not happen ,ery o-ten. O-ten( one
co+pany will buy another and( a) part o- the deal) ter+)( )i+ply allow the Ac<uired -ir+ to
proclai+ that the action i) a +er*er o- e<ual( e,en i- it0) technically an ac<ui)ition. Cein*
bou*ht out o-ten carrie) ne*ati,e connotation. Cy u)in* the ter+ “Mer*er' Deal +aker) and
top +ana*er) try to +ake the take o,er +ore palatable.
A purcha)e deal will al)o be called a) +er*er when both #EO) a*ree that joinin*
To*ether in bu)ine)) i) in the be)t intere)t) o- both their co+panie). Cut when the deal i)
un-riendly 2 that i)( when the tar*et co+pany doe) not want to be purcha)ed it i) alway)
re*arded a) an ac<ui)ition.
So( whether a purcha)e i) con)idered a +er*er or an ac<ui)ition really depend) on
whether the purcha)e i) -riendly or ho)tile and how it i) announced. In other word)( the real
di--erence lie) in how the purcha)e i) co++unicated to and recei,ed by the Tar*et
#o+pany0) board o- director)( e+ployee) and )hareholder).
TYPES OF MERGERS AND ACQUISITIONS:
U7(a11/ !h"ee '*00e"e%! !/e7 &0 M : A a"e
i. Strate*ic
ii. Binancial
iii. #on*lo+erate
*. S!"a!eg*) ($2H3-$H+9)
Mo)t o- the +er*er) durin* 1JE4%1E:7 could be cla))i-ied a) )trate*ic +er*er). Thi)
wa) al)o the ca)e durin* the period leadin* up to the *reat depre))ion. A Strate*ic
ac<ui)ition in,ol,e) operatin* )yner*ie) i.e. two -ir+) are +ore =ro-itable co+bined
than )eparate. A*ain in 1EE:0) )uch ac<ui)ition )tarted Do+inatin*.
17
**. F*%a%)*a1
The bidder u)ually belie,e) that the price o- the -ir+0) )tock i) le)) than the Galue o-
the -ir+0) a))et). Such ac<ui)ition) declined )ince the late 1EJ:0) ?ohl ber* ?ra,i)
and obert0) le,era*ed buyout o- F Nabi)co i) a well%?nown e5a+ple.
***. C&%g1&.e"a!e I D*6e"7*0/*%g
#on*lo+erate in,ol,e) -ir+) with no apparent potential -or operatin* )yner*ie). A
nu+ber o- lar*e ,). corporation were built up in the 1E8 throu*h con*lo+%Erate
ac<ui)ition). =ro-it had been )haken by political ri)k. Such a) the Nationali;ation o-
ITT0S HInternational Telephone and Tele*raphI telephone Sy)te+ in #uba( the #EO(
Darold !eneen( reco++ended in an internal Docu+ent in 1E84 that ITT adopt a
policy o- ac<uirin* U.S. #o+pany. The Bir)t +ajor purcha)e by ITT wa) A,i)
entacat( which wa) -ollowed by both Ci* and )+all na+e. Mo)t o- the +er*er) in
the United State) durin* 1E@( 1E8 and 1E9 were con*lo+erate.
AARIETIES OF MERGERS:
Bro+ the per)pecti,e o- bu)ine)) )tructure)( there are a whole ho)t o- di--erent
Mer*er). The -ollowin* are a -ew type)( di)tin*ui)hed by the relation)hip between The two
co+panie) that are +er*in*.
• >&"*F&%!a1 Me"ge": Two co+panie) that are in direct co+petition in the Sa+e
product line) and +arket).
• Ae"!*)a1 Me"ge": A cu)to+er and co+pany or a )upplier) and co+pany -or E5a+ple
-ro+ a cone )upplier to an ice crea+ +ark.
• Ma"?e! # eC!e%7*&% Me"ge": Two co+panie) that )ell the )a+e product) in
Di--erent +arket).
• P"&'()! # eC!e%7*&% Me"ge": Two co+panie) )ellin* di--erent but related =roduct)
in the )a+e +arket.
1@
• C&%g1&.e"a!*&%: Two co+panie) that ha,e no co++on bu)ine)) area. Bro+ the
per)pecti,e o- how the +er*er and con)olidation +er*er). Each ha) certain
i+plication -or the co+panie) in,ol,ed and -or in,e)tor)
P(")ha7e Me"ge"7:
A) the na+e )u**e)t( thi) kind o- +er*er occur) when one co+pany purcha)e)
Another one. The purcha)e i) +ade by ca)h or throu*h the i))ue o- )o+e kind o- debt
In)tru+ent( and the )ale i) ta5able.
Ac<uirin* co+panie) o-ten pre-er thi) type o- +er*er becau)e it can pro,ide the+ >ith a
ta5 bene-it. Ac<uire a))et) can be “written%up'. To the actual purcha)e price( and the a))et)
can depreciate annually( reducin* ta5e) payable by the ac<uirin* #o+pany.
C&%7&1*'a!*&% Me"ge"7:
>ith thi) +er*er( a brand new co+pany i) -or+ed and both co+panie) are brou*ht
And co+bined under the new entity. The ta5 ter+) are the )a+e a) tho)e o- a purcha)e
Mer*er.
TYPES I FORMS OF TAEEOAERS:
Unlike all Mer*er)( all ac<ui)ition) in,ol,e one -ir+ purcha)in* another 2 there i) No
e5chan*in* o- )tock or con)olidation a) a new co+pany. Ac<ui)ition) are o-ten #on*enial(
will all partie) -eelin* )ati)-y with the deal. Other -ir+)( ac<ui)ition) are More ho)tile.
In an ac<ui)ition( a) in )o+e o- the +er*er deal)( a co+pany can buy another with #a)h(
with )tock( or a co+bination o- the two. Another po))ibility( which i) co++on in )+aller
deal)( i) -or one co+pany to ac<uire all the a))et) o- another co+pany. #o+pany A buy) all
o- co+pany Y0) a))et) -or ca)h( which +ean) that co+pany Y will ha,e only ca)h Hand debt(
i- they had debt be-oreI. O- cour)e( co+pany Y Ceco+e) +erely a )hell and will e,entually
li<uidate or enter another area o- bu)ine)).
Another type o- ac<ui)ition i) a re,er)e +er*er a deal that enable) a pri,ate #o+pany to
*et publicly li)ted in a relati,ely )hort period. A re,er)e +er*er occur) >hen a pri,ate
co+pany that ha) )tron* pro)pectu) and i) ea*er to rai)e -inancin* Cuy) li+ited a))et). The
18
pri,ate co+pany re,er)e) +er*er) into the public co+pany( And to*ether they beco+e an
entirely new public corporation with tradable )hare).
A !a?e &6e" .a/ 4e '&%e !h"&(gh !he 0&11&;*%g ;a/7:
• Oe% Ma"?e! P(")ha7e:

