MERGER &

ACQUISITIONS
PRESENTED BY
JAWED AKHTAR
DEEKSHYA AJEY
LOVEJOY
NITIKA BHANDARI
MANAN ARORA
YASH AGRAWAL

Contents

Introduction

Definition

Reasons

Advantage

Disadvantages

Types

Cases

Introduction

Mergers and acquisitions(M&A are both

aspects ofstrategic management,
corporate finance andmanagement.

It is a type ofrestructuringin that they

result in some entity reorganization with
the aim to provide growth or positive
value.

Definition
MERGER

Itis a legalconsolidation of two

companies into one entity

Combining of two business entities under

common ownership
Or
Two firms coalesce and share resources
in order to realise a common goal

ACQUISITION

It occurs when one company takes over

another and completely establishes itself
as the new owner.

Itis the purchase of one business or

company by another company or other
business entity.

"Acquisition" usually refers to a purchase

of a smaller firm by a larger one.

REASONS

Increase the value of company stock

Increase growth rate & make good

investment

Improve stability of earning and sell

To acquire reasons to stabilize operations

To balance, complete or diversify the

product line

ADVANTAGES

DISADVANTAGES

Diseconomies of scale if business become too large, which

leads to higher unit costs.

Clashes of culture between different types of businesses can

occur, reducing the effectiveness of the integration.

May need to make some workers redundant, especially at

management levels - this may have an effect on motivation.

May be a conflict of objectives between different businesses,

meaning decisions are more difficult to make and causing
disruption in the running of the business.

Types of merger

Horizontal

Vertical

Co- generic

Market extension

Product extension

Contd
HORIZONTAL
exists between two companies who compete in same industry
segment
companies continue their operations and gains strength in
terms of improve performance, increase capital & enhance
profits
FOR EG: A merger between Coca-Cola and the Pepsi beverage
division, for example, would be horizontal in nature. The goal
of a horizontal merger is to create a new, larger organization
with more market share. Because the merging companies'
business operations may be very similar, there may be
opportunities to join certain operations, such as
manufacturing, and reduce costs.

CONTD

VERTICAL
two or more companies merge who are in same
industries but in different fields
decides to combine all their operations and
production under one shelter
FOR EG : An automobile company joining with a parts
supplier would be an example of a vertical merger.
Reliance and FLAG telecom group in 2003

Contd

CO-GENERIC
companies in association are some way or the other
are related to the production process, business market
or basic required technology
Includes extension of product line or acquiring
components that are required in the daily operations

FOR EG: CITI group acquisition of travelers insurance while

both were in the financial service industry but have
different product line

CONTD

MARKET EXTENSION
A market extension merger takes place between
two companies that deal in the same products but in
separate markets. The main purpose of the market
extension merger is to make sure that the merging
companies can get access to a bigger market and that
ensures a bigger client base.

FOR EG: Eagle Bancshares Inc by the RBC Centura. Eagle

Bancshares is headquartered at Atlanta, Georgia and has
283 workers. It has almost 90,000 accounts and looks
after assets worth US $1.1 billion.

CONTD

PRODUCT EXTENSION
A product extension merger takes place between two
business organizations that deal in products that are related to
each other and operate in the same market. The product
extension merger allows the merging companies to group
together their products and get access to a bigger set of
consumers. This ensures that they earn higher profits.

FOR EG: The acquisition of Mobilink Telecom Inc. by Broadcom

Broadcom deals in the manufacturing Bluetooth

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

Mobilink Telecom Inc. deals in the manufacturing of product

designs meant for handsets that are equipped with the Global
System for Mobile Communications technology.

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

networking chips that have high speed and General Packet

POSITIVE ASPECTS OF MERGER

MERGER OF BANK OF RAJASTHAN WITH ICICI BANK

MERGER OF CENTURION BANK OF PUNJAB AND HDFC

BANK

MERGER OF BANK OF
RAJASTHAN WITH ICICI BANK

The Reserve Bank of India approved the merger of Bank of

Rajasthan with ICICI Bank Ltd, India's largest private sector
Bank.

