Explaining the mechanism of M&A, Re-construction in Indian Scenario

1. Amalgamations, Mergers &
Acquisitions
MVSK RUTHVIK

2. Coverage of the Session
• Introduction
• Understanding of BasicTerms
• Strategies of M&A
• Valuation of M&A
• Determining theViability of M&A Deal
• Case Study- Bank Acquisitions
• Benefits & Challenges in M&A Deals
• M&A Advisory- Prospect forCA
• Conclusion

3. Introduction
• Global M&A is one of the most happening and
fundamental element of corporate strategy in today's
world. Many companies around the world have merged
with each other with a motive to expand their businesses
and enhance revenue.
• There were quite a good number of deals which took place
in the first half of FY-16 majority of being Snapdeal-
Exclusively.com,Paytm-Freecharge,Kotak-ING,Ola-TaxiForSureetc
• The number of M&A majorily in October 2015 have been
close to USD 3144 mn majorily due to big ticket
transactions like American tower corporation majority
stake in Viom Network & Carnival Group Acquistion of L&T
commercial arm.

4. Basic Terms
• Amalgamation is an arrangement where two or more
companies consolidate their business to form a new firm, or
become a subsidiary of any one of the company.
• For practical purposes, the terms amalgamation and merger
are used interchangeably. However, there is a slight difference
• Merger involves the fusion of two or more companies into a
single company where the identity of some of the companies
gets dissolved.
On the other hand, amalgamation involves
dissolving the entities of amalgamating companies and
forming a new company having a separate legal.

5. Types of Amalgamation
• Amalgamation In the nature of Purchase- Purchase Method
• Amalgamation in the nature of Merger – Pooling of Interest Method
• AS-14 throws more light over when and how can we consider
amalgamation to be in the nature of purchase or merger.

6. Acquisitions
• Acquisition refers to the process where a bigger company taking over
a smaller company and the price paid for acquiring a company is called
the acquisition price or acquisition premium. The price is paid in terms
of cash or acquiring company's shares or both
• There are two types of business acquisitions
• Friendly acquisition: A company invites other companies to acquire
its business.
• Hostile acquisition: The company does not want to sell its business.
However, the other company determined to acquire the business
takes the aggressive route of buying the equity shares of the target
company from its existing shareholders.

7. Mergers & Acquisitions
• M&A can be defined as a type of restructuring in that they result
in some entity reorganization with the aim to provide growth or
positive value.
• An acquisition or takeover is the purchase of one business or
company by another company or other business entity. Such
purchase may be of 100%, or nearly 100%, of the assets or
ownership equity of the acquired entity.
• It is a challenge for people outside the company to exactly decide
whether it was hostile take over or friendly take over.
• How many of you all can tell about LetsBuy.com-Flipkart & Air
Deccan-Kingfisher Airlines ??

8. Popular M&A Deals in India in 2015
• Large Indian companies are going through a phase of
growth as all are exploring growth potential in foreign
markets and on the other end even international
companies is targeting Indian companies for growth
and expansion.
• Some of the major factors resulting in this sudden
growth of merger and acquisition deal in India are
favorable government policies, excess of capital flow,
economic stability, corporate investments, and
dynamic attitude of Indian companies.
• The Below are few of the M&A which are very
popularly known across the country

9. New Delhi based online marketplace Snapdeal acquires Exclusively.com
Star India acquires telugu language based MAA network
Hike, messenger app by a Joint Venture of Bharati enterprises and
SoftBank acquires US-based Zip Phone
Chennai based hospital chain, Apollo Hospital acquires Nova Speciality
Bengaluru Based Online cab aggregator Ola Cabs acquires TaxiForSure in
March 2015

10. Types of Mergers & Acquisitions
• Horizontal Merger:
Companies Combine in same field &
Same industry combine together.
• Vertical Merger:
Companies in different field but same
industry combine together.

11. • Conglomerate Merger:
• Merger between two firms that a totally un-
related to each other
A. Pure Conglomerate-nothing is common in
them.
B. Mixed Conglomerate-Companies that
looking for product extensions or market
extensions.
Co-generic Merger:
• Both the companies are related to each other
by way of production process, business
markets or basic required technologies.