The ac<uirer buy) the )hare) o- the li)ted co+pany in the )tock +arket. !enerally(
ho)tile takeo,er) are initiated in thi) +anner.
• Neg&!*a!e' I 0"*e%'1/ a)=(*7*!*&%:
The ac<uirer buy) )hare) o- the tar*et co+pany -ro+ one o- +ore e5i)tin*
Shareholder) who are likely to be pro+oter )hareholder)% in a ne*otiated tran)action.
• P"e0e"e%!*a1 a11&!.e%!:
The ac<uirer buy) )hare) o- the tar*et co+pany( throu*h a pre-erential Allot+ent o-
)take in the co+pany and al)o in-u)e) -und) into the co+pany.
• Ba*1 # &(! !a?e&6e"7:
A pro-it earnin* co+pany take) o,er a -inancially )ick co+pany to bail it out.
REASONS FOR MERGERS:
Cy +er*in*( the co+panie) hope to bene-it -ro+ the -ollowin*6
$. E)&%&.*e7 &0 7)a1e:
The operatin* co)t ad,anta*e in ter+) o- econo+ie) o- )cale i) con)idered to
be the pri+ary +oti,e o- +er*er)( in particular( -or hori;ontal and ,ertical +er*er).
They re)ult in lower a,era*e co)t o- production and )ale) due to hi*her le,el o-
Operation).
-. Econo+ie) to )cope6
19
A co+pany +ay u)e a )peci-ic )et o- )kill) or a))et) that it po))e))e) to u)e a Speci-ic
)et o- )kill) or a))et) that it po))e))e) to widen the )cope o- it) acti,itie). Bor e5a+ple(
=roctor and !a+ble can enjoy econo+ie) o- )cope o- it) acti,itie) a #on)u+er product
co+pany that bene-it) -ro+ it0) hi*hly con)u+er +arketin* Skill).
3. S/%e"g/:
Syner*y i) the +a*ic -orce that allow) -or enhanced co)t e--iciencie) o- the
New bu)ine)). Syner*y take) the -or+ o- re,enue enhance+ent and co)t )a,in*). Mo)t o-
the +er*er) )eek )yner*i)tic *ain) to both the ac<uirin* a) well a) the Tar*et -ir+).
S/%e"g/ ;&(1' 4e eC"e77e' a7 0&11&;7:
I% e00e)!8 7/%e"g/ *7 )"ea!e' a%' *7 &7*!*6e &%1/ ;he% !he 0&11&;*%g e=(a!*&% h&1'7
True6
G HAMCING HAI MG HCI
>here6 G HAMCI 6 Galue o- the co+bined -ir+
G HAI 6 Galue o- -ir+ A
G HCI 6 Galue o- -ir+ C
Al)o( +er*er and ac<ui)ition e--ect alon* all o- the abo,e con)ideration) )hould
al)o be po)iti,e( -ailin* which little )yner*ie) bene-it i) dee+ed to ha,e been *enerated. The
net e--ect o- )yner*y would be6
=o)iti,e % I- all or one o- the abo,e three happen.
Neutral % No chan*e o,er the )tand%alone po)ition.
Ne*ati,e % All or one o- the abo,e +ay happen in re,er)e direction.
9. Fa7! G"&;!h:
1J
Mer*er o-ten enable) the a+al*a+atin* -ir+ to *row at a rate -a)t than i) =o))ible
under internal e5pan)ion route ,ia it) own capital bud*etin* propo)al) Cecau)e the ac<uirin*
co+pany enter a new +arket <uickly( a,oid) the delay A))ociated with buildin* a new plant
and e)tabli)hin* the new line o- product.
<. TaC Be%e0*!7:
>hen a new -ir+ with accu+ulated lo))e) and/ or unab)orbed depreciation
Mer*er) with a pro-it 2 +akin* -ir+( it) accu+ulated lo))e) and / or unab)orbed
Depreciation can be )et o-- a*ain)t the pro-it) o- the pro-it 2 +akin* -ir+ and ta5 Cene-it)
can be <uickly reali;ed.
@. S!a00 Re'()!*&%:
A) e,ery e+ployee know)( +er*er tend) to +ean job lo))e). #on)ider all The
+oney )a,ed -ir+ reducin* the nu+ber o- )ta-- +e+ber) -ro+ accountin*( Marketin* and
other depart+ent)( Fob cut) will al)o include the -or+er #EO( who Typically lea,e) with a
co+pen)ation packa*e.
,. A)=(*"*%g Ne; Te)h%&1&g/:
To )tay co+petiti,e( co+panie) need to )tay on the top o- technolo*ical
De,elop+ent) and their bu)ine)) application). Cy buyin* a )+aller co+pany with Uni<ue
technolo*ie)( a lar*e co+pany can keen to de,elop a co+petiti,e ed*e.
2. I."&6e' Ma"?e! Rea)h a%' I%'(7!"/ A*7*4*1*!/:
#o+panie) buy co+panie) to reach new +arket) and *row re,enue) and Earnin*).
A +er*er +ay e5pand two co+panie) +arketin* and di)tribution( *i,in* The+ new )ale)
opportunitie). A +er*er can al)o i+pro,e a co+pany0) )tandin* in The in,e)t+ent
co++unityO bi**er -ir+ o-ten ha,e an ea)ier ti+e rai)in* capital Than )+aller one).
1E
H. E)&%&.*e7 &0 Ae"!*)a1 I%!eg"a!*&%:
>hen co+panie) e+er*ed at di--erent )ta*e) o- production o- ,alue chain Mer*e(
econo+ie) o- ,ertical inte*ration +ay be reali;ed. Bor e5a+ple( the +er*er O-
a co+pany en*a*ed in oil e5ploration and production Hlike ON!#I with a
#o+pany en*a*ed in re-inin* and +arketin* Hlike D=#&I +any i+pro,e
#oordination and control.
$+. C&.1e.e%!a"/ Re7&(")e7:
I- two -ir+) ha,e co+ple+entary re)ource)( it +ay take )en)e -or the+ to Mer*e. A
*ood e5a+ple o- a +er*er o- co+panie)( which co+ple+ented each other >ell( i) the +er*er
o- Crown Co,ery and A)ea that re)ulted in A)ea Crown Co,ery HACCI. Crown Co,ery wa)
international( wherea) A)ea wa) not. A)ea e5cellent in Mana*e+ent( wherea) Crown Co,ery
did not. Thetechnolo*y( +arket)( and culture) o- the two co+panie) -itted well.
$$. U!*1*Fa!*&% &0 S("1(7 F(%'7:
A -ir+ in a +ature indu)try +ay *enerate a lot o- ca)h but +ay not ha,e Opportunitie)
-or pro-itable in,e)t+ent( )uch a -ir+ ou*ht to di)tribute *enerou) Di,idend) and e,en buy
back it) )hare)( i- the )a+e i) po))ible. Dowe,er( +o)t Mana*e+ent0) ha,e a tendency to
+ake -urther in,e)t+ent)( e,en thou*h they +ay not be pro-itable. In )uch a )ituation( a
+er*er with another -ir+ in,ol,in* ca)h #o+pen)ation o-ten repre)ent) a +ore e--icient
utili;ation o- )urplu) -und).
$-. Ma%age"*a1 E00e)!*6e%e77:
One o- the potential *ain) o- +er*er i) an increa)e in +ana*erial e--ecti,ene)) thi) +ay
occur i- the e5i)tin* +ana*e+ent tea+( which i) per-or+in* poorly( i) replaced by a +ore
e--ecti,e +ana*e+ent tea+. O-ten a -ir+( pla*ued with Mana*erial inade<uacie)( can *ain
i++en)ely -ro+ the )uperior +ana*e+ent that i) &ikely to e+er*e a) a )e<uel to the +er*er.
Another allied bene-it o- +er*er +ay be in the -or+ o- *reater con*ruence between
the intere)t o- the +er*er) and the )hareholder).
3:
ACCOUNTING FOR AMALGAMATIONS
Accordin* to the accountin* )tandard 17HA)% 17I on accountin* -or A+al*a+ation)
i))ued by the in)titute o- #hartered Accountant) o- India( an A+al*a+ation can be in the
nature o- either unitin* o- intere)t( which i) re-erred To a) P a+al*a+ation in the nature o-
+er*er0 o- P ac<ui)ition0.
The condition) to be -ul-illed -or an a+al*a+ation to be treated a) an PA+al*a+ation
in the nature o- +er*er0 are a) -ollow)6
i. All a))et) and liabilitie) o- the tran)-eror co+pany be-ore a+al*a+ation
)hould beco+e the a))et) and liabilitie) o- the tran)-eree co+pany.
ii. Shareholder) holdin* not le)) than E: percent o- the -ace ,alue o- the
E<uity )hare) o- the tran)-er or co+pany He5cludin* the proportion held by the
tran)-eree co+panie)I )hould beco+e )hareholder) to the tran)-eree #o+pany.
iii. The con)ideration payable to the a-ore)aid )hareholder) )hould be
Di)char*er by the tran)-eree co+pany by i))ue o- e<uity )hare). #a)h can be paid in
re)pect o- -ractional )hare).
i,. The bu)ine)) co+pany intend) to incorporate i) intended to be carried on
by the tran)-eree co+pany.
31
,. The tran)-eree co+pany intend) to incorporate in it) balance )heet the
Cook ,alue) o- a))et) and liabilitie) o- the tran)-eror co+pany with any Adju)t+ent
e5cept to the e5tent needed to en)ure uni-or+ity o- accountin* =olicie). An
a+al*a+ation( which i) not in the nature o- a +er*er( i) treated A) and ac<ui)ition0.
The accountin* treat+ent o- an a+al*a+ation in the book) o- the tran)-eree #o+pany i)
dependent on the nature o- a+al*a+ation a) )tated abo,e. Bor a +er*er( The P=oolin* o-
Intere)t0 +ethod i) to be u)ed and -or an ac<ui)ition the P=urcha)e0 Method i) to be u)ed.
Under the P=oolin* o- Intere)t0 +ethod( the a))et) and liabilitie) o- the +er*in*
#o+panie) are a**re*ated. &ikewi)e( the re)er,e) appearin* in the balance into the Calance
)heet o- the tran)-er co+pany. The di--erence in capital on account o- the Share )wap ratio
He5chan*e ratioI i) adju)ted in the re)er,e).
Under the P=urcha)e0 +ethod)( the a))et) and out)ide liabilitie) o- the tran)-eror #o+pany
are carried into the book) o- the tran)-eree con)ideration and the net book Galue o- a))et)
o,er liabilitie) i) treated a) P !oodwill0 that ha) to be a+orti;ed o,er a period not e5ceedin*
-i,e year). Should the purcha)e con)ideration be le)) than the net book ,alue o- a))et) o,er
liabilitie)( the di--erence i) )hown a) P#apital e)er,e0.
Since there i) o-ten an a))et write%up a) )o+e *oodwill( the reported pro-it under the
purcha)e +ethod i) lower becau)e o- hi*her depreciation chan*e a) well a) A+orti;ation o-
*oodwill
AALUATION MATTERS:
In,e)tor) in a co+pany that i) ai+in* to takeo,er another one +u)t deter+ine whether
the purcha)e will be bene-icial to the+. In order to do )o( they +u)t a)k the+)el,e) how
+uch the co+pany bein* ac<uired i) really worth.
Naturally( both )ide) o- an M " A deal will ha,e di--erent idea) about the worth o- a
tar*et co+pany( it) )eller will tend to ,alue the co+pany a) hi*h a) po))ible( while the buyer
will try to *et the lowe)t price po))ible.
33
There are howe,er( +any le*iti+ate way) to ,alue co+panie). The +o)t co++on
Method i) to look at co+parable co+panie) in an indu)try( but deal +aker) e+ploy a ,ariety
o- other +ethod) and tool) when a))e))in* a tar*et co+pany. Dence are ju)t -ew o- the+6
$) C&.a"a!*6e Ra!*&7:
The -ollowin* are two e5a+ple) o- the +any co+parati,e +etric) on which
Ac<uirer) +ay ba)e their o--er)6
• PIE (P"*)e-!&-Ea"%*%g7) Ra!*&:
>ith the u)e o- thi) ratio( an ac<uirer +ake) an o--er a) a +ultiple o- the Earnin*) the
tar*et co+pany i) producin*. &ookin* at the =/E -or all the )tock) within the )a+e
indu)try *roup will *i,e the ac<uirer *ood *uidance -or what the tar*et0) =/E +ultiple
)hould be.
• EIA Sa1e7 (E%!e""*7e # 6a1(e # !& # Sa1e7 Ra!*& &" P"*)e # !& # Sa1e7)
Ra!*&:
>ith thi) ratio( the ac<uirin* co+pany +ake) an o--er a) a +ultiple o- the
e,enue)a*ain. >hile bein* aware o- the =/S ratio o- other co+panie) in the
indu)try.
-) Re1a)e.e%! C&7!: In a -ew ca)e)( ac<ui)ition) are ba)ed on the co)t o- eplacin*
the tar*et co+pany. Bor )i+plicity0) )ake( )uppo)e the ,alue o- a create i) )i+ply the
)u+ o- all it) e<uip+ent and )ta--in* co)t). The Ac<uirin* #o+pany can literally
order the tar*et to )ell at that price( or it will create a co+petitor -or the )a+e co)t.
Naturally( it take) a lon* ti+e to a))e+ble *ood +ana*e+ent( ac<uire property
and *et the ri*ht E<uip+ent. Thi) +ethod o- e)tabli)hin* a price certainly wouldn0t
34
+ake +uch )en)e in a )er,ice indu)try where the key a))et) 2 people 2 are Dard to
,alue and de,elop.
3) D*7)&(%!e' Ca7h F1&; (DCF): A key ,aluation tool in M " A di)counted #a)h
-low analy)i) deter+ine) a co+pany0) current ,alue) accordin* to it) e)ti+ated -uture
ca)h -low). Boreca)ted -ree ca)h -low) Hoperatin* pro-it M Depreciation M
a+orti;ation o- *oodwill 2 capital e5penditure) 2 ca)h ta5e) % #han*e in workin*
capitalI are di)counted to a pre)ent ,alue u)in* the #o+pany0) wei*hted a,era*e
co)t) o- capital H>A##I.
S/%e"g/: The P"e.*(. 0&" P&!e%!*a1 S())e77
Bor the +o)t part( ac<uirin* nearly alway) pay a )ub)tantial pre+iu+ on the )tock +arket
,alue o- the co+panie) they buy. The ju)ti-ication -or doin* )o nearly alway) boil) to the
notion o- )yner*y. A +er*er bene-it) )hareholder) when a co+pany0) po)t%+er*er )hare price
increa)e) by the ,alue o- potential )yner*y.
It would be hi*hly unlikely -or rational owner) to )ell i- they would bene-it +ore by
not )ellin*. That +ean) buyer) will need to pay a pre+iu+ i- they hope
ac<uire the co+pany( re*ardle)) o- what pre%+er*er ,aluation tell) the+. Bor
)eller)( that pre+iu+ repre)ent) their co+pany0) -uture pro)pect). Bor
buyer)( the pre+iu+ repre)ent) part o- the +er*er )yner*y they e5pect can
be achie,ed. The -ollowin* e<uation o--er) a *ood way to think about
)yner*y and how to deter+ine i- a deal +ake) )en)e. The e<uation )ol,e) -or
the +ini+u+ re<uired )yner*y.
P"e-Me"ge" Aa1(e &0 B&!h F*".7 J 7/%e"g/ K P"e # Me"ge" S!&)? P"*)e P&7! # Me"ge"
N(.4e" &0 Sha"e7
In other word)( the )ucce)) o- a +er*er i) +ea)ured by whether the ,alue o- the
buyer i) enhanced by the action. Dowe,er( the practical con)traint) o- +er*er o-ten pre,ent
the e5pected bene-it) -ro+ bein* -ully achie,ed
Gha! !& L&&? F&"
37
It0) hard -or in,e)tor) to know when a deal i) worthwhile. The burden o- a proo- )hould
-all on the ac<uirin* co+pany. To -ind +er*er) that ha,e a chance o- )ucce))( in,e)tor)
)hould )tart by lookin* -or )a+e o- the)e criteria6
• A Rea7&%a41e P(")ha7e P"*)e: A pre+iu+ o- )ay( 1:K abo,e the +arket price
)ee+) within the bound) o- le,el headedne)). A pre+iu+ o- @: K( on the other hand(
re<uire) )yner*y o- )tellar proportion) -or the deal to +ake )en)e. The in,e)tor)
)hould )tay away -ro+ co+panie) that participate in )uch content).
• Ca7h !"a%7a)!*&%: #o+panie) that pay in ca)h tend to be +ore care-ul when
calculatin* bid)( and ,aluation) co+e clo)er to tar*et. >hen )tock i) u)ed a) the
currency -or ac<ui)ition( di)cipline can *o by the way )ide.
• Se%7*41e Ae!*!e: An ac<uirin* co+pany )hould be tar*etin* a co+pany that i)
)+aller or in bu)ine)) that the ac<uirin* co+pany know) inti+ately. Syner*y i) hard
to create -ro+ co+panie) in di)parate bu)ine)) area).
Mer*er) are aw-ully hard to *et ri*ht( )o in,e)tor) )hould look -or ac<uirin* co+panie)
with a healthy *ra)p o- reality.
In other word)( the )ucce)) o- a +er*er i) +ea)ured by whether the ,alue o- the buyer i)
enhanced by the action. Dowe,er( the practical con)traint) o- +er*er )o-ten pre,ent the
e5pected bene-it) -ro+ bein* -ully achie,ed
D&*%g !he Dea1
S!a"! ;*!h a% O00e":
>hen the #EO and top +ana*er) o- a co+pany decide that they want to do a
+er*er or ac<ui)ition( that )tart with a tender o--er. The proce)) be*in) with the ac<uirin*
3@
co+pany care-ully and di)creetly buyin* up )hare) in the tar*et co+pany( or buildin* a
po)ition. One o- the ac<uirin* co+panie) )tart) to purcha)e )hare) in the open +arket( it
i) re)tricted to buyin* @K o- the total out )tandin* )hare) be-ore it +u)t -ile with the
SE#. In the -ilin*( the co+pany +u)t -or+ally declare how +any )hare) it) own) and
whether it intend) to buy the co+pany o- keep the )hare) purely a) an in,e)t+ent.
>orkin* with -inancial ad,i)or) and in,e)t+ent banker)( the ac<uirin* co+pany
will arri,e at and o,erall price that it0) wilin* to pay -or it) tar*et in ca)h( )hare) or both. The
tender o--er) i) then -re<uently ad,erti)ed in the bu)ine)) pre))( )tatin* the o--er price and
the deadline by which the )hareholder) in the tar*et co+pany +u)t accept Hor rejectIit.
The Ta"ge!L7 Re7&%7e: Once the tender o--er ha) been +ade( the tar*et co+pany can do
one o- )e,eral thin*).
• A))e! !he Te".7 &0 !he O00e": I- the tar*et -ir+0) top +ana*er) and
)hareholder) are happy with the ter+) o- the tran)action( they will *o ahead with the
deal.
• A!!e.! !& %eg&!*a!e: The tender o--er price +ay not be hi*h enou*h -or the
Tar*et co+pany0) )hareholder) to accept( or the )peci-ic ter+) o- the deal +ay not be
attracti,e. In a +er*er( there +ay be +uch at )take -or the +ana*e+ent o- the tar*et 2
their job) in particular. I- they are not )ati)-ied with the ter+) laid out in the tender
o--er( the tar*et0) +ana*e+ent +ay try to work out +ore a*reeable ter+) that let the+
keep their job) or( e,en better( )end the+ with a nice( bi* co+pen)ation packa*e.
Not )urpri)in*ly( hi*hly )ou*ht o--er tar*et co+panie) that are object o- )e,eral
bidder) will ha,e *reater latitude -or ne*otiation. Burther +ore( +ana*er ha,e
+ore ne*otiatin* power i- they can )how that they are crucial to the +er*er0)
-uture )ucce)).
• ECe)(!e a P&*7&% P*11 &" S&.e O!he" >&7!*1e Ta?e&6e" De0e%7e:
38
A poi)on pill )che+e can be tri**ered by a tar*et co+pany which a ho)tile )uitor ac<uire)
a predeter+ined percenta*e o- co+pany )tock. To e5ecute it) de-en)e( the tar*et co+pany
*rant) all )hareholder) e5cept the ac<uirin* co+pany0) )hare and intercept) it) control o- the
co+pany.
F*%' a Gh*!e E%*gh!:
A) an alternati,e( the tar*et co+pany0) +ana*e+ent +ay )eek out o- -riendlier potential
ac<uirin* co+pany( or white kni*ht. I- a white kni*ht i) -ound( it will o--er an e<ual or hi*her
price -or the )hare) than the ho)tile bidder.
Mer*er) and ac<ui)ition) can -ace )crutiny -ro+ re*ulatory bodie). Bor e5( the two
bi**e)t lon* di)tance co+panie) in the U.S... AT " T and Sprint( wanted to +er*e( the deal
would re<uire appro,al -ro+ the Bederal #o++unication #o++i))ion HB##I. The B##
would probably re*ard a +er*er o- the two *ain) a) the creation o- a +onopoly or( at the ,ery
lea)t( a threat to co+petition in the indu)try.
C1&7*%g !he Dea1:
Binally( once the tar*et co+pany a**re)) to the tender o--er and re*ulatory
re<uire+ent) are +et( the +er*er deal will be e5ecuted by +ean) o- )o+e tran)action. In a
+er*er in which a co+pany buy) another the ac<uirin* co+pany0) will pay -or the tar*et
co+pany0) )hare) with ca)h( )tock or both.
BREAE # UPS
A7 .e"ge"7 )a!("e !he *.ag*%a!*&% &0 .a%/ *%6e7!&"7 a%' )&.a%*e78 !he *'ea
o- the *ettin* )+aller +i*ht )ee+ counterintuiti,e. Cut corporate break%up) or de%+er*er)
can be ,ery attracti,e option) -or co+panie) and their )hareholder).
A de%+er*er re)ult) in the tran)-er by a co+pany o- the one or +ore o- it) undertakin*) to
another co+pany. The co+pany who)e undertakin* i) tran)-erred i) called the de%+er*ed
co+pany and the co+pany Hor the co+panie)I to which the undertakin*) i) tran)-erred i)
re-erred to a) the re)ultin* co+pany.
A'6a%!age7:
39
1I The rationale behind a )pin o--( trackin* )tock( or car,e 2 out i) that “the part) are
*rater than the whole'. The)e corporate re)tructurin* techni<ue) which in,ol,e the
)eparation o- a bu)ine)) unit o r )ub)idiary -ro+ the parent can help a co+pany
rai)e additional e<uity -und).
3I A break%up can all boo)t a co+pany0) ,aluation by pro,idin* power-ul
incenti,e) to the people who work in the )eparatin* unit( and help +ana*e+ent
o- the parent -ocu) on core operation).
4I Shareholder) *et better in-or+ation about the bu)ine)) unit becau)e it
i))ue) )eparate -inancial )tate+ent). Thi) i) particularly u)e-ul when a co+pany0)
traditional line o- bu)ine)) di--er) -ro+ the )eparated bu)ine)) unit).
7I >ith )eparate -inancial di)clo)ure( in,e)tor) are better e<uipped to *au*e the ,alue
o- the parent corporation. The parent co+pany +i*ht attract +ore in,e)tor) and
ulti+ately +ore capital.
@I Al)o( )eparatin* a )ub)idiary -ro+ it) parent can reduce internal co+petition -ro+
corporate -und). Bor in,e)tor)( that0) *reat new)6 it curb) the kind o- ne*ati,e internal
wran*lin* that can co+pri)e the unity and producti,ity o- a co+pany.
8I Bor e+ployee) o- the new )eparate entity( there i) a publicly traded )tock to
+oti,ate and reward the+. Stock option) in the parent o-ten pro,ide little incenti,e to
)ub)idiary +ana*er)( e)pecially )ince their e--ort) are buried in the o,erall -ir+
per-or+ance.
D*7a'6a%!age7:
1I De%+er*ed -ir+) are likely to be )ub)tantially )+aller than their parent)( po))ibly
+akin* it harder to tap credit +arket) and co)tlier -inance that +ay be a--ordable only
-or lar*er co+panie).
3I The )+aller )i;e o- the -ir+ +ay +ean it ha) le)) repre)entation on +ajor inde5e)(
+akin* it +ore di--icult to attract intere)t -ro+ in)titutional in,e)tor).
3J
4I There are e5tra co)t) that the part o- the bu)ine)) -ace i- )eparated. >hen a -ir+
di,ide) it)el- into )+aller unit)( it +ay be lo)in* the )yner*y that it had a) a lar*er
entity. Bor in)tance( the di,i)ion o- e5pen)e) )uch a) +arketin*( ad+ini)tration and
" D into di--erent bu)ine)) unit) +ay cau)e redundan co)t) without increa)in* o,erall
re,enue).
Re7!"()!("*%g Me!h&'7
There are )e,eral re)tructurin* +ethod)6 doin* an outri*ht )ell o--( doin* an e<uity
car,e 2 out( )pinnin* o-- a unit to e5i)tin* )hareholder)( or i))uin* trackin* )tock. Each ha)
ad,anta*e) and di)ad,anta*e) -or co+panie) and in,e)tor). All o- the)e deal) are <uite
co+ple5.
Se11 # O007:
A )ell 2 o--( al)o known a) a di,e)titure( i) the outri*ht )ale o- a co+pany )ub)idiary.
Nor+ally( )ell 2 o--) are done becau)e the )ub)idiary doe)n0t -it into the parent co+pany0)
core )trate*y. The +arket +ay be under,aluin* the co+bined bu)ine))e) due to a lack o-
)yner*y between the parent and )ub)idiary. Mana*e+ent and the board there-ore decide that
the )ub)idiary i) better o-- under di--erent owner)hip.
E=(*!/ Ca"6e # O(!7:
In e<uity car,e out( a parent co+pany )ell) a portion o- it) e<uity in a wholly owned
)ub)idiary. A )ale +ay be to the *eneral in,e)tin* public or to a )trate*ic in,e)tor. E<uity
car,e) out) undertaken to brin* ca)h to the parent and to induct a )trate*ic in,e)tor in a
)ub)idiary.
S*% # &007
3E
In a )pin 2 o-- an undertakin* or di,i)ion o- a co+pany i) )pun o-- into an
independent co+pany. A-ter the )pin o--( the parent co+pany and the )pun o-- co+pany are
)eparate corporate entitie). Bor e5a+ple( the In-or+ation Technolo*y Di,i)ion o- >I=O
li+ited wa) )pun o-- a) a )eparate co+pany in the late 1EJ. HIn the late 1EE( howe,er( it
wa) +er*ed back into the parent co+panyI
S1*! # (
In a )plit 2 up( a co+pany i) )plit 2 up into two or +ore independent co+panie). A) a
)e<uel( the parent co+pany di)appear) a) a corporate entity and in it) place two or +ore
independent co+panie). A) a )e<uel( the parent co+pany di)appear) a) a corporate entity
and in it) place two or +ore co+panie) e+er*e. Bor e5a+ple( )eparate co+panie)( ,i;.(
the New Ah+edabad Ad,ance Mill) and the Tata Metal Strip).
MERGERS AND ACQUISITIONS OF INDIAN COMPANIES:
ISSUES AND CONCERNS
A decade into the ern o- &=!( +ore co+panie) in the corporate )ector -ace a
wild jun*le like )ituation with -ierce co+petition -or )ur,i,al. A lot o- debate i) *oin* on
about the +er*er proce)). The po)t 2 +er*er )cenario in the ca)e o- two or*ani;ation)
*enerate) )e,eral i))ue). The )ta-- o- both the or*ani;ation )it) )ide % by 2 )ide and work
to*ether. The book)( re*i)ter) and product) o- one or*ani;ation are likely to be di)carded
totally. The )y)te+) and procedure) o- one or*ani;ation Hab)orbin* co+panyI ha,e to be
i+bibed by the )ta-- o- another H+er*in*I co+pany. The phy)ical and p)ycholo*ical )tre))
i) not +ini+al in the proce)) o- +er*er.
The I%*!*a1 Q(e7!*&%
>hen one think) o- +er*er o- two co+panie)( the initial <ue)tion one -ace) in
when an Indian co+pany i) ha,in* hi*h percenta*e o- lo))( i) it nece))ary or bene-icial to
think o- +er*erQ It +ay not be pro-itable to +er*er co+panie) when the +er*in*
co+panie) are pla*ued with hea,y lo)). The reco,ery proceedin*) / +ay be a--ected i-
the co+panie) are +er*ed.
4:
I77(e7 I%6&16e'
The i))ue) in,ol,ed relatin* to the preparatory and the po)t%+er*er )ta*e) are
brie-ly outlined in the -ollowin* para*raph). They are cate*ori;ed under -our head).

