YOGESH J.

LALANI
18
MBA-1
S.R.LUTHRA

MERGER & ACQUISITION

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Authored by: Rohan
Definition of Merger & Acquisition {M&A}:-
1. Merger: - A merger is the complete absorption of one firm by
another and in this scenario we refer to an acquisition that takes
place in friendly terms.
2. Acquisitions:-The acquiring firm retains its identity and
acquires all the assets and liabilities of the acquired firm that
ceases to exist and, thus, such transactions are also called
acquisitions.
In a consolidation, both firms cease to exist and a new firm is
created after the acquisition (e.g. Peco Energy and Unicom
merged to form the new utility firm Exelon.
Types of Mergers :-
 Horizontal: a firm acquires another firm in the same industry
(Daimler – Chrysler in 1998)
 Vertical: a firm acquires another firm in a different stage
(backward or forward) of the production process (GM -
Fisher Body)
 Conglomerate (merger): combination of two firms in
unrelated industries (Mobil Oil – Montgomery Ward in 1974)
 Concentric:-Merger of two firms that are so related that
there is a carryover of specific management functions
(research, manufacturing, finance, marketing, etc.)
Example: Citigroup (principally a bank) buying Salomon
Smith Barney (an investment banker/stock brokerage
operation)
Reasons for M & A:-
• Economies of scale from horizontal mergers (e.g. BP and
Amoco expected to save $2 bn annually from operations)
• Economies of scope from vertical mergers (integrate
suppliers, such as in the case of GM and Delphi, but recent
trend is towards outsourcing)
 • Complementarities: a small firm may have a unique product,
but may need the experience in marketing and sales of a
mature firm that may also be in need of new products
• Unused tax shields: a firm may acquire another (loss-
making) firm to take advantage of tax-loss carry-forwards
(IRS will object if this is only reason for merger)
• Excess cash/inefficiencies
 A firm with excess cash can use it better by acquiring
another firm with good projects; a firm with excess cash can
also become a target of an acquisition if it is not investing the
cash in positive NPV projects
 Acquisitions can also eliminate inefficiencies frequently
related to bad management
Profile of Some of the Company Merger and
Acquisition by Tata Group

M
General Chemical Industrial Products Merge by Tata Chemicals.
General Chemical Industrial Products (GCIP) is one of the top five global
producers of soda ash. Established in 1884, GCIP was acquired by Tata
Chemicals in March 2008, making the Tata company the second largest soda
ash producer in the world.GCIP mines the Green River basin in Wyoming, USA,
for naturally occurring deposits of trona (an ore containing soda ash). The site is
estimated to contain 134 billion tonnes of trona, enough to meet global soda ash
demand for hundreds of years at current levels of consumption.
Areas of business
GCIP produces natural soda ash, which requires much less energy, capital and
raw materials than synthetic soda ash production, thus making it a significantly
less costly process. This cost differential gives the company a competitive edge
in international markets.
Joint ventures, subsidiaries, associates
GCIP has a 75-per cent stake in the General Chemical (Soda Ash) Partners
business, the unit that operates the Green River facility, consisting of an
underground trona mine and a refining plant on the surface. Tata Chemicals
has100% stake of a company.
Location
General Chemical has its headquarters in East Hanover, New Jersey, USA
Jaguar & Land Rover Merge by Tata Motors.
Jaguar Land Rover is a business built around two great British car brands with
exceptional design and engineering capabilities. Jaguar Land Rover’s
manufacturing facilities are in the UK.

Areas of business
Jaguar Cars, founded in 1922, is one of the world’s premier manufacturers of
luxury saloons and sports cars. Land Rover has been manufacturing 4x4s since
1948. Acquired by Tata Motors in June 2008Its products have defined the
segments in which they operate.Jaguar Land Rover’s manufacturing facilities are
in the UK. The Jaguar Land Rover business employs over 16,000 people,
predominantly in the UK, including some 3,500 engineers at two product
development centres, in Whitley in Coventry and Gaydon in Warwickshire.
The Jaguar XF, XJ and XK models are manufactured at the company's Castle
Bromwich plant in Birmingham, UK, while the Jaguar X-TYPE is produced
alongside the Land Rover Freelander 2 at the Halewood plant in Liverpool, UK.
Land Rover's Defender, Discovery 3, Range Rover Sport and Range Rover
models are all built at Solihull, UK.
The business is a major wealth generator for the UK, with 78 per cent of Land
Rovers exported to 169 countries and 70 per cent of Jaguars exported to 63
countries. Sales to customers are conducted principally through franchised
dealers and importers . Aquire. $2.3 billion (approximately)
Location
Jaguar Land Rover is based in the UK

Google bought YouTube ($1.65B)

 Google bought a rival.
 YouTube had four times as many hits as Google Video
 YouTube streamed nine times as many clips as Google Video.
 Google’s choice to buy rather than build marked a big strategic change.
 YouTube = 53% of video users in the world.

Major M&A Deals Undertaken Abroad by India Inc.

  Tata steel buys Corus Plc : 12.1$ billion
 Hindalco acquired novelis: 6$ billion
 Tata buy jaguar and land rover : 2.3$ billion
 Essar steel buys Algoma Steel: 1.58$ billion
 Vodafone buys hutch : 11$ billion
 POSCO to invest in building steel manufacturing plants and facilities in India by
2016
 Goldman Sachs Plans investment in private equity, real estate, and private
wealth management

SOME FAIL CASES IN M&A.

 Quaker Oats bought in 1994 Snapple for $ 1,7 bn.
$ 500 mil. lost on announcement, $ 100 mil. a year later
Snapple was spun off 2 years later at 20% of price
 Anheuser-Busch bought in 1982 Campbell-Taggart at $
560 mil
Closed down after 13y of struggling for survival
 IBM bought Lotus for $ 3,2 bn. (more than 100%
premium)
Probably never to be recouped