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Merger motives, benefits and outcomes

Motives and Benefits of Mergers

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Merger motives, benefits and outcomes

  1. 1. Mergers Motives, Benefits and Outcomes
  2. 2. Business Combination - Motives and benefits 1. Functional 2. Strategic 3. Psychological Dr Raju Indukoori 2
  3. 3. A. Functional Motives Functional motives result in synergies and efficiencies resulting in growth, expansion and profit or wealth maximization of the shareholders which can be classified as 1) Financial benefits 2) Operational synergies 3) Managerial efficiency 4) Resources advantage Dr Raju Indukoori 3
  4. 4. A. Functional Motives 1) Financial Benefits • Tax Benefits : OBC acquiring GTB and Tata Steel acquired Corus • Cash Rich : Satyam and Mytas • Zero debt firms : Soft ware • Low debt value : Essel Group in IVRCL • Cost cutting : India Cements + Raasi Cements Dr Raju Indukoori 4
  5. 5. A. Functional Motives 2) Operational Synergies • Operations and Capacity : IBP and IOC • Technology : Essar Steel and Algoma • Resources: Tata Steel and Corus, Hindalco and Nevelis Dr Raju Indukoori 5
  6. 6. A. Functional Motives 3) Managerial Efficiency • Virgin Mega Stores (UK) MBO into Zavvi in 2007 • Virgin Comics (UK) MBO into Liquid Comics in 2008 • Virgin Radio (UK) MBO into Absolute Radio in 2008 • International Harvester (USA) MBO into Navistar in 1993 Dr Raju Indukoori 6
  7. 7. A. Functional Motives 4) Resources Advantage • Sterlite Industries acquired BALCO and Hindustan Zinc • Vedanta acquired Sterlite • Sesagoa and Mingoa Dr Raju Indukoori 7
  8. 8. B. STRATEGIC REASONS 1) Business Expansion / Growth / Scale up 1. ICICI Bank acquired SCICI, ITC Classic Finance, Anagram Finance, Bank of Madura, ICICI, Standard Chartered Grindlays Bank, Sangli Bank and Bank of Rajasthan. 2. Ranbaxy’s acquisition of Merck’s generic in 2014 3.Hindustan Lever and Brooke Bond Lipton India in 1996 4.HDFC Bank acquiring Times Bank and Centurion Bank of Punjab Dr Raju Indukoori 8
  9. 9. B. STRATEGIC REASONS 2) Enter New Markets / Overseas Market 1.Tata Steel acquiring Corus 2.Tata Tea and Tetley 3.Coca Cola acquired Parle food to enter Indian Market 4. Tata Tele + DoCoMo Dr Raju Indukoori 9
  10. 10. B. STRATEGIC REASONS 3) Diversification • Mahindra + Satyam • L&T and Voltas Dr Raju Indukoori 10
  11. 11. C. PSYCHOLOGICAL REASONS • Leadership: SBI and its Associates, Indian Airlines and Air India • Megalomania : Laxmi Niwas Mittal • Hubris spirit : Competitive Auctions / Bid Offer Dr Raju Indukoori 11
  12. 12. Motives and benefits of a Merger A. Functional 1. Financial 2. Operational 3. Managerial 4. Resources B. Strategic 1. Business Expansion / Growth : 2. Enter New Markets 3. Diversification Dr Raju Indukoori 12 C. Psychological 1. Megalomania 2. Hubris spirit
  13. 13. Outcomes of Business Combination • Change in stock price • Change in Ownership • Change in Management • Change in Product/s • Financial Structure • Change in culture • Organizational Structure • Job Structure • Company Name • Brand image • Logo Dr Raju Indukoori 13
  14. 14. Any Questions…. Dr Raju Indukoori 14
  15. 15. Thank You Dr Raju Indukoori 15
  • SravyaPentapati

    Sep. 13, 2020
  • MaheshTata5

    Feb. 26, 2020

Motives and Benefits of Mergers

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