1. I))ue) relatin* to per)onnel
3. I))ue) relatin* to +aterial
4. I))ue) relatin* to +ana*e+ent
7. Other i))ue)
$. I77(e7 Re1a!*%g !& Pe"7&%%e1
There are two issues to personal
a) C&%01*)! a.&%g T"a'e U%*&%7 &0 T;& C&.a%*e7:
It i) co++on in India that the )ta-- o- e,ery co+pany beco+e) +e+ber) o-
or 4 union)( which are in turn a--iliated to )o+e political party or other. There are )e,eral
hierarchical po)t) enjoyed by the o--ice bearer) o- the)e union). The power and )upre+acy
enjoyed by each leader within hi) co+pany ,arie). >hen two co+panie) +er*er( naturally(
there i) a po))ibility -or power )tru**le a+on* the leader) the+)el,e). In the proce))( it i)
likely that the intere)t) o- the +e+ber *o unprotected.
4) T"a*%*%g C&7!:
In order to )ucce))-ully run the corporation( e,ery corporation would ha,e to
)pend enor+ou) a+ount) in -a+iliari;in* the )y)te+) and procedure) o- it) )ta--. Once the
+er*er take) place( )ta-- o- both corporation) )u--er) under the new )y)te+. The )ta-- o-
ab)orbin* corporation need) to know brie-ly about the procedure o- the +er*in* corporation.
The )ta-- o- +er*in* corporation need) to know e,erythin* about the ab)orbin* corporation.
A) the )ta--) o- both corporation) ha,e to be trained( that too in the )horte)t po))ible ti+e(
41
there will be enor+ou) pre))ure on the trainin* )y)te+ and the new +ana*e+ent. Thi)
proce)) would in,ol,e enor+ou) co)t and )train to the )ta--.
-. I77(e7 Re1a!*%g !& Ma!e"*a1:
I77(e7L "e1a!*%g !& .a!e"*a1 *%)1('e7.
a) Cha%ge &0 7/7!e. a%' "&)e'("e7:
Each corporation ha) it) own )y)te+ and procedure) de,eloped and i+pro,ed o,er
a period o- ti+e. It would ha,e already in,e)ted )e,eral crore) o- rupee) and +an hor) in
publi)hin* the book) o- in)truction o- -a+iliari;in* the+ to all the operatin* )ta--. >hen
the +er*er o- two corporation) take) place. E+ployee) and )uper,i)or) o- the corporation
e)pecially -ro+ the +er*in* corporation -ace utter con-u)ion. Burther( chan*e o- the a*e%
old e)tabli)hed practice) will not be reli)hed nor the new )y)te+) ea)ily under)tood by the
e+ployee).
4) S/%)h"&%*Fa!*&% &0 L&%g7!a%'*%g S/7!e. Ge%e"a11/:
E,ery corporation would ha,e traditionally )tabili;ed in a particular )y)te+ o-
Bunctionin* or accountin*. A-ter +er*er o- two corporation)( a need +ay ari)e to Modi-y
the lon*)tandin* )y)te+ in the ab)orbin* corporation to )ynchroni;e with The need o- the
new en,iron+ent. So( the ab)orbin* corporation +ay co+e acro)) a )ituation which it had not
encountered earlier.
)) Ga7!e &0 C&.a%/ # Se)*0*) Te)h%&1&g/:
A) a re)ult o- increa)in* need) o- cu)to+er)( co+puteri;ation ha) already taken
=lace to a )i*ni-icant e5tent in each co+pany. Each co+pany would ha,e paid Du*e )u+) a)
royalty and )pent )e,eral +an hour) in *ettin* )uitable )o-tware De,eloped -or the )peci-ic
accountin* need) o- the co+pany -ro+ a particular ,endor. I- and when two co+panie) need
to be +er*ed( all the +oney and &abor )pent by one co+pany would *o a total wa)te becau)e
o- the likely Inco+patibility o- the two )eparate )o-tware0) o- the +er*in* co+panie).
') A''*!*&%a1 O6e"hea'7 C&7!:
At any point o- ti+e( all co+panie) +aintain -i5ed a))et)( )ecurity -or+ and
43
Stationery worth )e,eral core) o- rupee) -or )+ooth -unctionin* o- their branch O--icer or
di,i)ion o--ice located at )e,eral place). A) a re)ult o- +er*er( the =rinted )tationery
lyin* with +er*in* co+pany +ay turn out to be unu)able.
Coth co+panie) a-ter a -inal deci)ion re*ardin* +er*er i) taken( will )pend Si;eable )u+)
and ,aluable ti+e/+anpower in ob)er,in* the -or+alitie) related to +er*er. Burther( they
need to co++unicate or publici;e about +er*er propo)al >ith a ,iew to *ettin* the con)ent
o- their )hareholder). Coth co+panie) need to In-or+ and educate their cu)to+er). Se,eral
le*al -or+alitie)( in,ol,in* )ta+p And procedural ha))le)( ha,e to be tackled. Thi) proble+
ulti+ately lead to E)calation o- co)t.
3. I77(e7 Re1a!*%g !& Ma%age.e%!:
The7e *%)1('e
a) A"ehe%7*&% &0 T& Le6e1 S!a00:
A-ter +er*er( e*o cla)he) +ay ari)e at the top +ana*e+ent o- the co+panie). In
thi) proce))( co+pany and cu)to+er) +ay not be drawin* the be)t out o- the
talent/e5perience lyin* in the two !eneral Mana*er).
4) Re1()!a%)e &0 Sha"eh&1'e"7:
>hile the )hareholder o- the weak co+pany +ay thank hi) )tart) o,er a +er*er
o- two co+panie) Ha weak co+pany and a )tron* co+panyI( the )hareholder) o- the
)tron* co+pany will rai)e hue and cry to )top t he +er*er( becau)e o- the lin*erin* -ear
that hi) )hare +ay not be earnin* a) in the pa)t and it) ,alue +ay deteriorate. E,en i-
two )tron* co+panie)( +er*e( the apprehen)ion o- the )hareholder) cannot be
ea)ily di)pelled in the initial +onth) till )ucce)) i) achie,ed and better return) reali;ed.
)) L&77 &0 A!!e%!*&% &% B(7*%e77 Ta"ge!7:
Durin* the proce)) o- +er*er( the branche) concentrate +o)tly on the )y)te+
44
related proble+). The new )y)te+ throw) up lo)t o- proble+) Had+ini)trati,e( le*al(
procedural etc.I which take away +o)t o- the ti+e and attention o- the head or Cranch
O--ice. Thu) the bu)ine)) tar*et) do not *et their due attention.
') C&..(%*)a!*&% De1a/7:
>hen the proce)) o- +er*er i) *oin* on( the +ana*e+ent o- each co+pany +ay
-ace )e,eral une5pected co+ple5 proble+) -ro+ di--erent <uarter). Deci)ion +akin*
could be delayed. It i) po))ible the e+ployee) and cu)to+er will e5perience the
delay) a) unbearable durin* the +er*er proce)) / tran)ition period. &eadin* to all
round di))ati)-action.
9. O!he"7 I77(e7: Other i))ue) include
a) F1()!(a!*&% &0 7ha"e "*)e7:
On account o- +er*er proce))( the lo))e) o- weak co+pany +ay be
tran)-erred to the healthy co+pany. The pro-it) o- the healthy co+pany +ay be a--ected
-or )o+eti+e. On account o- decrea)e in the pro-it) o- the co+pany( the +arket ,alue
o- the )hare o- the healthy co+pany al)o +ay be a--ected to )o+e e5tent.
4) C(7!&.e"7 7e"6*)e:
In the co+petiti,e ear( cu)to+er )er,ice( cu)to+er )ati)-action( and
cu)to+er deli*ht are the watchword) -or any indu)try. On account o- +er*er( the
reco*nition o- cu)to+er) and per)onali;ed )er,ice rendered in the pa)t +ay be a--ected
to )o+e e5tent.
)) C&%0(7*&% !& C(7!&.e"7:
Each co+pany( be-ore +er*er( +ay be populari;in* it) own )tyle o-
47
di)tribution and product) by di--erent na+e) and +o)t o- the cu)to+er) would ha,e(
o,er a period o- ti+eO *ot accu)to+ed to the)e na+e). >hen the +er*er take) place(
not only the in)ider) H)ta--I but al)o the cu)to+er) )tart e5periencin* the con-u)ion.
') P&&" C"e'*! Ma%age.e%!:
>hen two co+panie) are in the proce)) o- +er*er( both the co+panie)
+ay not *i,e due attention to credit di)pen)ation or to -ollow up/)uper,i)ion o-
ad,ance). The debtor) al)o +ay not *et pro+pt re)pon)e) to their re<ue)t) -or enhanced
credit li+it) or te+porary e5ce)) drawin*). #o+pany )ta-- al)o +ay not *i,e -ull
attention to reco,ery a)pect.
e) I%7*'e" F"a('7:
There i) a con)iderable )cope da+a*e or pil-era*e. Dence the proce)) o-
+er*er +ay be u)ed a) a *od%)ent to de-raud the co+pany by any in)ider with +ala-ide
intention).
0) Ma"?e! Ca!("e 4/ P1a/e"7:
>hile the +er*er proce)) o- two co+panie) i) *oin* on( the delay0) on
account o- ad+ini)trati,e rea)on) or un preparedne)) o- )ta-- +ay occur. Other player)
will e5ploit thi) opportunity to lure away the i+portant clientele o- the +er*in*
co+panie) and increa)e their +arket )hare.
In )pite o- the abo,e i))ue)/ con)traint)( the +er*er) o- co+pany +ay
)till be ,iewed a) the only alternati,e li-t in the place o- other hard choice). It i) true
that +er*er o- co+panie) +ay increa)e the )i;e o- the balance )heet( wider the
network and trade opportunitie) in new area)( *enerate )cope to o--er +ore u)er
-riendly product) and opportunity to the )ta-- to pro,e e--iciency.
>hate,er be the rea)on) -or appro,in* the +er*er( the planner) and )uper,i)ion
4@
in the +er*er proce)) )hould con)ider the abo,e i))ue)/con)traint) to plan a )+ooth
tran)ition o- +er*er.
EAALUATION OF SYNERGIES # A REAIEG OF LITERATURE:
The ,a)t +ajority o- Mer*er and Ac<ui)ition) rely on )yner*ie) in the
,alue creation only a )+all proportion o- Mer*er and Ac<ui)ition) are undertaken
-or non%)yner*i)tic rea)on)( &iterature re,iew. Thi) re,iew con)ider particular type) o-
Mer*er and Ac<ui)ition that atte+pt to create )o+ethin* *reater than the )u+ o- the
pre,iou)ly independent part). >ith thi) type o- co+bination( the -ocu) i) on )trate*ie)
and proce))e) re<uired -or the identi-ication and attain+ent o- true and producti,e
)yner*ie) HMark) and Mir,i)( 1EE9I
REASONS FOR DOING MERGERS AND ACQUISITIONS:
Mer*er) and Ac<ui)ition) are carried out -or a ,ariety o- rea)on) which
can be cate*ori;ed a) )yner*i)tic( non % )yner*i)tic and / or )trate*ic. Non% )yner*i)tic
co+bination) can be de)cribed a) non%core di,er)i-ication tran)action and )trate*ic
co+bination) are done -or rea)on) )uch a eli+inatin* co+petition( )ecurin* )upply o-
di)tribution line or pre,entin* a co+petitor -ro+ ac<uirin* the tar*et. The rea)on)
*i,en in the literature -or carryin* out Mer*er and Ac<ui)ition) are6
? I%'(7!"/ 7e)*0*) "e=(*"e.e%!7
(>a7e71ag% a%' De.*7&%8 $HH$)
? G1&4a1*Fa!*&% 1ea'*%g !& 7)a1e "e=(*"e.e%!7
(Ga1*% a%' >e"%'&%8 $HHH)
? See' a%' C&a! )&%7*'e"a!*&% &0 g"&;!h
(Ma"?7 a%' M*"*6*78 $HH,)
? P"&'()! a%' Se"6*)e "a%ge eCa%7*&%
48
(Ga1*% a%' >e"%'&%8 $HHH)
? R*7? "e'()!*&% a%' '*6e"7*0*)a!*&%
(Raa"&!8 $HH2)
? Le6e"age &0 )&"e )&.e!e%)*e7 &" !e)h%&1&g/ )ha%ge
(S1(7?/ a%' Ca6e78 $HH$)
All o- the abo,e pri+ary rea)on -or doin* Mer*er and Ac<ui)ition)
ha,e )yner*i)tic ele+ent) to the+
REASONS FOR T>E FAILURE OF MERGERS AND ACQUISITIONS:
Table 1 )et0) out the ,ariou) rea)on) -or the -ailin* o- M " A and )how) the
e5tent o- )upport o- the)e -ailin*) in the literature under re,iew.
The literature clearly )how) that the pay+ent o- too hi*h an ac<ui)ition
price and the lack o- plannin* to inte*rate the or*ani;ation) are the leadin* ca)e) o-
-ailure. Coth o- the)e relate to unreali;ed )yner*ie). Syner*ie) can only be achie,ed or
reali;ed throu*h po)t%+er*er inte*ration o- both proce))e) and people and( where a
pre+iu+ ha) been paid -or the ac<ui)ition( the )lower the inte*ration( the )lower
the reali;ation o- )lower the inte*ration( the )lower the reali;ation o- )yner*ie) will
be and the +ore e5pen)i,e it will be to repay the pre+iu+ paidHlajou5(1EE9I.
Dorwit;( Ander))en( Cn;uidenhout( #ohen( ?ir)ten( Mo)oeuntane( S+ith( Thole and
Gan heerden H3::3I )how that ne*lect o- the P)o-t0 due dili*ence -actor) o- cultural
and hu+an re)ource capabilitie) ha+per) tran)ition and e--ecti,e inte*ration o- the
49
new entity( Cijil)u+ Branke+a H3::1I e5a+ine) the -riction between the +er*in*
or*ani;ation) and how be)t to +ini+i;e it.