ICICI paid Rs.3000 Cores for it.

All branches of Bank of Rajasthan Ltd. will function as

branches of ICICI Bank Ltd. with effect from August 13, 2010

The boards of both the banks on May 23, 2010 approved

the merger.

RBI was critical of BOR's promoters not reducing their

holdings in the company.

Contd

Each 118 shares of BOR will be converted into 25 shares of

ICICI Bank

All customers will be extended seamless services as per

existing Bank of Rajasthan procedures.

All existing BoR products will continue with current features

and charges. Customers can continue to transact using their
current BoR cheque books, ATM cards, lockers etc.

The minimum balance requirements and service charges on

all type of accounts will remain unchanged.

Post the system integration customers can benefit from ICICI

Bank's enhanced branch network of over 2500 branches and
over 5600 ATMs spread across 1400 locations in the country.

REASONS FOR MERGER

The Bank of Rajasthan with the asset base of Rs incurred the net
loss after provisions and taxes remained at Rs. 102.13 crores for
the year ended 31st Mar 2010. . 17,300.06 crores

ICICI Bank is learnt to have indicated that its willing to pay more
than BoRs present market valuation.

According to banking circles, the Tayals, who acquired BoR a

decade ago, have been under pressure to sell the old private bank
which is grappling with directives from Sebi and RBI.

In March, Sebi banned 100 entities allegedly holding BoR shares on

behalf of the promoters from all stock market activities.

RBI had slapped a penalty of Rs 25 lakh on the bank for a string of

violations like deletion of records in the banks IT system,
irregular property deals and lapses in the accounts of a corporate
group

Contd

Post merger results are satisfactory.

The liquidity position i.e the quick ratio has increased

after merger.

Debt equity ratio is also improving,

Net Profit margin is increasing year by year.

Return on net worth has been increased after merger

and the EPS has taken a good move after merger.

Hence, the merger is good for both the banks.

MERGER OF CENTURION
BANK OF PUNJAB AND
HDFC
BANK
The deal took
place in February 2008

It was the largest merger in the private sector banking space

in India.

CBOP was valued at $2.63 billion (Rs 9510 crores)

In 2008 RBI sanctioned merger of CBoP with HDFC Bank.

The operations of both banks were merged with effect from

May 23, 2008.

WHY HDFC CHOOSED CBOP

Cultural fit between the organizations

The bank had a large nationwide network

Strong leadership positions in retail segment

Strong asset quality

High earning growth

Both the banks had a strong position in vehicle financing

Attractive route to supplement HDFC Banks organic growth

7,500 talented employees

OBJECTIVE OF MERGER

Horizontal merger (Both the companies were from same industry)

Core objectives:

Achieve economies of scale

Widening the line of products

To get more dominance on the market

To face the competition posed by foreign banks and domestic banks

(ICICI)

IMPACTS

Positive impact:

Increased geographical presence

Recorded growth figures as follows: [by march-2013]

Net profit by 44.6% to Rs. 4.6 billion
Net Interest Income by 74.9% to Rs.17.2 billion
Advances grew by 79.8% & deposits by 60.4%

Negative impact:

High level of write-offs due to bad asset quality of CBoP in personal

loan and 2 wheeler loans

NEGATIVE ASPECTS

MERGER BETWEEN AIR INDIA AND INDIAN AIRLINES

MERGER BETWEEN AIR INDIA

AND INDIAN AIRLINES

The government of India on 1 march 2007 approved the

merger of Air India and Indian airlines.

Consequent to the above a new company called National

Aviation Company of India limited was incorporated under the
companies act 1956 on 30 march 2007 with its registered
office at New Delhi

Reasons for Failure

The merger coincided with a flurry of increased

domestic and international competition.

Weak management and organization structure.

More attention to non-core issues such as long term

fleet acquisitions and establishing subsidiaries for
ground handling and maintenance, than to addressing
the state of the flying business.

Bloated workforce

Unproductive work practices

Political impediments to shedding staff