The document provides a comprehensive study on mergers and acquisitions in the Indian corporate sector. It discusses key deals in various sectors between 2007-2009 and analyzes the financial performance and synergies achieved by the acquiring companies. The research methodology involves ratio analysis and t-tests to test hypotheses about changes in liquidity, solvency, profitability and other metrics after various acquisitions. Key findings include improvements in liquidity, solvency and returns for most acquisitions, but some deals showed no significant changes or needed improvements in specific areas. Suggestions focus on cost reduction and inventory management.

1. A COMPREHENSIVE STUDY ON
“MERGER AND AcquisitiON”
PRESENTED BY:-
SPECIAL THANKS
TO, ANJALI GUPTA
PROF. SHYAMSUNDER REHANA MINSARIYA
SINGH
Represented from Laxmi Institute of
Management, Sarigam

2. MERGER & ACQUISITON CHANGING
INDIAN CORPORATE SECTOR
 MNCs have actively participated in M&A process :
 to get market entry or to strengthen their presence
 to quickly get access to various complementary assets
 Relatively cheaper access to capital
 to capture huge Indian market at relatively low cost of capital
 to improve manufacturing capabilities
 OTHERS:
 The reliance of Indian Corporate Sector on Foreign Technology purchase
has increased
 To stand up to transnational with their strong and internationally
recognized brands

3. INTRODUCTION

4.  Meanings:
 MERGER: When two companies become one entity with a new
name, and agree upon shared control in the management of
the new company, a merger is said to have taken place
 ACQUISITION: When two companies become one, but with the
name and control of the acquirer, and the control goes
automatically into the hands of the acquirer. An
acquisition, also known as a takeover or a buyout, is the buying
of one company by another

5. TYPES OF M&A
 Horizontal Merger
 Vertical Merger
 Conglomerate Merger
 Congeneric Merger
 Reverse Merger
 Accretive Merger
 Dilutive Merger
 Triangular Merger
 Reverse Triangular Merger
 Cross Border Acquisition

6. PROCESS OF M&A
 PLANNING PHASE  IMPLEMENTATION PHASE
 Develop Business Plan  Search companies for Acquisition
 Develop Acquisition Plan  Screen & prioritize Potential
companies
 Initiate Contact with Target
 Negotiate the deal
 Develop Integration plan
 Obtain necessary approval & close
the deal
 Implement Integration

7. MODE OF FINANCING
 Cash
 Financing:
 Leverage or Buyouts
 Exchange Ratio
 Internal Accrual
Factoring
Hybrids

8. REASONS FOR FAILURE OF M&A
 Cultural Diversity leads to Differences
 Negligence in Due Diligence Process
 Inefficiency of Management
 Improper valuation of acquisition deal
 Difficult to meet with the complexity of rules
and regulations

9. RESEARCH
METHODOLOGY

10.  OBJECTIVES:
 To apply theoretical concept of merger and acquisition in practical
manner.
 To study the impact on Companies’ Financial Position after acquisition or
after being acquired.
 To analyze the effect of going global through merger and acquisition on
Investors’ Earnings respectively.
 To evaluate the worthiness of the company before and after merger and
acquisition.

11.  TOOLS
 Ratio Analysis
 T- Test
 HYPOTHESIS:
• Ho1: The merged companies did not achieve better liquidity after merger and
acquisition. The parameters used are current ratio and quick ratio.
• Ho2: The merged companies did not achieve better solvency after merger and
acquisition. The parameters used are debt equity ratio, interest coverage
ratio, long term debt equity and total assets to owners fund.
• Ho3: The merged companies did not achieve better profitability after merger and
acquisition.
• Ho4: After the merger and acquisition, Management of the focused companies got
inefficient
 The parameter used as dividend per share, operating profit per share:
• Ho5: Return on capital employed did not change after merger and acquisition.
• Ho6: Operating profit margin did not show any change after merger and
acquisition.
• Ho7: Average cost of capital did not show any change after merger and acquisition.

12.  LIMITATIONS:
 The Project emphasis on a limited sample
 One serious limitation of the study is, that it is quite difficult
to analyzes the in-depth study of the financial data, as some
acquirer company is cross-bordered based firm so their
accounting standard and methods are different
 There are many tools and methods for evaluating the Merger
and Acquisitions but we had used only pre and post analysis

13. SEGMENT
OVERVIEW

14. Year Deal ($ mn) Sector Acquirer Target
2007 12040 steel Tata steel Corus
2008 2600 Metals Sterlite industries Asarco
(India) Ltd
2008 4600 Pharmaceutical Daiichi sankyo co. Ranbaxy
ltd Laboratories Ltd.
2009 2591 Oil $ gas ONGC Ltd Imperial energy
corp
2009 591 IT Tech Mahindra Ltd Mahindra satyam

15. CORPORATE STAKE METHODS OF FINANCING SYNERGY EFFECT
HOLDING
1. Tata steel 100%  Leveraged Buyout  Low Cost with High-tech
 Internal Accrual Production
 Strong Culture fit
2. Sterlite 100%  Net Cash  Expansion of business
Industries  Increase in market share
(India) Ltd
3. Daiichi sankyo 51%  Net Cash  Competitive Advantage
co. Ltd  Cost Benefit
 Excellence in R&D
 Strong IP
4. ONGC Ltd 100%  Loan from Parent Company  Increase in market Share
 Help from Government
5. Tech 51%  Buyout  Tax Benefit
Mahindra Ltd  Exchange Ratio  Right Time at Right Price