Ta41e $: Rea7&%7 0&" !he Fa*1("e7 &0 Me"ge"7 a%' A)=(*7*!*&%7
No. plan
to
inte*rate
and
inte*ration
proble+)
Bailure to
under)tand
the
ac<ui)ition
*a+e
-or+ulate
Cia)e) in
-a,or o-
)yner*ie)
and it)
con)e<uen%
ce)
Slow pace
o-
inte*ration
Inade<uate
due
dili*ence(
no
)trate*y(
poor
preparation
and undue
ha)te
&o)) o-
,alue
throu*h
-ailure
o-
current
)trate*ic
plan)
Bailure o-
Di*h
ac<ui)ition
pre+iu+
Cijl)+a%
Branke+a
H3::1I
?
#a+pbell
and !oold
H1EEJI
? ?
#opeland
?oller and
Murrin H1EE:I
? ? ? ? ?
Eccle)( &ane
and >il)on
H1EEEI
? ?
!alpin and
Derndon
H1EEEI
? ? ?
Daun)child
H1EE7I
?
Da)pe)la*h
and
? ? ? ?
4J
Fe+i)on
H1EE1I
Dorwit; et.al.
H3::3I
?
Dowell H1E9:I
? ?
Fe+i)on and
Sltkin H1EJ8I
? ?
?ey H1EJEI
?
&ajou5 H1EE9I
? ? ? ?
Mark) and
Mir,i) H1EE9I
? ? ?
appaport
H1EEJI
? ? ?
Seyhu+
H1EE:I
?
Sirower
H1EE9I
? ? ? ?
Rwei* H1EE@I
? ? ?
Bre<uency
Hout o- total
19I
$$ - 9 < @ 3 $$

S/%e"g/ E6a1(a!*&% a7 a S(47e)!*&% &0 !he Me"ge" P"&)e77
The identi-ication and e,aluation o- )yner*ie) are crucially i+portant becau)e.
1I There are no dre)) rehear)al) -or ac<ui)ition).
3I The entire pre+iu+ i) paid up-ront.
4I E5it co)t) are o-ten ,ery hi*h and
7I Achie,in* )yner*ie) i) analo*ou) to )tartin* up a bu)ine)).
Addin* )yner*y +ean) creatin* ,alue that not only doe) not yet e5it but i) not
yet e5pected0 HSirower( 1EE9 6 31I. Syner*y e,aluation i) an i+portant a)pect M " A
and +u)t nece))arily be dealt with )o+ewhere in the proce)).
The S*g%*0*)a%)e &0 S/%e"g/ E6a1(a!*&% *% !he Aa1(e C"ea!*&% P"&)e77
Since lar*e ac<ui)ition pre+iu+) are bein* paid -or tar*et co+panie) in e5ce))
o- their )tand 2 alone ,alue)( it )tand) to rea)on that there +u)t be )o+e relation)hip
between the )i;e o- the pre+iu+) and the ,alue o- the anticipated )yner*ie). Sirower
4E
de-ine) the +er*er o- takeo,er pre+iu+ a) Pthe a+ount the ac<uirin* -ir+) pay) -or an
ac<ui)ition that i) abo,e the pre%ac<ui)ition price o- the tar*et co+pany. The
ac<ui)ition pre+iu+ repre)ent) the e5pectation o- )yner*y in a corporate co+bination
HSirower( 1EE96 78%79I
The literature deli,ered e,idence o- three broad +ethod) -or analy;in* the
relation)hip between )yner*ie) and the pay+ent o- an ac<ui)ition pre+iu+.
• Ei*ht o- the author) related the pre)ent ,alue o- the e5pected )yner*ie) -ro+
the tran)action to the anticipated -uture ca)h -low i+pro,e+ent re)ultin* -ro+
the ac<ui)ition H Eccle)( &ane and >il)on( 1EEEO Daun)child( 1EE7O &ajou5(
1EE9O Mark) and Mir,i)( 1EEEO appaport( 1EEJO Sirower( 1EE9O Garaiya(
1EJ9O Rwei*( 1EE@ I
• Se,en o- the author) al)o u)ed )o+e -or+ o- break e,en analy)i) to deter+ine
the point at which )hareholder ,alue i) either created or de)troyed H Eccle)(
&ane and >il)on( 1EEEO Daun)child( 1EE7O &ajou5( 1EE9O Mark) and Mir,i)(
1EE9O appaport( 1EE4O Sirower( 1EE9O Garaiya( 1EJ9I
• Si5 o- the author) indicated an ancillary proce)) wa) per-or+ed throu*h an
analy)i) -or the ,alue dri,er) o- a )yner*i)tic tran)action( a) e)ti+ation o- the
increa)e) in ca)h -low re)ultin* -ro+ tho)e dri,er) and then -or+ that point.
Deter+inin* the ,alue to be created by the co+bination H #a+pbell and
))!oold( 1EEJO !alpin and Derndon( 1EEEO Da)pe)la*h and Fe+i)on( 1EE1O
Dealy( =alepu and uback( 1EE3O Dowell( 1E9:O appaport( 1EEJ I
Since the e5i)tence o- potential paper )yner*ie) i) the pre%deal
ju)ti-ication -or the pay+ent o- an ac<ui)ition pre+iu+( the reali;ation o-
tan*ible and producti,e )yner*ie) i) the po)t%+er*er ju)ti-ication o- the ac<ui)ition
pre+iu+. >here the e5pected )yner*ie) do not e5i)t or ha,e not been captured( there
i) no ju)ti-ication -or the pre+iu+ and the )hareholder ,alue( -ro+ the buyer0) point
o- ,iew( ha) been de)troyed.
7:
Re7&(")e7 a%' Me!h&'&1&g*e7 Re=(*"e' 0&" !he A)h*e6e.e%! &0
P"&'()!*6e S/%e"g*e7
A )tudy re,ealed that only 34K o- +er*er e,en co,e the co)t o- the
Ac<ui)ition( not to +ention achie,in* the le,el) o- )yner*i)tic *ain) that are totaled
about a tran)action HBi)her( 1EE7I. I- )yner*ie) pro,ide the rationale -or +er*er and
ac<ui)ition acti,ity( the be)t practice +u)t be identi-ied and i)olated. Nine
predo+inant techni<ue) and )trate*ie) -or the creation and )u)tainability o-
)yner*ie) were identi-ied -ro+ the literature. The relati,e )i*ni-icance o- the
,ariou) techni<ue) i) -ro+ the literature. The relati,e )che+atically repre)ented in
Table 3.
Ade<uate plannin* -or the inte*ration o- the +er*er( e)tabli)hin* e--icient
And e--ecti,e reward )y)te+) and incenti,e +echani)+)( and e)tabli)hin* the
ac<ui)ition pre+iu+ relati,e to the anticipated )yner*ie) appear to be the +o)t
)i*ni-icant techni<ue) and )trate*ie) -or )ucce))-ul +er*er) and ac<ui)ition).
Not with)tandin* thi) relati,e )i*ni-icance( there i) *enerally hi*h occurrence O-
each techni<ue( and all +u)t( there-ore be re*arded a) )ub)tantially i+portant in the
reali;ation o- producti,e )yner*ie) throu*h +er*er) and ac<ui)ition).
TABLE -: Te)h%*=(e7 0&" ge%e"a!*%g "&'()!*6e 7/%e"g*e7
P&7!-
Me"ge"
*%!eg"a!*&%
1a%
A)=(*"*%g
a%' "e!a*%
7(e"*&"
.e"ge"
.a%age.e%!
a%'
eCe)(!*6e
1ea'e"7h*
Pe"0&". a
)&."ehe%7*
6e
'(e '*1*ge%)e
*% a'6a%)e
*.e.8
4(/ !he "*gh!
)&.a%/
Pe"0&".
a'6a%)e'
1a%%*%g
a%'
"&6*'e
0&"
7(47!a%!*a1
.a%age.e
%!
E7!a41*7
h
e00*)*e%!
"e;a"'7
a%'
*%)e%!*6
e7
F&)(7
&%
7ha"e
h&1'e"
6a1(e
)"ea!*&%
Re1a!e
!he
"e.*(
.
a*' !&
!he
eCe)!e'
7/%e"g*e
7
Lea"%
0"&.
/&("
.*7!a?e7
a%'
)&..(%-
*)a!e
e00e)!*6e1/
A1
/
a
4&a"
'
4a7e
&0
&"'*
%a"/
.g.
!
"*%
)*1e
7
A14e"!7 a%'
Sega11 ($H,9)
? ? ?
A14e"!7 a%'
Aa"a*/a ($H2H)
? ?
A%71*%ge" a%'
C&e1a%'
($HH@)
? ? ? ?
Ca.4e11 a%'
G&&1' ($HH2)
? ? ?
E))e1e78 La%e
a%'
G*17&% ($HHH)
? ?
71
E*e%ha"'! a%'
Ga1(%*) (-+++)
?
F*7he" ($HH9) ? ? ? ? ?
Ga1*% a%'
>e"%'&% ($HHH)
? ? ? ? ? ? ?
>ae71agh a%'
De.*7&% ($HH$)
? ? ? ? ? ?
>&;e11 ($H,+)
>a7e71agh a%'
De.*7&% ($HH$)
>&;e11 ($H,+)
De.*7&% a%'
S*"?*% ($H2@)
? ? ?
Ee/ ($H2H) ? ?
E*!)h*%g ($H@,) ? ? ?
La5&(C ($HH,) ? ? ? ?
Ma"?7 a%'
M*"6*7 ($HH,)
? ? ? ? ? ?
Raa&"!
($HH2)
? ? ? ?
Sh1e*0e" a%'
A*7h%/ ($HH2)
?
S*"&;e" ($HH,) ?
F"e=(e%)/ 2 , < @ H 9 2 < <

DATA ANAYSIS AND PRESENTATION
Me"ge"7 a%' A)=(*7*!*&%7 # Se)!&" ;*7e
Mer*er) and Ac<ui)ition) ha,e beco+e a +ajor -orce in the -inancial and
Econo+ic and en,iron+ent all o,er the world. On the Indian )cene( thank) to the
liberali;ation o- BEA( MT= act and indu)trial licen)in* and the co+pul)ion
to be +ore co+petiti,e( corporate are lookin* )eriou)ly at +er*er) and
ac<ui)ition).
Mer*er) and ac<ui)ition) *athered +o+entu+ in the Indian econo+y in
the decade o- 1EE. Bro+ Fanuary 1EE: to Fune 1EE96 E83: co+panie) in
the world ca+e under the new owner)hip throu*h +er*er) and ac<ui)ition)
>orth S4.Etn in 1EEE alone( it i) e)ti+ated that world wide +er*er and
ac<ui)ition acti,ity ro)e by o,er one third -ro+ 1EEJ le,el) to +ore
73
than S 4.7tn.
>*7!&"/ &0 Me"ge"7 a%' A)=(*7*!*&%7:
Mer*er) and ac<ui)ition) acti,ity ha) increa)ed )ub)tantially )ince the +id
1E8 in 1E89( the total dollar ,alue o- the corporate +er*er " ac<ui)ition >a)
under S3:bn( by 1EJ7 it *rew to a total dollar ,olu+e o- S 1:: billion and by 1EEJ
the dollar ,olu+e ha) e5ceeded one trillion.
ECh*4*! $ li)t) the lar*e)t +er*er) be-ore the year 3:::
ECh*4*! $ La"ge7! Me"ge" *% !he La7! M*11e%%*(.:
B(/e" Se11e" P"*)e
O00e"e'
(.*11*&%7)
A%%&(%)e
'
/ea"
=BIRE >arner%&a+bert S J3(4EE.8 1EEE
EAAON Mobil S J173E.J 1EEJ
SC# #o++unication A+eritech S 9@344.@ 1EEJ
GODABONE !OU= AI TOU#D
#OMMUNI#ATION
S 8398J.: 1EEE
Criti)h =etroleu+ #o. A+oco S @87J3.: 1EEJ
AT " T Media One !roup S @@[email protected] 1EEE
74
CE&&A%AT&ANTI# !TE S @[email protected] 1EEJ
AT " T Teleco++unication S @3@[email protected] 1EEJ
NATIONA& CAN? Cank A+erica S [email protected] 1EEE
>O&D #OM M#I #o++unication S [email protected] 1EE9
TAGE&&ES !OU= #iticorp S 48:41.8 1EEJ
$>EST
#o++unication.Intl
US >e)t S
4797J.:
1EEE
GIA #OM #CS S 477@7.: 1EEE
NO>EST >ell) Bor*o and #o. S 4188:.3 1EEJ
DAIM&E%CENR >ell) Bor*o and #o.
#hry)ler
S 411@8.: 1EEJ
Bro+ the e5hibit( it can be noted that the)e are all hori;ontal +er*er)( in,ol,in* -ir+
at the )a+e indu)try. In particular( the)e -ir+ in the )a+e indu)try. In particular( the)e
+er*er) created )o+e o- the lar*e)t oil and teleco++unication) co+panie) in the world
a) well a) the lar*e)t -inancial )er,ice) co+panie) in the United State).
In the pa)t -ew year) there ha,e been a lar*e no o- block bu)ter +er*er) and
ac<ui)ition) that +ade the pa)t +er*er and ac<ui)ition look )+all by co+pari)on. Bor
e5a+ple( the +er*er between #iti*roup and Tra,eler) *roup e)ti+ated at S99bn in ,alue
and EAAON0S ac<ui)ition o- +obile -or S J1(73E.J+n. the )i;e and no. o- +er*er and
ac<ui)ition tran)action continue to *row world wide.
The role o- +er*er and ac<ui)ition had e,ol,ed a) a )trate*ie) tool -or -a)t%track%
Technolo*y%led co+panie). In current rapidly chan*in* en,iron+ent and in the era o-
)y)te+atic inno,ation( where technolo*ie) i) e+bedded in people and proce))e)( well
77
planned +er*er and ac<ui)ition are reco*ni;ed a) critical to -a)t track
technolo*y co+pany )ucce)) and e,en )ur,i,al.
Takeo,er) ha,e beco+e co++on place in the Indian corporate world too. So+e
o- the pro+inent takeo,er) witne))ed recently are6
ECh*4*! - P"&.*%e%! Ta?e&6e"7:
#hhauahria) Shaw >allace
!oenka) #alcutta Electric Supply #o+pany
Dinduja) A)hok &eyland
Mcleod u))el Union #arbide Hena+ed a) E,eready
IndiaI
Satya+ India >orld
Dindalco Indal
eliance I=#&
Tata) GSN&
Sterlite CA&#O

Ac<ui)ition re+ain) the <uicke)t route co+panie) ha,e( to acce)) new +arket) and
new capabilitie). >ith *lobali;ation o- +arket) and the pace at which technolo*ical chan*e
accelerate)( co+panie) are -indin* +er*er and ac<ui)ition a) co+pellin* )trate*y -or
*rowth.
Accordin* to a pa)t )ur,ey +ade by Dar,ard Cu)ine)) e,iew the le*endary
Mer*er +ain ai+ o- the 1EJ -all) be)ide the +er*er and ac<ui)ition acti,ity o- the E. In
1EEJ alone( 13(4@8 deal) in,ol,in* U.S tar*et) were announced -or a total ,alue o- S1.84tn.
The pace )o+ehow )lowed down in the decade 3::: howe,er( )ur*e in +er*er and
ac<ui)ition acuity and )pendin* +ade 3::7 a year to re+e+ber -or the U.S and
European deal +aker) alike( accordin* to )tati)tic) -ro+ -act )et +er*er )tate(

=ro,ider o- *lobal M " A in-or+ation( in the United State)( the nu+ber o- M " A
announce+ent) ju+ped 17.JK to E(E87 in 3::7 alone )pendin* -or +er*er) and
ac<ui)ition) )ince the record%breakin* +arket o- 3:::.
7@
I%'*a% C&.a%*e7 a%' G1&4a1 A)=(*7*!*&%7:
The nu+ber o- Indian co+panie) that are in,e)tin* abroad ha) been )teadily
*rowin*. Accordin* to ?M=!( Indian co+panie) )helled out S 1.9bn in the -ir)t ei*ht
+onth) o- 3: -or ac<uirin* 83 o,er)ea) co+panie). >hile the IT )ector( bankin* and
-inancial )er,ice)( and phar+aceutical co+panie) ha,e been the +o)t acti,e in M " A
deal)( increa)in*ly other )ector) too are *ettin* in on the act. I- the )+all and +id%)i;ed
Indian co+panie) too *o in -or ac<ui)ition deal)( in the S 1 +illion ran*e thi) could *i,e
a tre+endou) boo)t to India0) +anu-acturin* )ector.
The Indian corporate )ector i) on the prowl. Cuoyed by an upbeat econo+ie)(
corporate around are plannin* to +ake that *reat +o,e -orward 2 ac<uirin*
co+panie) *lobally to enhance their international co+petiti,ene)). The table below
pro,ide) )o+e e5a+ple) o- the )ector) in which Indian corporate ha,e the +o)t acti,e.

ECh*4*! 3 G1&4a1 A)=(*7*!*&%7
I%'*a% C&.a%/ A)=(*"e' C&.a%/
Auto co+ponent co+panie) Charat
Bor*e( U#A& Buel( Sundara+( Ba)tener)
A+tek( Tata(
=har+a #o+panie) Matri5( Fubilant( Malladi
#on)u+er !ood) #o+panie) Tata Tea
#D=( Bederal( I+atra A+tee
#ra+lin*ton !>?( Reler( An,il Incat
>und)ch( >eidiner( Daewoo
Docphar+a( Mche( E5plora Tar*et
e)earch No,u) Bine #he+ical)
78
Apeejay
IT #o+panie) >ipro Ma)tek
BMA&I( !ood Earth =re+ier
Ner,e >ire Entra+
In the -ir)t ei*ht +onth) o- 3:( Indian co+panie) paid S1.Jbn +ore than 7
ti+e) that the a+ount -or all o- 3::1% -or 83 o,er)ea) co+panie). Indian -ir+) are truly
beco+in* *lobal and i- the trend continue)( we will ha,e a ho)t o- ho+e%*rown +ultinational
co+panie) operatin* all around the world.
Rea7&%7 0&" !he 7(''e% 7("ge *% I%'*a I%)L7 g1&4a1 a)=(*7*!*&%7
1I The ea)y a,ailability o- dollar) in India( a) a re)ult o- the *o,ern+ent0)
policy o- liberali;ation which be*an in 1EE1( ha) +ade it ea)ier -or co+panie) to *o
*lobal. In 1EE1( India had le)) than S 1bn in re)er,e) and today( the country i) -lu)h with
-orei*n re)er,e)( totalin* S 17: billion.

