m&a changing face of indian biz

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MERGERS AND ACQUISITIONS

CHANGING FACE OF INDIAN BUSINESS



MERGERS & ACQUISITIONS?MERGERS & ACQUISITIONS?

y Merger: When two or more companies or firms join

to become one entity. It involves absorption of one

company by another or amalgamation of twocompanies to form a new company .

y Acquisition: Acquiring control of a corporation,

called a target, by stock purchase or exchange,either hostile or friendly.Also calledTakeover.



WHY M&A?WHY M&A?

Cost Efficiency through economies of scale.

Increased value generation.

Increase in market share.

Tax gains and revenue enhancement through market

share gain.

Beneficial to the companies weathering through the

tough times.



M& A: BENEFITSM& A: BENEFITS

y When a firm :

y Wants to enter a new market.

y

Wants to introduce new products through researchand development.

y Wants achieve administrative benefits.

y To increased market share.



M& A: BENEFITSM& A: BENEFITS

y To lower cost of operation and/or production.

y

To gain higher competitiveness.

y For industry know how and positioning.

y For Financial leveraging.



DEALDEAL CYCLECYCLE

GrowthStrategy

PotentialTargets

DueDiligence

Cultural

Integration

CreatingSingle entity

Develop &Sustain



DUE DILIGENCEDUE DILIGENCE

y Complicated process should be given majoremphasis.

y Helps in understanding the inner working of the

seller·s company.

y Due diligence is divided into 4 sub sections.

x Financial

x Business

x Legal

x Tax

y A through examination of the firm.



M&A SNAPSHOTM&A SNAPSHOT

Volume Value Avg. Deal Size

·06 ¶07 ¶08 ·06 ¶07 ¶08 ·06 ·07 ·08

Inbound 76 112 86 5.4 15.5 12.5 71.05 138.40 145.89

Outbound 190 243 196 9.9 32.7 13.2 52.18 134.81 67.31

Total Cross border 266 355 282 15.3 48.2 25.7 57.57 135.94 91.27

Domestic 214 321 172 4.9 2.8 5.2 23.32 8.89 30.30

Total M&A 480 676 454 20.2 51 30.9 42.30 75.61 68.17

PE 302 405 312 7.8 19.3 10.5 26.02 46.99 33.93

Total 782 1081 766 28 70.3 41.4 36.02 64.89 54.23



M&A SNAPSHOTM&A SNAPSHOT

Total value of M&A and PE investment declined by

49% in 2009.

M&A deals declined by 41% in 2009.

63% decrease in volume of Q1in 2009 as compared to

2008.

30% decrease in terms of value.

Domestic deals were greater than cross border

counterparts.



KEY M&A DEALS(2008)KEY M&A DEALS(2008)Acquirer Target Sector Price (US$

Mns)

% Stake

Daiichi Sankyo

Co.

Ranbaxy

Laboratories

Ltd.

Pharma 4506.31 60.63%

Oil & Natural

Gas CorpVidesh Ltd

Imperial Energy

PLC

Oil & Gas 800.00 100.00%

NTT

DOCOMO.

INC.

Tata

Teleservices

Ltd

Telecom 2700.00 26%

HDFC Bank

Ltd.

Centurion

Bank of Punjab

BFSI 2377.50 100%

GMR

Infrastructure

Ltd

InterGen NV Power and

Energy

1100.00 50%

HCL

Technologies

Axon Group

plc

IT & ITES 749.70 100%



KEY M&A DEALS(2009)KEY M&A DEALS(2009)

Acquirer Target Sector Price (US$

Mns)

% Stake

Reliance

Industries

Reliance

Petroleum

Oil and Gas 1888.89 NA

Quippo

TelecomInfrastructure

Ltd.

Wireless Tata

TelecomInfrastructure

Ltd.

Telecom 533.33 49.00%

Sesa Goa Ltd. VS Dempo &

Co. Private

Ltd.

Metals and

Ores

388.89 100%

Tech Mahindra

Ltd.

Satyam

Computer

Services Ltd.

IT & ITES 351.00 31%

Fire Capital

Fund

Fire Arcor

Infrastructure

Pvt. Ltd.

Real Estate &

Infrastructure

Management

250.00 75%



KEY M&A DEALS (2010)KEY M&A DEALS (2010)

Acquirer Target Sector Price (US$ Bns)

Bharti Airtel Zain African

operation

Telecom 10.7

GTL Infrastructure AIRCEL Telecom

Infrastructure

1.8

Fortis Healthcare Parkway Holdings Healthcare .685

Essar Group Trinity Coal

Corporation

Mining .600

Telenor ASA Unitech wireless telecom .433



FINANCIAL BUYERSFINANCIAL BUYERS

Private equity firms ( financial sponsors)

Venture capital firms

Hedge funds

Family investment offices

Ultra high net worth individuals (UHNWs)



PRIVATE EQUITY FUNDPRIVATE EQUITY FUND

MANAGEMENT CYCLE:MANAGEMENT CYCLE:

Fund raisingfor limitedpartners

Portfolioacquisition

searchInvestment Growth Divestment

Dispersal of funds tolimited

partners



STRATEGIC VS. FINANCIALSTRATEGIC VS. FINANCIAL

BUYERSBUYERSStrategic buyers Financial buyers

Evaluation of business Focus heavily on

synergies and integration

capabilities

Standalone cash

generating capabilities and

capacity for earnings

growth

Determining investmentmerits of industry

Less time on macro viewof industry and more

time on micro view of

company

More time on macroview of industry and less

time on micro view of

company

Strength of back office

infrastructure

Focus less Focus more

Impact of investment

horizon

Less sensitive to business

cycle risk

More sensitive to

business cycle risk

Transaction efficiency Process takes longer time Execute deals in a timely

fashion



KEY PE DEALS (2008)KEY PE DEALS (2008)

Investor Investee Sector Stake % Price (US$Mns)

Providence

Equity

Partners

Aditya Birla

Telecom

Telecom 20 640.00

SymphonyCapital DLF Assets Real Estate &Infrastructure

Management

N.A. 450.00

MPC Synergy Phoenix Mills

Ltd.

Real Estate &

Infrastructure

Management

N.A. 325.00

Orient Global

Tamarind Fund

Pvt. Ltd.

Cairn India

Ltd.

Power &

Energy

3 278.69

DE Shaw Mack Star

Marketing

Real Estate &

Infrastructure

Management

N.A. 250.00



REFERENCESREFERENCES

y PwC study on Strategic deals and mergers of

productivity to drive M&A in 2010.

y

http://equityez.com/portfolio/stages-of-the-private-equity-fund-management-cycle/

y Study by KPMG Indian-M&A-Landscape-2009.

y Study by Evalueserve - Greenfield Business Sentiments

Survey on Indian M&A - post editorial.

y Deal Tracker Annual Issue 2008.



REFERENCESREFERENCES

y Assocham Financial Pulse study ́ M&A in India:

Retrospect & Prospectsµ April 2009.

y Study by Grant Thornton ́ Marketing Services

Merger and Acquisitionsµ Summer 2010.

y ´Global Private Equity Report 2010µ by Bain &

Company.

m&a changing face of indian biz

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