Professional Documents
Culture Documents
5
Economies of Scale
Government Product
Approval 3 3 Differentiation
Scale of 5
Actual
2
PORTER’S FIVE FORCES
5
Number of Supplier
3
Availbility of Supplier's Threat to
Substitutes Forward Integration
5
3
PORTER’S FIVE FORCES
Number of Buyers
1 1
4
PORTER’S FIVE FORCES
Threat of Substitutes
Availbility of Close
Substitutes
Profitability of the
Scale of 5
Producers of 4 1 Switching Cost
Actual
Substitutes
4
Substitute-Price
Value
5
PORTER’S FIVE FORCES
6
CRITICAL SUCCESS FACTOR FOR READYMADE GARMENTS
Retailing Channel 07
02
Brand Strength & Reach
Financial Position 06
03
Technology
04 05
Product Diversity Price Policy
7
Corporate Strategy: ABNL
Vision: To be a premium conglomerate building leadership in businesses and creating value for all the stakeholders
8
CORPORATE STRATEGY OF PANTALOONS:
• Provide value to customers and stakeholders- Deliver everything, everywhere and at every time in
the most profitable manner
• Customer centric – constantly evolving strategies attending to changing customer trends
• Strategy of cyclic process of learning, unlearning and relearning with respect to market scenarios
Rewrite rules, retain values
India One
3
Class specific strategy India Two
India Three
9
MERGER MOTIVES: ACQUIRER & TARGET
• Business expansion into branded apparel domain • Reduce the accumulated debt to the tune of
INR.1600 crores
• Expansion of the existing portfolios by the
addition of brands across men’s, women’s and • Lower the inventory days leading to more
children segments efficient working capital
• Leverage the opportunities of cross-selling
• Help attain economies of scale and lower the
costs
• Synergies in operations in terms of procurement
& distribution as well as marketing and new
product development
10
DUE DILIGENCE
11
TYPE OF MERGER: 2012
• Aditya Birla Nuvo (Madura Fashion and Lifestyle) through its subsidiary: Peter England Fashion & Retail
Limited acquired Pantaloons business format, a part of Future Retail Group.
• The deal is an example of Forward Triangular Merger.
• The target subsidiary – Pantaloons business format is retained post-merger with the management being
replaced by that of Aditya Birla Nuvo Limited.
Pantaloons Pantaloons
ABNL- A conglomerate;
Retail India Fashion & Retail
part of ABG
Limited Limited
As a subsidiary of ABNL
12
DEAL CHARACTERISTICS: ABNL ACQUIRING PANTALOONS-2012
13
14
TYPE OF MERGER: 2015
• A business consolidation where all the apparels businesses under Aditya Birla Group come together under
one roof, to be named as Aditya Birla Fashion & Retail Limited.
• An all share deal – Explained under deal characteristics.
• A demerger under the scheme of arrangements;
ABNL- A conglomerate;
Aditya Birla Group
part of ABG
Demerge
Madura Madura
Fashion Lifestyle
Fashion unit of ABNL Part of MGLRCL-
subsidiary of ABNL
Aditya Birla
Pantaloons - Fashion and Retail
PFRL Merger Limited
Listed subsidiary
of ABNL
15
ORGANIZATIONAL ISSUES:
17
ORGANIZATIONAL ISSUES: 2012
18
Was the Deal a Success or a Failure???
Metric
2018 2017 2016 2015 2014 2013 2012 2011
Net Margin 1.58% 0.81% -1.65% -11.90% -11.02% -5.20% 6.48% 0.08%
Debt to Equity 1.61 2.12 1.57 3.58 1.75 1.92 0.00 0.00
19
Was the Deal a Success or a Failure???
Metric
2018 2017 2016 2015 2014 2013 2012 2011
Net Margin 1.58% 0.81% -1.65% -11.90% -11.02% -5.20% 6.48% 0.08%
Debt to Equity 1.61 2.12 1.57 3.58 1.75 1.92 0.00 0.00
Net profit margins declined consistently after the deal from 6.48% in 2012 to -11.90% in 2015
After the restructuring in 2015, net margins have improved but still behind the industry average of over 5%
Debt to Equity ratio has been very high since the acquisition; The fashion industry has a D/E ratio of ~0.5
ROE kept on declining post 2012 deal; After the restructuring in 2015, the returns have improved to 10.78%
in FY18
20
MARKET REACTION ( Event Study WRT Acquirer – ABNL)
Alpha =0.20215 0
NUVO
Beta =0.98835 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81
-5
-10
DATES BEFORE AND AFTER ANNOUNCEMENT OF DEAL
0
-40-36-32-28-24-20-16-12 -8 -4 0 4 8 12 16 20 24 28 32 36 40
-5
-10
-15
Days
21
T Statistics to gain insights
NUVO was having a prolonged negative CAR before the acquisition, which started
improving before the announcement and became positive just after announcement of deal
The CAR rose positive for a short time before again falling back back to negative (low level)
The CAR calculated over variable windows do not show any significant amount of abnormal
(+ve/-ve) returns
No insider information
Assess price of asset Efficient Market
leakage
22
Deal Premium Comparison and insights
Deal Premium: 36.5%
24