3I Mane) o- the re*ulation) and control) which +ade it di--icult -or Indian
#o+panie) to operate internationally beyond e5port) ha,e been li-ted.
4I Al)o( the bi* chan*e in the +ind)et that ca+e about a) a re)ult o- *reate)t
e5po)ure and increa)ed co+petiti,e. A) corporate ha,e )ucce))-ully -aced
the challen*e) o- co+petin* o- -orei*n co+panie)( they ha,e +atured and
*rown in )el-%con-idence.
7I Meanwhile( +ore and +ore US and other *lobal pri,ate e<uity -ir+) are
*i,in* Indian co+panie) -undin* -or ac<ui)ition).
The E.e"g*%g G1&4a1 P1a/e"7
• IT 7e)!&" "e.a*%7 1ea'*%g &6e" &!he" 7e)!&"7 *% a)=(*7*!*&% 'ea17. I! a))&(%!7
0&" %ea"1/ $,M &0 a11 a)=(*7*!*&%7 *% A"*1-D(1/ -++<.
79
• Ba%?*%g a%' *%7("a%)e )&.a%*e7 !&& a"e 0"&%! "(%%e"78 a))&(%!*%g $3M &
a11 M : A
• Pha".a)e(!*)a1 *%'(7!"/ - $3M
• FMCG *%'(7!"/ - 2M
• Me'*a a%' Te1e)&. - 9M ea)h
• E%g*%ee"*%g8 .e!a1 a(!&.&4*1e : !eC!*1e7 # 3M ea)h
• Pae" # -M
• I%0"a7!"()!("e8 h&!e18 a)?ag*%g : )he.*)a17 # $M a"e !he 7e)!&"7 !ha! a"e
a)!*6e *% a)=(*7*!*&% 'ea17 a4"&a'.
#learly( IT( bankin* " in)urance are ahead o- the other accountin* -or @:K
O- the deal).
IT co+panie) 2 9 o- the+ ac<uirin* -orei*n co+panie) and +o)t )i*ni-icant one)
include
• Ac<ui)ition) o- I%Ble5 by ca)te5 )o-tware )tay top inc by !old)tone
Technolo*y &td and
• Mok)ha co+panie) by Delio).
Ba%?*%g a%' F*%a%)*a1 Se"6*)e7
Too ha) been a pro+inent player in *lobal ac<ui)ition).
• I#I#I Cank0) ac<ui)ition o- u))ian In,e)tit)ionno ?reditny Cank
• SCI takeo,er o- Mauritiu) Cank and
• The Mer*er o- Cank o- =unjab with #enturion Cank( are )o+e o- the
=ro+inent e5a+ple).
7J
In in)urance one o- the bi**e)t deal) accrued when )tandard li-e o- U? )old it) 7.EK
Stake in DDB# to #&SA Merchant Canker) -or ).1:1J crore).
Pha".a)e(!*)a1 7e)!&"L7 4*gge7! a)=(*7*!*&% 'ea1 ;a7
• Matri5 &aboratory0) ac<ui)ition o- 33K )take in the Cel*iu+ ba)ed
#o+pany Docphar+a -or US S 384 +n.
• U#A& Buel0) purcha)e o- the US 2 ba)ed A+tec =reci)ion product) line
En*a*ed in +anu-acturin* o- auto ancillary product) -or S 3J +n.
• Aditya Gikra+ Cirla !roup0) buyout o- a #anada 2 ba)ed pulp plant.
S())e770(1 Me"ge"
• IS=AT Steel a corporate ac<uirer that conduct) it) M " A acti,itie) a-ter
Elaborate due dili*ence. IS=AT wa) a relati,ely le)) known Indian Steel #o+pany
with one )teel +ill in Indone)ia. Today( thank) to the ac<ui)ition( it I) now one o- the
world) leadin* )teel co+panyQ
• #iticorp and tra,eler) created a +e*a bank with o,er S9:: bn. In a))et) the
Ability to e--ecti,ely co+bine the re)ource) that were owned by the -or+ally
Independent -ir+) i) thou*h to be critical to city *roup ability to *ain the #o+petition
bene-it).
• Tyco International increa)ed it) +arket capitali;ation -ro+ S1.8bn to S 7E bn at
the end o- 1EEJ.
• eliance Indu)trie) &td. And eliance =etroleu+ &td. A-ter +er*er beca+e -ully
di,er)i-ied )in*le entity and al)o the -ir)t pri,ate )ector -ortune *lobal @:: Indian
co+pany.
• !E cap) with 39 )eparate bu)ine))( +ore than @::: e+ployee) world wide and
bu)ine)) that ran*e -ro+ pri,ate label credit card )er,ice) to co++ercial real e)tate
-inancin*.
• I#I#I &td and I#I#I Cank a one 2 )top )hop -or -inancial )er,ice) with total
a))et) o- ).E@: billion are )econd only to the )tate owned SCI( o- ). 4.18 trillion.
7E
R(77*a: N(.4e" $ Me"ge" : A)=(*7*!*&%
A))e))ed +arket ,alue o- M " A ha) ri)en -ro+ S 9.@ billion to S34.9
Cillion in one%year ti+e. u))ia +ade +ore than hal- o- the deal) with Ea)tern Europe.
At a ti+e when M " A had decrea)ed by 34K in 3::4 i.e.( *lobal rece))ion( a nu+ber
o- M " A in Ea)tern Europe ha) )i*ni-icantly *rown in 3::7. A total a+ount o- M " A
acti,itie) in E countrie) o- Ea)tern Europe ha) e<ualed to S 4J.8 bn in 3::4. O,erall( a
total o- 1198 M " A deal) o- pri,ate and )tate co+panie) ha,e been )i*ned in the re*ion
durin* 3::7.
Re)e%! !"e%'7 *% M : A
The nu+ber and )i;e o- cro)) border +er*er increa)ed )ub)tantially in 1EE: ).
The nu+ber o- ho)tile takeo,er and le,era*ed buyout) ha) declined. Accordin* to the
report pre)ented by Andrade( Mitchell and Sta--ord H3::1I o,er 17K o- the in the 1EJ:
) were ho)tile and about 1/4 o- the)e -ailed. Do)tile takeo,er and &CO0) di)appeared in
1EE: ). Thi) wa) due to a co+bination o- an increa)e in i+port. O- in)titutional
in,e)tor)( a *reater u)e o- )tock option) and other -or+) o- incenti,e) pay. Another
rea)on i) the pre,alence o- ,ariou) anti 2 takeo,er de-en)i,e action) that +ana*er)
i+ple+ented in the la)t 1EJ: ).
M : A: C&..&% P*!0a117 a%' Re.e'*e7
Mer*er)( ac<ui)ition) and takeo,er) ha,e been a part o- the bu)ine))
>orld -or centurie). In today0) dyna+ic en,iron+ent( co+panie) o-ten -ace deci)ion)
concernin* the)e thin*). The job o- +ana*e+ent i) to +ini+i;e )hareholder ,alue. In
+o)t ca)e)( by u)in* +er*er) and ac<ui)ition)( a co+pany co+pany can de,elop
co+petiti,e ad,anta*e and ulti+ately increa)e )hareholder ,alue.
Cut +o)t M : A add no ,alue to the partner) o,er ti+e i- done without
proper plannin*( analy)i) and )tudy. Mo)t top +ana*er) o-ten u)e the ter+ +urder) and
ac<ui)ition) in)tead o- +er*er) and ac<ui)ition). In +any ca)e)( the u)ual dictu+
ac<uire) in ha)te and repent at lei)ure would be applicable.
@:
M : A alway) look e5cellent on E5cel )pread)heet. Syner*ie) appear( co)t)
Are +ini+i;ed( *rowth ;oo+) and )en)iti,ely analy)i) )how) a *loriou) picture o- the
co+pany in -uture. Mo)t M : A ) doe)n0t work. In a recent Dar,ard Cu)ine)) e,iew
article plu) the -ailure rate at 9:%J:K. It doe) not +atter whether the co+panie) are
lar*e or )+all or in con)u+er *ood) or in technolo*y2 the re)ult) are the )a+e. Thi) i)
becau)e M " A) i) e5tre+ely di--icult. E5pected )yner*y ,alue) +ay not be reali;ed
and there-ore( the +er*er i) con)idered i) -ailure.
Accordin* to Tho+)on Genture Econo+ic) and the National Genture
#apital A))ociation( 91 co+panie) were ac<uired durin* the )econd <uarter o- 3::4.
In the +id 2 1EE: )( M " A ) wa) leadin* *rowth )trate*y -or brick 2 and % Mortar
co+panie) and technolo*y )ector. Un-ortunately( +o)t o- the)e deal) didn0t create ,alue
-or )hareholder)( in,e)tor) or cu)to+er).
The key )ucce)) in Mer*er and Ac<ui)ition inte*ration i) “=ractice Make)
=er-ect'. !eneral Electric ca+e to be )hown a) the “ Ce)t in cla))' -or the
e--ecti,ene)) o- it) ac<ui)ition inte*ration proce)) by plannin* -or the inte*ration
durin* tran)action )trate*y )e))ion) and learnin* -ro+ pa)t +i)take).
Inte*ratin* two or +ore bu)ine)) entitie) with di--erent proce))e)(
redundancie) and di)parate culture) i) di--erent and +i)take) are *oin* to happen. The
)take) are ,ery hi*h.
Mo)t po)t +er*er co+panie) are accurately ,alued at le)) than the two entitie)
were be-ore the deal. Many e5%#EO ) are ,ery -a+iliar with thi) )ituation it0) not u)ual
-or a #EO to be di)+i))ed a-ter a -ailed ac<ui)ition or +er*er inte*ration. Dowe,er(
+o)t o- the)e -ailure) are not due to poor ne*otiation). They are the re)ult o- poor
inte*ration plannin* and e5ecution( and unachie,able a))u+ption) o- which deal
price and ter+) are ba)ed.
Gh/ M : A 7 Ca% Fa*1
@1
P*!0a117 &0 .e"ge"7 !he "ea7&%7 0&" 0a*1("e7 a%' !he *!0a117 &0 .e"ge"7 a"e:
1. =oor Strate*ic Bit.
3. #ultural and Social Di--erence).
4. Inco+plete and Inade<uate due dili*ence.
7. =oorly Mana*ed Inte*ration.
@. =ayin* too +uch.
8. &i+ited -ocu).
9. Bailure to *et the -i*ure) audited.
J. Bailure to +ake i++ediate control.
E. Bailure to )et the place -or inte*ration.
1:. Inco+patibility o- partner).
11. Bailure) to adopt the product to local ta)te.
13. Irrele,ant core co+petence.
14. III%Ad,i)ed and III%=lanned di,er)i-ication.
SECTION # A
MERGERS AND ACQUISITIONS IN T>E BANEING INDUSTRY:
INTRODUCTION:
Mer*er) and Ac<ui)ition) in the Indian Cankin* )ector are *oin* to be the order o-
the day. India i) )lowly but )urely +o,in* -ro+ a re*i+e o- Plar*e nu+ber o- )+all bank)0 to
P)+all o- lar*e bank)0.
ecent )pate o- bank +er*er) ha) led to the Mer*er) and Ac<ui)ition) )cene in the
Indian Cankin* Indu)try war+in* up. Mer*er) and Ac<ui)ition route i) pro,idin* pro,idin*
a <uick )tep to ac<uire co+petiti,e )i;e and o--erin* bank) on opportunity to )hare +arket)
and reduce co)t o- product de,elop+ent and deli,ery.
@3
#on)ideration in the bankin* )ector i) ine,itable +er*er) o- )+aller( newer bank)
>ould be +uch ea)ier than the =SU bank). Due to le*al and )ocial con)traint). India i) now
+o,in* in the direction o- -e,er but lar*er +e*a bank).
EASONS BO ME!ES AND A#$UISITIONS IN CAN?IN! SE#TO6
The bankin* indu)try i) an i+portant area in which +er*er) and ac<ui)ition do +ake
enor+ou) -inancial *ain). The traditional corporate cu)to+er) o- a banker turn away banker
turn away increa)in*ly -ro+ traditional loan. They are in -a,or o- alternati,e )ource) o-
-inancial in)tru+ent) like co++ercial paper) etc..( A) a re)ult o- chan*e) in the e5pectation
o- the corporate cu)to+er)( bank) are now con)trained to rethink their bu)ine)) and de,i)e
new )trate*ie).
On the other hand co+panie) out -ro+ India are encroachin* upon e,ery area o-
bu)ine)) in the pre,ailin* policy o- &=!. There-ore( Indian banker) ha,e to )tru**le to
)ur,i,e in a co+petiti,e en,iron+ent. In the chan*ed en,iron+ent( banker) adopt di--erent
)trate*ie). They ha,e no other option e5cept to reduce their co)t) Hboth operational co)t) and
the co)t o- creditI.
The only way to +ana*e co+petiti,ene)) i) co)t throu*h ac<ui)ition( which enable)
the banker) to )pread it) o,erhead co)t o,er a lar*e cu)to+er ba)e. Bro+ the current trend( it
can be predicted that con)olidation will al)o be one o- the e--ecti,e )trate*ie) widely adopted
by banker).
STATEMENT OB TDE =OC&EM6
Thi) )tudy atte+pt) to a))e)) the )ucce))-ulne)) o- Mer*er) and Ac<ui)ition)
Strate*y in bankin* indu)try. It analy)e) the i+plication) o- takeo,er) -ro+ the -inancial
point o- ,iew.
ANALYSIS OF T>E STUDY6
@4
The per-or+ance o- +er*ed bank) i) co+pared takin* -our year) o- pre%+er*er and
+er*er and -our year) o- po)t +er*er a) the ti+e -ra+e.
A rando+ )a+ple o- )e,en bankin* unit) HThe li)t i) *i,en in Table 2 1I wa) drawn
-ro+ the li)t o- 3: bankin* unit)( which ha,e under*one +er*er) and ac<ui)ition) H The li)t
o- +er*ed bank) in India i) *i,en in Table 2 II I.
A )a+ple o- 4@K o- the +er*ed bank) H9I -ro+ total +er*ed bank) H3:I wa) drawn.
The )tudy ha) analy;ed the *rowth o- total a))et)( pro-it)( re,enue( in,e)t+ent and depo)it o-
+er*ed bank) be-ore and a-ter the +er*er.
Stati)tical tool) like +ean( )tandard de,iation and t%te)t ha,e been u)ed. The
State+ent o- the proble+( +ethodolo*y o- the )tudy( data collection o- the )tudy and tool)
u)ed -or the analy)i) are pre)ented in chapter I HIntroductionI o- thi) project report.
Bor the purpo)e o- thi) )tudy analy)i) wa) +ade in ter+) o- the -ollowin* ,ariable)6
HCa)ic +oti,e) -or under)tandin* +er*er " ac<ui)itionI
#han*e) in !rowth o- Total A))et) o- Mer*ed Cank).
#han*e) in !rowth o- =ro-it) o- Mer*ed Cank).
#han*e) in !rowth o- e,enue o- Mer*ed Cank).
#han*e) in !rowth o- In,e)t+ent) o- Mer*ed Cank).
#han*e) in !rowth o- Depo)it) o- Mer*ed Cank).
A. C>ANGES IN GROGT> OF TOTAL ASSETS OF MERGED
BANES:
A))et) repre)ent econo+ic re)ource) that are the ,aluable po))e))ion) owned by a
-ir+. A))et) are +ainly u)ed to *enerate earnin*). The total a))et) re-er to net -i5ed a))et)
and current a))et). The *rowth o- total a))et) indicate) -ir+0) ability to produce lar*er
re,enue. One ai+ o- bu)ine)) )trate*y na+ely. Mer*er and ac<ui)ition i) the +a5i+i;ation o-
total a))et) o- +er*ed bank) i.e.( -ir+0) ability to produce lar*e ,olu+e o- )ale). It i) e5pected
that the bank unit) a-ter +er*er would -unction e--iciently.
Table 2 4 )how) chan*e) in a,era*e total a))et) and it) ,ariability o- )a+ple +er*ed
@7
bank). It i) clear that all )a+ple 2 +er*ed bank) HState Cank o- India( Oriental Cank o-
Caroda( DDB# bank( I#I#I CankI ha,e )hown a tre+endou) upward *rowth in total a))et)
a-ter +er*er. The re)ult o- )tandard de,iation clearly )how) that +er*er wa) hi*h than o- pre%
+er*er period.
A) )tated earlier( the t%te)t wa) u)ed to te)t the )i*ni-icance o- a,era*e chan*e in total
a))et) o- +er*ed bank a-ter +er*er. The application o- t%te)t re,ealed that all +er*ed bank)
HState Cank o- India( Oriental Cank o- #o++erce( #enturion Cank( Cank o- Caroda( Union
Cank o- India( DDB# Cank and I#I#I CankI *ot )i*ni-icantPt0 ,alue) in their a))et) *rowth.
The analy)i) o- *rowth rate H+ean ,alueI o- )a+ple bank) clearly )hould that I#I#I
Cank achie,ed hi*h rate o- *rowth H14J9.:4I( -ollowed by #enturion Cank H981.37I( DDB#
Cank H919.7EI( Oriental Cank o- #o++erce H148.18I( Union Cank o- India H97.@:I( Cank o-
Caroda H87.9:I and State Cank o- India [email protected].
B. C>ANGES IN GROGT> OF PROFITS OF MERGED BANES:
The pro-it i) an indication o- the e--iciency with which the bu)ine)) operation)
are carried out by corporate )ector. The poor operational per-or+ance +ay re)ult in poor )ale)
leadin* to poor pro-it). The +er*er intend) to boo)t pro-it) throu*h eli+ination o-
o,erlappin* acti,itie) and to en)ure )a,in*) throu*h econo+ie) o- )cale. The a+ount o-
pro-it) +ay be increa)ed throu*h reduction in o,erhead)( opti+u+ utili;ation o- -acilitie)(
rai)in* -und) at lower co)t and e5pan)ion o- bu)ine)). The +er*ed bank) are e5pected to
*row -a)t in all a)pect) and the e5ception) )takeholder) o- both ac<uirin* and +er*ed bank)
could be -ul-illed. Dere the pro-it re-er) to pro-it be-ore ta5.
@@
Table 2 7 Illu)trate) chan*e) in a,era*e pro-it and it) ,ariability in )elect +er*ed
bank). Accordin* to the table( the a,era*e pro-it earned by +er*ed bank) taken -or the )tudy
durin* the po)t%+er*er period wa) hi*her than the pro-it earned durin* the pre%+er*er period.
The )tandard de,iation ha) )hown that the ,ariation in the *rowth o- pro-it) durin*
the po)t +er*ed period wa) hi*her than that o- pre%+er*ed period in the ca)e o- State Cank o-
India( #enturion Cank( Union Cank o- India( DDB# Cank and I#I#I Cank. In the ca)e o- the
other two bank) HOriental Cank o- #o++erce and Cank o- CarodaI the ,ariation durin* pre
+er*ed period wa) hi*her than the po)t +er*ed period.
ThePt0 te)t clearly )howed that the #enturion Cank( Cank o- Caroda( DDB# Cank(
I#I#I Cank( State Cank o- India and Oriental Cank o- #o++erce ha,e )i*ni-icant pro-it)
earned by the+. Thi) )how) that *rowth o- pro-it) o- Union Cank o- India i) )tati)tically
)i*ni-icant while the *rowth o- pro-it) o- Union Cank o- India i) in)i*ni-icant.
It i) under)tood -ro+ the *rowth rate H+ean ,alueI that I#I#I Cank achie,ed hi*he)t
*rowth rate in re)pect o- pro-it) a+on* )a+ple bank). The low *rowth rate wa) )een
in Union Cank o- India.
C. C>ANGES IN GROGT> OF REAENUE OF MERGED BANES:
The re,enue i) earned -ro+ the +ain line o- bu)ine)). !enerally( it e5clude) inco+e
&ike non%recurrin* inco+e and e5traordinary inco+e. The econo+ic acti,ity o- a co+pany i)
con)idered to cla))i-y the inco+e. In ca)e o- -inancial in)titution) includin* bankin* unit)(
Intere)t a) +ain inco+e. Bor the purpo)e o- thi) )tudy( re,enue inco+e re-er) to intere)t
recei,ed( di,idend earned( )ecurity tran)action)( lea)in* and hire )er,ice)( bill di)countin*(
e5chan*e tran)action)( co++i))ion and other).
Table 2 @ pre)ent) chan*e) in a,era*e *rowth o- re,enue inco+e and it) ,ariability o-
@8
)a+ple +er*ed bank). It i) clear that the +er*ed bank) like State Cank o- India( Oriental
Cank o- #o++erce( #enturion Cank( Cank o- Caroda and Union Cank o- India( DDB# Cank
and I#I#I Cank ha,e )hown a tre+endou) *rowth in re,enue.
The +ean *rowth rate re*ardin* re,enue inco+e clearly indicate) the -act that the
I#I#I Cank achie,ed hi*h *rowth rate -ollowed by #enturion Cank H1:3E.4JI( DDB# Cank
[email protected]( Oriental Cank o- #o++erce H17:.43I( Union Cank o- India H89.@3I( State Cank o-
India [email protected] and Cank o- Caroda H@:.@1I.
D. C>ANGES IN GROGT> OF INAESTMENT OF MERGED
BANES:
In,e)t+ent re-er) to the in,e)t+ent o- -und) in )ecuritie) o- another co+pany bank.
They are lon* 2 ter+ a))et) in,e)ted out)ide the bu)ine)) o- -ir+. The +ain purpo)e o- )uch
in,e)t+ent i) either to earn a return or/ and to control another co+pany. It i) u)ual that
in,e)t+ent) are )hown in the a))et) )ide o- balance )heet o- bank).
Burther they are )hown at +arket ,alue. The in,e)t+ent) are +ade in *o,ern+ent
Securitie)( appro,ed )ecuritie)( a))i)ted co+panie)( )ub)idiarie)/a))ociate)( +utual -und) and
other).
Table 2 8 portray) chan*e) in a,era*e *rowth o- in,e)t+ent) and it) ,ariability o-
Sa+ple +er*ed bank). It i) )i*ni-icant to note that all +er*ed bank) taken -or thi) )tudy ha,e
)hown tre+endou) *rowth in in,e)t+ent +ade durin* pre%+er*ed period. The )tandard
de,iation brin*) out the -act that there i) hi*her ,ariation in the *rowth o- in,e)t+ent o- all
+er*ed bank) e5cept State Cank o- India durin* po)t +er*ed than the pre%+er*ed period. In
the ca)e o- State Cank o- India( the ,ariation in the *rowth o- in,e)t+ent i) hi*her durin* pre%
+er*ed period. The analy)i) o- t%te)t )howed that out o- )e,en +er*ed bank) taken -or thi)
)tudy( all Cank) ha,e )i*ni-icantPt0 ,alue).
It i) clearly under)tood -ro+ the +ean *rowth rate o- in,e)t+ent that I#I#I Cank *ot
hi*h rate H13EE.88I a+on* )a+ple book). The -low rate wa) achie,ed by State Cank o-
India [email protected].
E. C>ANGES IN GROGT> OF DEPOSITS OF MERGED BANES:
@9
The i+portant ele+ent o- con,entional bankin* bu)ine)) i) to accept depo)it) -ro+
the cu)to+er). Now %a%day) +anu-acturin* co+panie) al)o )tarted acceptin* depo)it -or a
)hort period -ro+ their +e+ber)( director) and the *eneral public. Thi) +ode o- rai)in* -und)
i) popular account o- the -act that the bank credit beco+e) <uite co)tlier. Depo)it)( )a,in*
bank depo)it)( de+and depo)it and +i)cellaneou) depo)it) and depo)it) out)ide India.
Table 2 9 e5hibit) chan*e) in a,era*e *rowth o- depo)it) and it) ,ariability o- )a+ple
+er*ed bank). It i) clear that all +er*ed bank) ha,e )hown a )i*ni-icant *rowth o- depo)it)
durin* po)t 2 +er*ed period than the a,era*e depo)it) recei,ed durin* po)t%+er*er period. It
i) true that the +er*er ha) led to the *rowth o- depo)it).

