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    LEADERSHIP THROUGH

    WEALTH CREATION BYMERGERS AND

    ACQUISITIONS

    Presented by: Group 7

    Tisha Gugliani D05

    Shraddha Tripathi D08

    Pankaj Ishpujani D30

    Rishabh Jain D48

    Gaurav Goel D53

    Karan Malhotra D59

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    Mergers and Acquisitions

    Merger - A Merger may be defined as the combination

    of two or more independent business corporations into

    a single enterprise, usually involving the absorption of

    one or more firms by a dominant firm.

    Mergers may be broadly classified as Horizontal,

    Vertical or Conglomerate

    Acquisition may be defined as an act of one enterprise

    of acquiring, directly or indirectly of shares, voting

    rights, assets or control over the management, of

    another enterprise .

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    Mergers

    STRUCTURE 1

    A = Amalgamating Company: Ceases to Exist

    B = Amalgamated Company

    B receives all of As assets and liabilities

    Shareholders of A receive shares in B and maybe other benefits

    like debentures, cash

    Transfer assets and liabilities

    A B

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    4

    Mergers

    STRUCTURE 2 A, B and C = Amalgamating Companies: Cease to exist

    D = Amalgamated Company: may or may not have existed

    before Merger

    All assets and liabilities of A, B and C transferred to D

    Shareholders in A,B and C get shares in D.

    A

    DB

    C

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    5

    Why M&A?

    Underlying Principle for

    M&A Transactions2 + 2 4

    Additional Value of Synergy

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    6

    Mergers and Acquisitions

    Reasons for mergers & acquisitions:

    Strategic: The combined FCFs (Free Cash Flows) of

    the merged operation are greater than the sum of

    the individual cash flows.

    Financial: The cash flows and also the market

    value of the target are below their true value, due

    to perhaps inefficient management. Such firmsare typically restructured after the acquisition.

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    Types of Takeovers

    How the Deal is FinancedCash Transaction

    The receipt of cash for shares by shareholders inthe target company.

    Share Transaction The offer by an acquiring company of shares or a

    combination of cash and shares to the targetcompanys shareholders.

    Going Private Transaction (Issuer bid) A special form of acquisition where the

    purchaser already owns a majority stake in thetarget company.

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    ESSAR COMMUNICATIONS

    Essar Communications operates in four businesssegments: Telecom, telecom retail, telecom

    infrastructure and Aegis Services.

    It has a joint venture with Vodafone, a chain of telecom

    retail outlets, a nationwide telecom tower network and apresence in IT enabled services.

    Essar Telecom Infrastructure Private Limited (ETIPL) is

    one of the largest independent telecom infrastructure

    service provisioning companies in the country. It builds telecom site infrastructure and shares it with

    multiple telecom operators in India.

    It has already set up over 3,500 towers in India, with

    plans to build 20,000 towers.

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    Why Hutch was willing to sell its stake in

    HutchisonEssar?

    Aid in creating value in emerging mobile markets and

    realizing the same for the benefit of shareholders at the

    right time

    Will be able to generate huge cash for launch of

    operations in Vietnam and Indonesia

    HTIL Suffers loss of HK$768 million in 2005

    The Company did not declare any dividends for the

    year ended 31 December 2006.

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    WhyVodafone interested to

    acquire control inHutchEssar??

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    Hutch Essar andVodafone

    Controlling interest in a major, fast growing market

    Meets twin financial investment criteria

    Strong management team with good cultural fit

    Vodafone and Essar will derive greater value together

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    India: A very large market

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    IndianMobile Market

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    Oneofonly 4 major mobileoperators

    inIndia

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    Sep

    tembe

    r 21, 2007

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    THE DEAL In the year 2007, the worlds largest telecom company in

    terms of revenue, Vodafone Plc (Vodafone) made a majorforay into the Indian telecom market by acquiring a 52% stakein the Indian telecom company Hutchinson Essar Ltd., througha deal with the Hong Kong based HutchinsonTelecommunication International Ltd. It was the biggest dealin the Indian telecom market. Vodafones main motive goingin for the deal was its strategy of expanding into emerging andhigh growth markets like India. In 2007, India has emerged asthe fastest growing telecom market in the world outpacingChina. But it still had low penetration rates, making it themost lucrative market for global telecom companies.

    British telecom giant vodafone has bagged the 67% HTIL at anenterprise value of $19.3 billion (approx. Rs. 86000 crore)which comes to $794 per share.

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    PRINCIPLE BENEFITS

    Accelerates Vodafones move to a controllingposition in a leading operator in the attractiveand fast growing Indian mobile market

    India is the worlds 2nd most populated countrywith over 1.1 billion inhabitants

    India is the fastest growing major mobile marketin the world, with around 6.5 million monthly netadds in the last quarter

    India benefits from strong economicfundamentals with expected real GDP growth inhigh single digits

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    Contd.

    Increases Vodafones presence in higher growth

    emerging markets

    proportion of Group statutory EBITDA from the

    EMAPA region expected to increase from below

    20% in the financial year ending 31 March 2007

    (FY2007) to over a third by FY2012

    As of 31st July 2010, Vodafone has 111,465,260numbering strong customer base.

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    What isWealth ?

    Net Worth that is the accumulation of your residualincome over time. Therefore, to create constant andlasting wealth, you need to add value to all yourfinancial resources. These financial resources are simply

    utilized to create added residual value over time.

    Steps in wealth creation:

    -Create wealth

    -Accumulate wealth

    -Monitor and grow the wealth

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    Leadership through wealth creation

    The purpose of business leadership is to create

    wealth financial and material, human and

    social in the face of external developments

    that are never entirely foreseeable.

    Vodafone India reported revenues ofRs 69

    billion, a growth of 13.2 per cent QoQ and

    26.4 per cent YoY, one of the strongest growthin last 5 quarters.

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    Attaining leadership Indias second largest telco by sales, Vodafone Essar, posted its strongest

    growth in the last six quarters with a better-than-anticipated 26.4%

    revenue jump in the three months ended June 30, 2010.

    Vodafone Essar had turned cash-positive.

    Posted revenues of 954 million for the June quarter, up 26.4% from the

    same period last year.

    It showed an impressive rise of 13.2%.

    The improvement was driven by continued strong customer growth and

    better usage trends in India where there have been no recent significant

    price reductions by market leaders. Significant price declines have been successful and seeing minutes return

    to operators with strong brands and performing networks.

    Vodafone added 8.2 million new users in India during this period taking

    its customer base to over 109 million. India accounted for over 75% of

    customer additions globally during this quarter.

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    Conclusion

    Vodafone creating value in India

    Controlling position in a leading operator with nationwide presence

    Strong existing platform for growth

    Additional value under Vodafone ownership

    Increased Vodafones presence in high growth markets

    Increased presence of big Global Players in India

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    References

    http://www.trai.gov.in

    http://www.vodafone.com

    http://www.afaqs.com/perl/news/case_studies/index.html?mid=13

    http://www.indiaprwire.com/pdf/news/20188.pdf

    http://www.vodafone.com/start/media_relations/news/local_press_releases/india/vod

    afone_essar_press/vodafone_is_here_.html

    http://www.tonsetelecom.com/pdf%20

    files/B_E_Feb07

    .pdf

    http://www.rediff.com/money/2007/mar/08hutch.htm

    http://www.domain-b.com/companies/companies_v/vodafone/2 0070212_control.htm

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