16. MARKET SHARE
OF COMPANIES

17. crude oil production
10%
9%
ONGC
Oil
81%
Pvt
Natural gas production
7% 0
16% ONGC
Pvt
77%
Oil

18. FINDINGS

19. Findings About Acquisition By TATA Steel Ltd of
Corus Plc.
Hypothesis Based on Assessment Result Remark
Ho1 Liquidity T-test<2tail Reject Better Liquidity
critical value
Ho2 Solvency T-test<2tail Reject Better Solvency
critical value
Ho3 Profitability T-test<2tail Reject Better Profitability
critical value
Ho4 Management T-test<2tail Reject Improve in Management
efficiency critical value Efficiency
Ho5 Return on T-test<2tail Reject Change in return on capital
Capital critical value employed
Employed
Ho6 Operating Profit T-test<2tail Reject Change in operating profit
critical value
Ho7 Average Cost of T-test<2tail Reject Change in interest
Capital critical value Coverage

20. Findings About Acquisition By Sterlite Industries (India)
Findings About Acquisition By Sterlite Industries
Ltd of ASARCO (India) Ltd of Asarco
Hypothesis Based on Assessment Result Remark
Ho1 Liquidity T-test<2tail Reject Better Liquidity
critical value
Ho2 Solvency T-test<2tail Reject Better Solvency
critical value
Ho3 Profitability T-test<2tail Reject Better Profitability
critical value
Ho4 Management T-test<2tail Reject Improve in Management
efficiency critical value Efficiency
Ho5 Return on T-test<2tail Reject Change in return on capital
Capital critical value employed
Employed
Ho6 Operating Profit T-test<2tail Reject Change in operating profit
critical value
Ho7 Average Cost of T-test<2tail Reject Change in interest
Capital critical value Coverage

21. Findings About Acquisition By Daichii Sankyo of
Ranbaxy Lab
Hypothesis Based on Assessment Result Remark
Ho1 Liquidity T-test>2tail Accept Need to improve the
critical value Liquidity Position
Ho2 Solvency T-test<2tail Reject Better Solvency
critical value
Ho3 Profitability T-test>2tail Accept Low Profitability. Need to
critical value improve
Ho4 Management T-test=2tail Neither At par
efficiency critical value accept nor
reject
Ho5 Return on T-test<2tail Reject Change in return on capital
Capital critical value employed
Employed
Ho6 Operating Profit T-test>2tail Accept No change in operating
critical value profit
Ho7 Average Cost of T-test<2tail Reject Change in interest
Capital critical value Coverage

22. Findings About Acquisition By ONGC Ltd of Imperial
Energy Corp
Hypothesis Based on Assessment Result Remark
Ho1 Liquidity T-test<2tail Reject Better Liquidity
critical value
Ho2 Solvency T-test<2tail Reject Better Solvency
critical value
Ho3 Profitability T-test<2tail Reject Better Profitability
critical value
Ho4 Management T-test=2tail Neither At Par
efficiency critical value accept nor
reject
Ho5 Return on T-test<2tail Reject Change in return on capital
Capital critical value employed
Employed
Ho6 Operating Profit T-test<2tail Reject Change in operating profit
critical value
Ho7 Average Cost of T-test<2tail Reject Change in interest
Capital critical value Coverage

23. Findings About Acquisition By Tech Mahindra Ltd.
Of Mahindra Satyam
Hypothesis Based on Assessment Result Remark
Ho1 Liquidity T-test<2tail Reject Better Liquidity
critical value
Ho2 Solvency T-test<2tail Reject Better Solvency
critical value
Ho3 Profitability T-test<2tail Reject Better Profitability
critical value
Ho4 Management T-test=2tail Neither At Par
efficiency critical value accept nor
reject
Ho5 Return on T-test<2tail Reject Change in return on capital
Capital critical value employed
Employed
Ho6 Operating Profit T-test<2tail Reject Change in operating profit
critical value
Ho7 Average Cost of T-test<2tail Reject Change in interest
Capital critical value Coverage

24. Suggestions

25.  Though it was observed in TATA Steel Ltd before, that its profitability is better
than premerger, still it needs to be attentive and careful about its cost
reduction system as Gross Profit Margin & Return on Long Term Fund are
showing a negative trend
 The Sterlite unit and Tech Mahindra must reduce the days of credit facility
made available to their customers as its credit policy is too liberal during post
M&A project
 The Tech Mahindra and Others should reduce their investment in inventory by
using Inventory Control Techniques.
 These units are required to use the latest Supply Chain Techniques like Just-In-
Time, Efficient Customer Response and Quick Response which focus on
reducing the inventory level and thereby reducing capital required the
inventory.
 Though it was observed in ONGC Ltd before, that its profitability is better than
premerger, still it needs to be attentive and careful about its cost reduction
system as Gross Profit Margin & Return on Long Term Fund are showing a
negative trend

26. CONCLUSION

27.  So, it is concluded that:
 Steel Industry is highly capital intensive sector and the whole investment
of TATA Steel Ltd cannot be capitalized in a short duration
 Acquisition of ASARCO Ltd. Is not much effective for Sterlite Industries Ltd.
 For Daichii Sankyo, M&A benefits the investors at a greater extent
 For ONGC, the tool of M&A has not proved as effective as it was expected
 Tech Mahindra can achieve success in long term as company is providing
maximum return on investment and also shows a positive sign in various
management parameters.
 Hence, Mergers and Acquisitions comes in all shapes and sizes, investors
need to consider the complex issues involved in mergers and acquisitions.