The application o- )tandard de,iation pro,e) that the ,ariation) in the *rowth o-
depo)it) o- all bank) durin* po)t +er*ed period i) hi*her than that o- pre +er*ed period.
The application o- E 2 te)t )howed that all +er*ed bank) ha,e )hown )i*ni-icant
#han*e) in the a,era*e depo)it) a-ter +er*er. The +ean *rowth rate o- depo)it) clearly )how)
the -act that DDB# Cank achie,ed H9@:.1:I -ollowed by I#I#I Cank H939.3:I( #enturion
Cank H@@:.8:I( Oriental Cank o- #o++erce H17E.:7I( Union Cank o- India [email protected]( State
Cank o- India H8J.7@I and Cank o- Caroda H8J.17I.
IMPROAEMENT OF PERFORMANCE:
ThePt0 ,alue o- di--erent ,ariable i) *i,en in Table 2 J. It i) clearly under)tood that
the a,era*e pro-it o- Union Cank o- India alone i) )i*ni-icant. All other t 2 ,alue) -or te)tin*
the <uality o- +ean ,alue) with re)pect to total a))et)( re,enue( in,e)t+ent and depo)it) are
)i*ni-icant at @K le,el. That i)( the a,era*e o- ca)h ,ariable ha) increa)ed a-ter the +er*er.
Thi) indicate) that the *oal o- M " A acti,itie) i) bein* achie,ed.
CONCLUSION:
The pre)ent )tudy analy;ed the *rowth o- )a+ple bank like State Cank o- India.
Oriental Cank o- #o++erce( #enturion Cank( Cank o- Caroda and Union Cank o- India(
DDB# Cank and I#I#I Cank durin* pre +er*er and po)t +er*er period. The abo,e analy)i)
clearly )howed that the per-or+ance o- +er*ed bank) i) re)pect o- *rowth o- total a))et).
e,enue( pro-it) in,e)t+ent) and depo)it) wa) not di--erent -ro+ the e5pectation). Dowe,er(
I#I#I Cank ha) achie,ed hi*her *rowth rate in all re)pect) He5cept depo)itI a+on* )a+ple
bank) taken -or the )tudy. It i) hoped by the corporate )ector) that i+pro,ed per-or+ance
@J
would -ollow M and A acti,itie)( they ha,e to proceed +ore care-ully )o that they can a,oid
co++on +i)take) a))ociated +ea)ure) to *au*e the )ucce)) o- the ac<ui)ition acti,itie) and
adopt )uitable +ea)ure to i+pro,e their po)t +er*er per-or+ance in -uture al)o.
TABLE-$
L*7! &0 Sa.1e Ba%?7
S.NO. Na+e o- the Cank Year
$. State Cank o- India 1EE@
-. Oriental Cank o- #o++erce 1EE9
3. #enturion Cank 1EEJ
9. Cank o- Caroda 1EEE
<. Union Cank o- India 1EEE
@. DDB# Cank 3:::
,. I#I#I Cank 3::1

TABLE # -
L*7! &0 Me"ge' Ba%?7 *% I%'*a
S.NO. Mer*in* Cank) Mer*ed Cank Year
1.
&ak)h+i #o++ercial Cank &td #anara Cank 1EJ7
3.
Cank o- #ochin &td State Cank o- India 1EJ7
4.
The Miraj State Cank &td. Union Cank o- India 1EJ7
7.
The Dindu)tan #o++ercial =unjab National Cank 1EJ@
@E
Cank &td.
@.
Trader0) Cank &td Cank o- Caroda 1EJ9
8.
United Indu)trial Cank &td Allahabad Cank 1EJJ%JE
9.
Cank o- Ta+ilnadu Indian O,er)ea) Cank 1EJJ%JE
J.
The Cank o- Thanja,ur Indian Cank 1EJJ%JE
E.
=arur #entral Cank &td Cank o- India 1EJJ%JE
1:.
=urbanchal #entral Cank o- India 1EE:
11.
New Cank o- India =unjab National Cank 1EE4
13.
Cank o- ?arad &td Cank o- India 1EE7
14.
?a)hinath Seth Cank State Cank o- India 1EE@
17.
Carl Doab Cank Oriental Cank o- #o++erce 1EE9
1@.
=unjab #o%operati,e Cank Oriental Cank o- #o++erce 1EE9
18.
3:0th #entury Binance #enturion Cank 1EEJ
19.
Careilly #orporation Cank Cank o- Caroda 1EEE
1J.
Sikki+ Cank Union Cank o- India 1EEE
1E.
Ti+e) Cank DDB# Cank 3:::
3:.
Cank o- Madura I#I#I Cank 3::1
TABLE - 3
Cha%ge7 *% a6e"age g"&;!h &0 !&!a1 a77e!7 a%' *!7 6a"*a4*1*!/ *%
Se1e)! Me"ge" Ba%? U%*! (R7. I% C"&"e7)
S.NO. Na+e o- the
Cank)
Mean
Ce-ore
Mean
A-ter
t % ,alue !rowth ate
TT
1. State Cank o-
India
E@@J:.7@J
H1@:[email protected]
1@:[email protected]
H371.9E43I
4.JJ:T @9.83
8:
3. Oriental Cank
O- #o++erce
9497.8E@:
H3@7E.:113I
19718.79@
H@@E7.3:71I
4.389T 148.18
4. #enturion
Cank
[email protected]@:
[email protected]@@I
[email protected]@:
H1E9J.EEE1I
4.4E:T 981.37
7. Cank o-
Caroda
[email protected]@4
H8411.1791I
81481.8::
H9E47.3993I
7.9@@T 87.9:
@. Union Cank O-
India
3174:.:9J
H4843.474:I
494E8.7:4
[email protected]@77I
7.997T 97.@:
8. DDB# Cank 37E8.E@@:
H1778.::8EI
3:713.7J:
HJ4E4.J@81I
7.3:9T 919.7E
9. I#I#I Cank 8:3J.JE@:
[email protected]
[email protected]@
H7@97J.:E83I
4.@:1T 14J9.:4
T % S*g%*0*)a%! 1e6e1 a! <M NN-Mea% g"&;!h "a!e.

TABLE-9
Cha%ge7 *% a6e"age g"&;!h &0 "&0*! a%' *!7 6a"*a4*1*!/ *%
Se1e)! Me"ge" Ba%? U%*!7 (R7. I% C"&"e7)
S.NO. Na+e o- the
Cank)
Mean
Ce-ore
Mean
A-ter
t % ,alue !rowth
ateTT
$. State Cank
O- India
1E3.3J9@
H9:.3@E@I
11JE.4J@:
H@[email protected]@7:I
4.9@ET @1J.@7
81
-. Oriental Cank o-
#o++erce
J3.373@
H9:.J371I
337.97@:
H71.4@:3I
4.79@T 194.39
3. #enturion Cank 8.99@:
H9.8477I
31.E9@:
H11.@@:3I
3.1E8T 337.4@
9. Cank o- Caroda 38E.143@
H14:.1978I
718.4E::
H13J.J9E4I
1.8:JT @7.91
<. Union Cank o-
India
184.1J3@
HJ3.4J47I
1J1.119@
HE3.19:4I
.3E:T 1:.E:
@. DDB# Cank @1.@J3@
H38.EE@:I
[email protected]:::
H117.J@:4I
4.738T 4E1.J4
,. I#I#I Cank 87.9@::
H3J.8@83I
[email protected]@
H933.@J7@I
3.:99T [email protected]
N -S*g%*0*)a%! 1e6e1 a! +.+<M NN -Mea% g"&;!h "a!e
N&!e: The 0*g("e g*6e% *% !he Pa"e%!he7*7 I%'*)a!e7 SD.

TABLE-<
Cha%ge7 *% a6e"age g"&;!h &0 "e6e%(e *%)&.e a%' *!7 6a"*a4*1*!/ *%
Se1e)! Me"ge" Ba%? U%*!7 (R7. I% C"&"e)
S.NO. Na+e o- the
Cank
Mean
Ce-ore
Mean
A-ter
t % ,alue !rowth
ateTT
$. State Cank o-
India
1:4:8.87:
H1@:J.413EI
1813@.@E9
H383@.:347I
4.J77T @8.78
83
-. Oriental Cank o-
#o++erce
9E4.11@:
H@1.@:J1I
1E:8.:1::
[email protected]
4.@:9T 17:.4J
3. #enturion Cank 4E.349@
H@1.@:J1I
774.173@
[email protected]:4:I
7.1EJT 1:3E.4J
9. Cank o- Caroda 4EE8.@J9@
[email protected]@8@I
8:[email protected]@
H897.7E3EI
7.8EJT @:.@1
<. Union Cank o-
India
[email protected]@:
H73J.4:7:I
8:[email protected]@
H897.7E3EI
7.8EJT @44.39
@. DDB# Cank 389.::3@ 18E:.J@3@
H938.497EI
4.J@1T @44.39
,. I#I#I Cank @87.@:::
[email protected]@7EI
8813.:9@:
[email protected]:3I
3.3E3T 1:91.41
N -S*g%*0*)a%! 1e6e1 a! +.+<M NN - Mea% g"&;!h "a!e
N&!e: The 0*g("e g*6e% *% !he Pa"e%!he7*7 I%'*)a!e7 SD.