12. Merger Arbitrage Reverse Merger
• Business of Stock trading of
companies which are to be
taken over or merged.
• Taking Advantage of increase in
the price of shares of acquirer
or acquire companies for a
short duration
• Arrangement where a Private
ltd company acquires public
listed company ( Shell
Company) to get the status of
listing.
• Easier way of getting listed
rather than IPO and other
complications
• Fast Process

13. Strategies of M&A
Determine the Business Plan Drivers
Strong understanding of the intended business market ,
market share & technological requirement.
Assessing the market by deciding the growth factors like
future market opportunities, recent trends.
Restructuring plans and future parameters should be
decided with exchange of information and knowledge from
both ends.
People involved in the merger should be convinced and
agree to take the deal forward

14. Valuation of M&A Deal
• It is a technical concept that needs to be estimated carefully. The
use of different valuation techniques and principles has made
valuation a subjective process. A conflict in the choice of
technique is the main reason for the failure of many mergers
• For instance, the asset value can be determined both at the
market price and the cost price. Calculating the swap ratio is at
the core of the valuation process.
• We Also determine the value of the company independently
using some of the common methods like Asset Valuation,
MarketValuation, Capitalization of income valuation.

15. Determining the Viability of Deal
• M&A’s deals are strategic business deals that are
executed only after comparing its cost with the potential
benefits to know the viability of the proposition.
• In an acquisition deal, the acquiring company estimates
the cost of acquiring the other company to gauge how
profitable will be the takeover in the long-run.
• Methods Commonly Used:
• Replacement Cost Method- Suitable for Manufacturing entities
• Discounted Cash Flow Method- Used for new companies

16. Case Study- Banks M&A
• In Nov 2014, Kotak Mahindra
Announced it was acquiring ING
Vysya Bank in all stock deal.
• The proposed Rs 15,000-crore
merger deal between Kotak
Mahindra Bank and ING Vysya
Bank got the Competition
Commission of India’s approval.

17. Benefits of M&A
• Synergic advantage when two companies come
together.
• Cost efficiency along with increasing purchasing power.
• Easy to maintain the competitive advantage.
• Increasing the market power which helps in facing
tough competition

18. Success of Merger & Acquisition
• Mergers & Acquisitions have become a common strategy to
consolidate business. The basic aim is to reduce cost, reap
the benefits of economies of scale and at the same time
expand market share.
• The success of any merger initiative primarily depends upon
the objective behind the need for a merger
• Many small organizations hastily got into mergers to stand
against highly-competitive, large scale multinational
corporations. They took mergers as a protective strategy to
save their business from being perished in the newly
created dynamic environment

19. Problems In M&A
• History of merger and acquisitions have revealed that
almost two thirds of the mergers taking place
experience failure and feel disappointed on their own
terms and pre defined parameters.
• Another reason for an unsuccessful merger is the lack of
efficient management to unite different organizational
cultures. The most challenging task is to bring together
people and make them work as a team.
• A flawed intention in terms of unethical motivation or
high expectations can eventually lead to failure of the
merger
• Any kind of agreement based completely on the
optimistic stock market condition can also lead to
failure as stock market is an uncertain entity

20. M&A Advisory
• Merging and acquiring business is a cumbersome
task. Any loophole or negligence can lead to huge
financial losses and in extreme cases even the closure
of business is possible.
• They are hired by organizations to study the market
and give strategic and financial inputs for growing
their business.
• M&A advisory analyze the need of M&A for the
organization, the cost involved, the possible benefits,
change in the capital structure, and many other
effects of the possible consolidation.
• They also plan, execute, and implement all the
phases of a mergers and acquisition process starting
from the pre-merger phase to the post-merger
integration.

21. Conclusion
• The Trend towards Merger & Acquisitions in the recent
past has drastically taken over. We keep finding many
deals might be Hostile and few would be Friendly.
• Companies are advancing very fast and big players aren’t
ready to ensure small companies turn out to be a big
player for them in future so they are going ahead with
M&A once they feel someone has a better market share in
the future.
• In Current year, there were good number of M&A Deals
happening in the startup space across all the sectors. It
has become unpredictable who may take over whom.