TABLE # @
Cha%ge7 *% a6e"age g"&;!h &0 'e&7*!7 a%' *!7 6a"*a4*1*!/ *%
Se1e)! Me"ge" Ba%? U%*!7 (R7. I% C"&"e)
S.No. Na+e o- the
Cank)
Mean
Ce-ore
Mean
A-ter
t % ,alue !rowth ateTT
$. State Cank o-
India
83J33.714 1J39.78 4.947T 8J.7@
84
H11937.@839I H1EJ4:.1:74I
-. Oriental Cank o-
#o++erce
833@.:43@
H1E39.97J1I
1@@:4.:74
H@1E:.7:9JI
4.4@1T 17E.:7
3. #enturion Cank 773.4944
[email protected]@7I
3J9J.:E@:
H1737.14E8I
3.994T @@:.8:
9. Cank o- Caroda [email protected]
[email protected]
@3E71.19:
H9118.J497I
7.93@T [email protected]
<. Union Cank o-
India
1E:JJ.91J
[email protected]
1@:3J.E3J
H8314.1394I
7.JT 9@:.1:
@. DDB# Cank 1989.E:
HEJ7.1J3:I
1@:3J.E3J
H8314.1394I
7.138T 9@:.1:
,. I#I#I Cank 7E9J.JE3@
H4J3:.@189I
[email protected]
H3317E.J3J3@I
4.333T 939.3:
T %S*g%*0*)a%! 1e6e1 a! +.+<M NN - Mea% g"&;!h "a!e
N&!e: The 0*g("e g*6e% *% !he Pa"e%!he7*7 *%'*)a!e7 SD.
TABLE # ,
“TB Aa1(e &0 D*00e"e%! Aa"*a41e7

S.N&. Na.e &0 !he
Ba%?
T&!a1
A77e!7
P"&0*! Re6e%(e I%6e7!.e%!7 De&7*!7
$. State Cank o-
India
S S S S S
-. Oriental Cank
O- #o++erce
S S S S S
87
3. #enturion
Cank
S S S S S
9. Cank o-
Caroda
S S S S S
<. Union Cank
O- India
S N.S S S S
@. DDB# Cank S S S S S
,. I#I#I Cank S S S S S

S&(")e: C&.(!e' 0"&. Ta41e 3-,
S: S*g%*0*)a%!
N.S: N&! S*g%*0*)a%!
A. FOCUS ON MERGER OF GTB GIT> OBC
The announce+ent by CI on 39
th
Fuly( 3: o- the +er*er o- Oriental Cank o-
#o++erce and the !lobal Tru)t Cank ca+e a) a )urpri)e to all tho)e trackin* the -ortune) o-
the belea*uered new *eneration pri,ate )ector bank +ainly -or two rea)on). Bir)tly( which
!C had been accountin* around -or a pri,ate in,e)tor to bait it out o- it) -inancial +e))( a
public )ector bank -a+ily co+in* to it) re)cue wa) <uite un-ore)een. Secondly( a ). 1@::
crore non 2 per-or+in* a))et) HN=AI =ort-olio con)titutin*1EK o- it) a))et) ba)e wa) hardly
an attracti,e propo)ition -or any potential ac<uirer.
ESU&TS OB TDE ME!E6
Bro+ the point o- ,iew o- OC#( the +er*er will pu)h the bank o- -ew notche) hi*her
in the lea*ue o- public )ector bank). In ter+) o- depo)it)( the +er*er will +ore the bank -ro+
it) current 11
th
po)ition to 1:
th
)lot in ter+) o- a))et) and ad,ance) -ro+11
th
and J
th
)lot.
ECh*4*! 9
P"e a%' P&7! Me"ge" >*gh1*gh!7
8@
H). #r)I 3:%:8
!TC
3:%:8
OC#
ank =o)t
Mer*er
OC#
ank
De&7*!7 @8:: 4@897 % 71397 1:
A'6a%)e7 4::: 1E8J1 % 338J1 J
A77e!7 8J:: 71::9 % 79J:9 J
Ne! P"&0*! %393.9: 8J8
E.1&/ee7 13:: 148:3
B"a%)he7 1:7 1:14
ATM7 39@ 93
NPA(M) 1E.99 Nil

The S/%e"g*e7: A part -ro+ catapultin* OC# three notche) hi*her in the =SC ladder
It wa) e5pected that the bank would bene-it -ro+ )yner*ie) in ter+) o- *eo*raphical network(
technolo*ical in-ra)tructure( -our) area) and ta5 bene-it).
a. Ge&g"ah*)a1 7/%e"g*e7: The North ba)ed OC# would *et an ea)y -oothold
into the already e)tabli)hed bankin* network o- !TC in the )outh and we)t. Thi) would
bene-it in ter+) o- +arket penetration and widenin* o- cu)to+er ba)e.
b. Te)h%&1&g*)a1 7/%e"g*e7: Coth bank) u)e the )a+e bankin* )o-tware.
Binancial o- In-o)y) which +ake) technolo*ical inte*ration +uch ea)ie).
c. F&)(7 a"ea7: !TN like) OC# ha) a )tron* retail ba)e port-olio and in ter+)
O- product e5ten)ion pro,ide) a *ood )it. It will al)o add +ore than 3:: ATM) to it) e5i)tin*
93 by ,irtue o- +er*er. Apart -ro+ addin* to it) depo)it) and ad,ance) ba)e( the bank which
i) )tron* on the reco,er) -ront i) con-ident o- reco,erin* at lea)t 7:K o- the N=A0) o- !TC
with in the -ir)t year it)el-.
88
d. TaC Be%e0*!7: carry -orward lo))e) to the tune o- al+o)t ). 4:: #rore) and
depreciation -ro+ !TC will be allowed to be )et o-- a*ain)t OCS0) pro-it) *i,in* the +uch
needed ta5 break -or the later which i) one o- the hi*he)t payin* bank) in India. It will al)o
*et 7:K ta5 rebate on the bad a))et) o- !TC.
Thu)( -ittin* the)e )yner*ie) into the ,alue chain +atri5( it wa) hoped that OC# would
on the whole *ain -ro+ the +er*er in ter+) o- increa)ed )ale) re,enue( )a,in* in operatin*
co)t)( on technolo*ical up *radation and inte*ration and in ter+) o- -inancial )yner*ie)
throu*h ta5 break). On e5pectation o- the)e )yner*ie)( the +er*er between !TC and OC#
took place.
SECTION # B
MERGERS AND ACQUISITIONS IN T>E P>ARMACEUTICAL
INDUSTRY:
International and national le,el +er*er( ac<ui)ition) and takeo,er) ha,e now beco+e
a co++on pheno+enon in the phar+aceutical indu)try( Internationally.
A+erican Do+e =roduct +er*ed with #yana+id.
S?C with )terlin*
hone =oulenc took o,er -a)hion)
CSB with boot)
!ala5 with Currou*h) welco+e
#iba !ei*y with Sando;(
>arner Dindu)tan with =arke Da,i)(
Doech)t with hone =ollenc ect.
Are )o+e o- the e5a+ple) o- bi* takeo,er). Cy M " A the)e co+panie) beca+e e,en
lar*er with +ore -inancial power at their di)po)al o,er their co+petitor). In co+in* day)(
with the help o- international co+panie) the MN#) will capture andtake control o- Indian
89
#o+panie) to control the Indian Market. To +atch the )ituation created by international
+er*er) and takeo,er)( Indian co+panie) are adoptin* the )a+e path -or e5a+ple. >ork hard
to took o,er Merind and Tata =har+a( anba5y took o,er #or)land)( Nichola) pira+al took
o,er oche( Coehrin*er and Su+itra =har+a.
EFFECTS OF M : A:
The ine,itable re)ult) are job lo)) o- worker). Cecau)e o- o,erlappin* o- lob) lar*e
nu+ber o- worker) are declared )urplu). A-ter +er*er !la5o 2 >elco+e and #iba 2Sando;
announced a reduction o- 1@ thou)and and 1: thou)and o- thi) work-orce re)pecti,ely world 2
wide. Upjohn and phar+acia decided to clo)e 37 o- their @9 plant) in di--erent countrie) a-ter
thi) +er*er. So+e countrie) are adoptin* the buy and *row +ethod. They are takin* o,er
)o+e popular brand) and increa)in* their bu)ine)).
S?C takeo,er crocin -ro+ Duphar( anba5y took o,er 9 leadin* brand) -ro+ !u-ic(
Dr. eddy0) &ab purcha)ed 8 product) o- Dolphin and two each -ro+ p-i+e5 and )ol=har+a
)un phar+a purcha)ed all leadin* brand) o- NAT#O.
A-ter )ellin* the popular brand) the co+panie) are beco+in* )ick and clo)in* their
)hutter) throwin* the worker) on the )treet. The *o,ern+ent per+i))ion to the MN#) to
co+e to India with 1::K e<uity ha,e threatened the e5i)tin* co+panie) with the )a+e ori*in
and their worker). Throu*h the proce)) o- +er*er)( ac<ui)ition) and takeo,er) MN#) will
*radually perpetuate their *rip on Indian Indu)try by the creation o- a li+ited nu+ber o-
+e*a co+panie) ha,in* +onopoly co+petition people will ha,e to pay an price a) it happen)
in the )eller) +arket.
ECh*4*!-<
S&.e !& Pha".a )&.a%/ .e"ge"7 *% !he ;&"1'
C&.a%/ Me"ge" Yea" &0 Me"ge" Aa1(e &0 Me"ge'
C&.a%*e7
DOG Che.*)a17 Ma"*&% La47 $H2@ O @.-$ 4%
B"*7!&1./e"7 S=(*44 C&". $H2H O $-.+H 4%
A.e"*)a% >&.e
P"&'()!7
A.e"*)a%
C/%a.*'e
$HH9 O H., 4%
Bee)ha. G"&( S.*!h8?1*%e:F"e%)h $H2H O ,.H 4%
8J
>&00%a% La
R&)he
S/%!aC La4 $HH9 O <.3 4%
E1*1/1/ PCS >ea1!h S/7!e. $HH9 O 9 4%
Sa%'&F Ge"4e" $H29 O 3., 4%
S.*!h?1*%e
Bee)ha.
S!e"1*%g $HH9 O -.H 4%
G1aC& B(""&(gh7 Ge1)&.e $HH< O $9.- 4%
>&e)h7! MMD8 R&(77e1 $HH< O ,.- 4%
Pha".*)a U5&h% $HH< O $9.- 4%
Rh&%e-P&(1e%)
R&"e7
F*7&% $HH< O -., 4%
BASF B&&!7 $HH< O $.3 4%
C*4a Ge*g/ Sa%'&F $HH@ O 3+.$ 4%
>&00.
%1a R&)he

C&.age L!'.8 $HH, O $$ 4%
>&e)h7! A.G Rh&%e P&(1e%) $HH2
A7!"a Pe%e)a $HH2 O @, 4%
GLOBAL P>ARMACEUTICAL INDUSTRY:
Nichola) =ira+al ha) +er*ed hone =oulenc with it)el-. Earlier it had ac<uired 7:K
Stake -ro+ Branco 2 !er+an li-e +ajor A,enti) =har+a -or 1@9.@: #rore " 3:K -ro+ an
open o--er to the public.
&ikewi)e( #adila Dealth #are throu*h it) )ub)idiary econ Dealth #are ha) ac<uired
39.93K )take in !er+an e+edie). Sub)e<uently the *roup +ade 3 open o--er)( re)ultin* it)
)take increa)in* to 99.49K in !er+an e+edie).
#ON#&USION6
!lobal =har+aceutical indu)try i) *oin* throu*h a di--icult pha)e due to three +ajor
8E
i))ue) dru* )a-ety( -ewer new dru* launche) and increa)in* penetration o- *eneric) in
de,eloped +arket). Dowe,er thi) alone +ay not be )u--icient to dri,e *rowth on )u)tainable
ba)i) and co+panie) would ha,e to increa)in*ly analy)i) in 2 hou)e " D producti,ity and
inno,ation proce)).
SECTION # C
MERGERS AND ACQUISITIONS IN STEEL INDUSTRY
A Re6*e; &% M*!!a1 # A")e1&" )&.4*%e
On Fanuary 39( 3::8 the ho)tile bid -or ac<uirin* Arcelor wa) publicly
announced by Mittal Steel. Arcelor i) the world0) )econd lar*e)t )teel producer a-ter Mittal
Steel. &ak)h+i Ni,a) Mittal( chie- e5ecuti,e and chair+an( Mittal )teel i) )et -or ac<uirin*
Arcelor a) part o- hi) *rand ,i)ion o- creatin* a *ain )teel corporation with a capacity o- o,er
1:: +illion +etric tone) which wa) three ti+e bi**er than Fapan0) Nippan Steel( clo)e)t ri,al
o- Mittal )teel.
I%!"&'()!*&% a4&(! M*!!a1 S!ee1:
&ak)h+i Ni,a) Mittal i) known -or ac<uirin* )ick )teel plant) where,er he could
-ind one to hi) likin*. The worth o- ac<ui)ition) +ade in one decade i) S J bn. In 3::7( he
ac<uired the US%ba)ed International )teel *roup -or S 7bn. Thi) catapulted +ittal )teel to the
no.1 po)ition in the *lobal )teel indu)try( o,ertakin* Arcelor. The ,ary ne5t year( in 3:(
Mittal beca+e the -ir)t per)on to own a )take o- 3E.@K in a #hine)e co+pany Du+an ,alin
)teel by in,e)tin* S 41.7 bn. Thank) to )trin* o- +er*er) and ac<ui)ition)( today( Mittal0) )teel
e+pire )pan) acro)) 17 nation) in -our continent).
A")e1&":
Arcelor i) one o- the +o)t pro-itable )teel co+panie) in the world and a )y+bol o-
European )ucce)). Arcelor i) al+o)t the entire )teel indu)try o- Spain( Brance( Cel*iu+ and
&u5e+bour*.
Mittal 2 Arcelor6 The deal detail) o--er price % S 34 bn The Creakup
% 7 Mittal )teel )hare) plu) [email protected]@ each -or @ Arcelor )hare)
9:
% Ability to elect to recei,e +ore ca)h or )hare)( )ubject to 3@K
#a)h and 9@K )tock paid in a**re*ate.
% 41K pre+iu+ on 1 2 +onth wei*hted a,era*e price.
C&%'*!*&%7
$. Mini+u+ acceptance N @:.:K
-. Mittal )teel )hareholder appro,al
3. Mittal -a+ily undertake) to ,ote -a,or o- tran)action
9. No chan*e in Arcelor )ub)tance durin* o--)et
O!he"7
$. A*ree+ent to )ell Do-a)co to Thy))enkrupp -or 4.J H # S 8J/)hare I
-. Modi-ication o- )uper ,otin* ri*ht) upon co+pletion
3. #o+pare with Cra;ilin* law with re)pect to Cra;ilian )ub)idie) E5pected clo)in*
% Q- -++@
I.a)! &0 !he a)=(*7*!*&%I4*' a%%&(%)e.e%!:
>hile Arcelor) )tock price) )hot up by 3JK a-ter the announce+ent( Mittal )teel0)
)hare price) *ained 8K )ince the bid wa) +ade public( )hare) price) o- both the Arcelor
and Mittal )teel are on the ri)eO in Bebruary Arcelor0) )tock price) reached an all%ti+e hi*h
41.143 ( -a,orin* Mittal. Ce)ide)( +any analy)t) and indu)try ob)er,er) opine Hthat it *i,e)
the co+bined -ir+ better *eo*raphical co,era*e and increa)ed acce)) to cheap raw +aterial)
a key -actor -or hi*her pro-it).
S!"a!eg*) 7/%e"g*e7:
The +er*er would create a ,ery lar*e co+petitor with acti,itie) in +any product)
91
and +arket). The i+pact could take )e,eral -or+).
1. The )i;e o- the +er*ed entity +i*ht al)o ati+ulate other +er*er) a+on* lar*e )teel
co+panie) )uch a) Fapane)e producer)( pre,iou)ly con)idered un thinkable.
3. The )i;e o- the +er*ed entity could *i,e it )u--icient )cale and +o+entu+ to per+it a
+ajor entry into china where -orei*n co+panie) ha,e been in)i*ni-icant in the )teel
indu)try.
4. The +er*er could al)o create opportunitie) -or other )upplier)( a) buyer) o- )teel
product) will not wi)h to be wholly dependant on a )in*le hu*e )upplier and +ay +o,e to
+ore +ultiple )ourcin*.
P&7!-Me"ge" 7*!(a!*&%:
1. Arcelor Mittal co+bine( i- +ateriali;ed would create a new behe+oth with +ore
than 1:K )hare o- the *lobal )teel production and a +arket capitali;ation clo)e to S
7: bn.The new co+pany would ha,e al+o)t 4@:::: e+ployee) in 81 plant) )pread
acro)) 39 countrie). A co+pany o- thi) )i;e i) bound to ha,e a )i*ni-icant i+pact on
the *lobal )teel indu)try it will al)o ha,e a )tabili;in* e--ect on the )teel and raw
+aterial price). Burther( Mittal and Arcelor are not co+petitor) in +any o- their
product )e*+ent)%Mittal rule) the +arket -or low%*rade )teel with littin* pre)ence
in the hi*h%end )teel +arket which i) Arcelor) do+ain. And while Mittal ha) a
)tron* pre)ence in North A+erica. Arcelor) )tron* hold) are Europe and &atin
A+erica.
3. The +er*er would create a co+pany with crude )teel capacity o- 1@7 +illion tone)
per year( e<ui,alent to 11.7K o- the world total.
4. The co+bined entity throu*h lar*e( will not be bi* enou*h to do+inate the world
+arket e5cept perhap) in )o+e re*ional or national +arket).
7. The US +arket i) one place which the co+bined entity can look at. Mittal )teel
throu*h it) ac<ui)ition o- the ailin* International Steel !roup HIS!I( ha) already created a
pre)ence -or it)el- in the hi*h *rade )teel )e*+ent. >ith Arcelor bein* a +arket leader in
Europe in the )a+e product cate*ory thi) help) the co+pany to e5pand it) pre)ence with little
+arket o,erlap.
93
The deal i) )ucce))-ul( will create the lar*e)t )teel enterpri)e in the world without any
)i*ni-icant o,erlap in the +arket a) both the -ir+) operate in di--erent )e*+ent). >hile
Arcelor i) the leader in hi*h <uality product)( Mittal operate) in low *rade )teel product).
C&%)1(7*&%:
Binally( the bid i) an indication that *ood ti+e) +ay be -inally co+in* -or the
notoriou)ly -ra*+ented *lobal )teel indu)try. A) o- now( the top -i,e producer) co+bined a
+er*er 3:K o- the *lobal )teel production the reali;ation i) )lowly but )urely drawin* on the
*lobal )teel player) and it would be no )urpri)e i- +er*er +ania hit) other) too.
SECTION # D
MERGERS AND ACQUISITIONS IN CEMENT INDUSTRY
One o- the olde)t o- brick and +ortar indu)trie)( the Indian ce+ent )ector i) now
ho**in* the li+eli*ht a) leadin* player) are *earin* to -ace the new econo+y. The ce+ent
)ector ha) under*one a ,eritable +eta+orpho)i) year) and now the indu)try i) e)ti+ated to
ha,e a turno,er o- 3@:: crore.
Girtually thrown open to +arket -orce)( the )ector )tand) witne))e) to lar*e 2 )cale
con)olidation +o,e) ,ia ac<ui)ition( +er*er) and ho)tile takeo,er).
Mer*er -e,er will hop up thi) year a) bank) jo)tle to e5pand their retail reach(
knowled*e ba)ed indu)trie) hunt -or )trate*ic -it) and co++odity co+panie) )eek
econo+ie) o- )cale.

M " A acti,ity be*an in 1EEE( a) pri,ate -ir+) launched re)tructurin* pro*ra+) in
)tru**le to )ur,i,e a )lowdown in Indian indu)trial *rowth in the late 1EE. Mer*er acti,ity
ha) hi*her by 3@K in calendar year 1EEE co+pared to year a*o. Analy)t) e5pect the price to
pick up thi) year. E5pert) )aid buyer) lookin* -or econo+ic) o- )cale can readily -ind )eller)
)addled )urplu) capacitie).
Al)o( +oney to -und M " A ) will co+e -ro+ a boo+in* )tock +arket. The ce+ent
indu)try )aw )e,eral +er*er) and )trate*ic buyout) in 1EEE( with India ce+ent) con)olidatin*
it) po)ition in )outh India and !ujarat A+buja Coo)tin* #apacitie) in the northern " we)tern
re*ion). In )e*+ented indu)trie) like ce+ent( con)olidation +ake) )en)e a) )+aller capacitie)
are not -ea)ible.
94
>OLCIMLS ACQUISITIONS OF GUDARAT AMBUDA CEMENT LTD:
Swi)) 2 Major Dolci+ ha) )truck a deal with !ujarat A+buja #e+ent &i+ited
H!A#&I the country0) -ourth lar*e)t ce+ent co+pany. Throu*h the deal( thi) i) con)idered a)
the bi**e)t in the Indian ce+ent indu)try and the +o)t e5pen)i,e in the *lobal indu)try.
Dolci+ ha) e)tabli)hed a )tron* po)ition in Indian that will help it to tower o,er it) *lobal
co+petitor)( &a-ar*e o- Brance( #e+e5 o- Me5ico( and Italy ce+ent) o- Italy. It ha) e,en
)urpa))ed it) do+e)tic ri,al !ra)i+( which wa) till recently the lar*e)t player with Ultratech
#e+ent.
#o+petitor)( both national and international( will now be all the harder 2 pre))ed
To +atch with Dolci+ a) it ac<uired a do+inant po)ition in a +arket o- the hi*her *rowth
potential.
T>E DEAL:
On Fanuary 4:
th
( 3::8( Dolci+ picked up a 17.JK in !A#& throu*h the deal( which
i) e)ti+ated to be about ). 31:: crore). It ha) paid ). 1 per )hare o- !A#&( which
include) a non 2 co+pete pre+iu+ o- ). 1@ per )hare. Thi) i) the hi*he)t e,er price in the
ce+ent indu)try( a) Dolci+ ha) )helled out a hu*e S 313 per ton o- +anu-acturin* capacity to
!A#&.
INTRODUCTION ABOUT >OLCIM:
Dolci+ -ir)t entered the Indian +arket throu*h A##. In Fanuary( 3: it bou*ht the
!ujarat A+buja )take in A##( which wa) around 17.7K throu*h an in,e)t+ent ar+ called
A+buja #e+ent India &td.( HA#I&I. &ater it went to ac<uire A+buja #e+ent) Ea)tern &td.(
HA#E&I de)pite payin* a hi*h price -or !A#&( Dolci+ now control) 44 +illion) ton) per
annu+ turno,er in the country. Throu*h !A#&( Dolci+ will be ha,in* a leadin* po)ition in
the northern and we)tern re*ion) o- India. Cy ha,in* a -a)t 2 tracked entry into the country.
Dolci+ i) well placed to increa)e the e5i)tin* capacity either by +oderni;ation / e5pan)ion
plan) or add new capacitie) by ac<ui)ition) o,er the ne5t two to three year).
97
POST # ACQUISITION EFFECT:
=o)t 2 Ac<ui)ition( Dolci+ ha) achie,ed a +arket )hare o- 3@K while !ra)i+ alon*
with )i)ter concern Ultratech #e+ent control)( another 3@K with the deal re)ultin* in two
clear +ajor player)( who to*ether control @:K o- the +arket and )e,eral )+all )hare)( e5pert)
-eel that the indu)try i) currently )tandin* on the )houlder) o- *iant) who will )upport) the
indu)try0) -uture *rowth and dri,e -urther con)olidation.
IMPLICATION FOR T>E INDUSTRY:
Indu)try e5pert) belie,e that the deal i) a po)iti,e )tep -or the indu)try. >ith the two
lar*e)t player). Dolci+ Halon* with A## and !A#&I an Aditya Cirla Hwith !ra)i+ and Ultra
Tech #e+entI now controllin* al+o)t @:K o- the +arket( the deal with re)ult in price
)tability -or the indu)try a) there will be little cuttin*. Burther( the)e two behe+oth) will
dictate the +arket dyna+ic) -or the indu)try throu*h their )trate*ie).
A-ter the Dolci+ 2 !A#& deal( there +ay be )o+e intra 2 *roup con)olidation. One
Intere)tin* )trate*y -or Dolci+ would be to +er*e all the three co+panie) A##( !A#& and
A#E& to e5ploit operational )yner*ie). On the other( the Aditya Cirla !roup +ay plan to
con)olidate it) ce+ent operation) by +er*in* !ra)i+ and Ultra Tech #e+ent). Burther( there
are al)o *ood chance) that the *roup +ay ac<uire a )ub)tantial )take in C? Cirla H?e)ora+
and Man*ala+I ce+ent) to beco+e the lar*e)t producer o- ce+ent.
CONCLUSION:
>ith the deal( with two +ajor player) Dolci+ and !ra)i+( controllin* @:K o- the
+arket to*ether( alon* with their a))ociate)( with their a))ociate)( with carry Indian #e+ent
Indu)try in -uture.
CONCLUSIONS : SUGGESTIONS
“They li,ed happily e,er a-ter' +ay not be true in +any +arria*e) and it i) +ere
)o in the ca)e o- corporate +arria*e). It i) )aid that +arria*e) are +ade in hea,en( but +er*e)
and ac<ui)ition are +ade on earth. &ike +arria*e( there are e)tran*e+ent)( +i)under)tandin*)
and -ailure) i- not di,orce in +er*er) and ac<ui)ition).
9@
In +any ca)e)( the u)ual dictu+ Pac<uire in ha)te and repent at lei)ure0 would be
applicable. Bailure rate) are about 9: to J:K. The +ain rea)on i) due to not ha,in* a
-ra+ework -or ac<ui)ition police). =oor )trate*ic -it( cultural and )ocial di--erence)( in
e--icient due dili*ence( e*o cla)h( -ailure to -ollow up and rank +i)placed opti+i)+ are )o+e
o- the +ajor cau)e) o- +er*er -ailure).
CONCLUSIONS:
Thi) )tudy hi*hli*ht) the -ollowin* conclu)ion)6
1I A +er*er can happen when two co+panie) decide to co+bine into one
entity or when one co+pany buy) another. An ac<ui)ition alway) in,ol,e)
the purcha)e o- one co+pany by another.
3I Mer*er) are -ound in +any ,arietie) )uch a) hori;ontal +er*er( ,ertical
+er*er( +arket 2 e5ten)ion +er*er( product e5ten)ion +er*er and
con*lo+eration.
4I Bro+ the per)pecti,e o- how the +er*er i) -inance( there are two type) o-
+er*er ,i;.( purcha)e +er*er and con)olidation +er*er.
7I An ac<ui)ition or a take o,er can be done throu*h open +arket purcha)e(
-riendly ac<ui)ition( pre-erential allot+ent o- bail%out takeo,er.
@I The -unction) o- )yner*y allow -or the enhanced co)t e--iciency o- a new
entity +ade -ro+ two )+aller once 2 )yner*y i) the lo*ic behind +er*er)
and ac<ui)ition).
8I The other rea)on) -or +er*er) include econo+ie) o- )cale and )cope( -a)t
*rowth( ta5 bene-it)( )ta-- reduction)( ac<uirin* new technolo*y( i+pro,e
+arket reach and indu)try ,i)ibility( utili;ation o- )urplu) -und) etc.
98
9I The accountin* treat+ent o- an a+al*a+ation in the book) o- the tran)-eree
co+pany i) dependent on the nature o- a+al*a+ation. Bor a +er*er( the
P=oolin* o- Intere)t0 +ethod i) u)ed and -or an ac<ui)ition the P=urcha)e
Method0 i) u)ed.
JI Ac<uirin* co+panie) u)e ,ariou) +ethod) to ,alue their tar*et. So+e o-
the)e are ba)ed on co+parati,e ratio) 2 )uch a) the =/E and =/S ratio)
replace+ent) co)t)( or di)counted ca)h -low analy)i).
EI An M " A deal can be e5ecuted by +ean) o- a ca)h tran)action. Stock 2
-or 2 )tock tran)action( or a co+bination o- both. A tran)action )truck with
)tock i) not ta5able.
1:I Creak 2 up de%+er*er )trate*ie) can pro,ide co+panie) with opportunitie)
to rai)e additional e<uity -und)( unlock hidden )hareholder ,alue( and
)harpen +ana*e+ent -ocu). De%+er*er) can occur +ean) o- di,e)titure)(
ca,e 2 out)( )pin 2 o--) or )plit 2 up.
11I The ,ariou) i))ue) that are in,ol,ed in M " A ) o- Indian co+panie) are
related to per)onnel( +aterial( +ana*e+ent and other i))ue) )uch a)
-luctuation o- )hare price( cu)to+er )er,ice( con-u)ion to cu)to+er poor
credit +ana*e+ent etc. The planner) and )uper,i)or) the +er*er proce))
)hould con)ider the)e i))ue) / cu)to+er) to plan a )+ooth tran)ition proce)).
13I Bro+ the re,iew o- literature( the rea)on) -or carryin* out M " A ) are
cate*ori;ed a) )yner*i)tic( non%)yner*i)tic and / or )trate*ic. The literature
clearly )how) that the pay+ent o- a hi*h ac<ui)ition pre+iu+ and the lack
o- plannin* to inte*rate the or*ani;ation) are the leadin* cau)e) o- -ailure.
14I Mer*er) can -ail -or +any rea)on) includin* a lack o- +ana*e+ent
-ore)i*ht( the inability to o,erco+e practical challen*e)( and lo)) o- re,enue
+o+entu+ -ro+ a ne*lect o- day%to%day operation).
99
CONCLUSION:
One )i;e doe)n0t -it all. Many co+panie) -ind that the be)t route -orward i)
e5pandin* owner)hip boundarie) throu*h +er*er) and ac<ui)ition). Bor other)( )eparatin* the
public owner)hip o- a )ub)idiary or bu)ine)) )e*+ent o--er) +ore ad,anta*e). At lea)t in
theory( +er*er) create )yner*ie) and econo+ie) o- )cale( e5pandin* operation) and cuttin*
co)t). In,e)tor) can take co+-ort in the idea that a +er*er will del,er enhanced +arket power.
Cy contra)t( de%+er*ed co+panie) o-ten enjoy i+pro,e operatin* per-or+ance
thank) to rede)i*ned +ana*e+ent incenti,e). Additional capital can -und *rowth or*anically
or throu*h ac<ui)ition. Mean while( in,e)tor) bene-it -ro+ the i+pro,ed in-or+ation -low
-ro+ the de%+er*ed co+panie).
M " A co+e) in all )hape) and in,e)tor) need to con)ider the co+ple5 i))ue)
in,ol,ed in M " A. The +o)t bene-icial -or+ o- e<uity )tructure in,ol,e) a co+plete analy)i)
o- the co)t) and bene-it) a))ociated with the deal).
Still e--ort) -or M " A will continue a) a )trate*y -or *rowth( -or )yner*y( -or
widenin* capabilitie) and e5perti)e -or acce))in* wider +arket etc. It i) i+portant to a))e))
the co)t bene-it) in,ol,ed and the opti+u+ )trate*y re<uired whether or not M " A i) the
nectar o- corporate li-e or poi)on pill -or de)truction.
SUGGESTIONS:
Thi) )tudy brin*) out the -ollowin* )u**e)tion)6
1I In,e)tor) in a co+pany that i) ai+in* to take o,er another co+pany +u)t
deter+ine whether the purcha)e will bene-icial to the+. In order to do )o(
they +u)t a)k the+)el,e) how +uch the co+pany bein* ac<uired i) worth.
In thi) conte5t( the deal+aker) ha,e to e+ployee) di--erent +ethod) and
tool) )uch a) co+parati,e ratio)( replace+ent co)t( di)counted ca)h -low
etc when a))e))in* a tar*et co+pany.
3I To -ind +er*e) that ha,e a chance o- )ucce))( in,e)tor) )hould look at the
9J
criteria o- rea)onable purcha)e price( ca)h tran)action) etc. In,e)tor) )hould
-or ac<uirin* co+panie) with a healthy *ra)p o- reality.
4I It would be a )eriou) +i)take i- the takeo,er) were concluded without a
proper audit o- the -inancial a--air) o- the tar*et co+pany. Area) to look
-or are )tock)( )ale ability o- -ini)hed product)( recei,able and their collect
ability( detail) and location o- -i5ed a))et)( un)ecured loan)( clai+) under
liti*ation( loan) -ro+ the pro+oter) etc.
7I The chance o- a )ucce))-ul takeo,er o- an unrelated bu)ine)) can be
con)idered to be ,ery bri*ht i- the an)wer) to the -ollowin* <ue)tion are
a clear ye).
• Doe) the co+pany ha,e a top cla)) +ana*e+ent tea+ to run the new
ac<ui)itionQ
• Doe) the co+pany ha,e deep pocket) to -ind un-ore)een -inancial need) o-
the co+pany taken o,erQ
• Doe) the co+pany ha,e ade<uate -inancial and in-or+ation control )y)te+
that can be tran)planted in the new co+panyQ
@I i)k o- -ailure will be +ini+i;ed i- there i) a detailed e,aluation o- the tar*et
co+pany0) bu)ine)) condition) carried out by pro-e))ional) in that line o-
bu)ine)). Detailed e5a+ination o- the +anu-acturin* -acilitie)( product de)i*n
-eature)( rejection rate)( di)tribution )y)te+( pro-ile o- key people and
producti,ity o- work -orce )hould be done.
One )hould not be carried away by a *ood head <uarter buildin*( *ue)t hou)e on a
beach( plenty o- land -or e5pan)ion etc.
8I The -ir)t )tep a-ter takeo,er i) the inte*ration o- the new out-it with the
ac<uirin* co+pany in all re)pect). All -unction) )uch a) +arketin*(
co++ercial( -inance( production( de)i*n and per)onnel )hould be put
in place. Thou*h new per)on) -ro+ the parent co+pany will be brou*ht(
the co+petent e5ecuti,e) o- the co+pany taken o,er )hould be *i,en
pro+inence and opportunitie) in the co+bined or*ani;ation.
9E
The *ood point) o- the earlier culture )hould be pre)er,ed while di)cardin*
tho)e not needed.
9I A-ter the )i*nin* o- the M " A a*ree+ent( the top +ana*e+ent )hould not
)it back and let thin*) happen. The -ir)t 1:: day) a-ter the takeo,er deter+ine
the )peed with which the proce)) o- tacklin* the proble+) can be achie,ed.
Top +ana*e+ent -ollow up i) e))ential to *o with a clear road +ap o- action)
to be taken and )et pace -or i+ple+entin* once the control i) a))u+ed.
JI Alliance) between two )tron*er co+panie) are a )a-er bet than between two
weal partner). Bre<uently +any )tron* co+panie) actually )eek )+aller
partner) in order to *ain control while weal co+panie) look -or )tron*er
co+panie) to bail the+ out. Cut( e5perience )how) that the weak link
beco+e) a dra* and cau)e) -riction between partie).
EI Ade<uate plannin* -or the inte*ration o- the +er*er( e)tabli)hin* e--icient
and e--ecti,e reward )y)te+ and incenti,e +echani)+) and e)tabli)hin*
the +o)t )i*ni-icant techni<ue) and )trate*ie) -or )ucce))-ul +er*er) and
ac<ui)ition). There-ore the)e and other )hould be re*arded a) )ub)tantially
i+portant in the reali;ation o- producti,e )yner*ie) throu*h +er*er) and
ac<ui)ition).
BIBLOGRAP>Y
B&&?7:
Binancial Mana*e+ent 2 Theory and =ractice
% =ra)anna #handra
Binancial Mana*e+ent 2 Te5t and =roble+)
% M.y ?han( =? Fain
MagaF*%e7 I Ne;7ae"7
J:
% Cu)ine)) Today
% Cu)ine)) Giew)
% Cu)ine)) Ti+e)
Ge47*!e7:
www.banknetindia.co+
www.captial+arket.co+


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