PROJECT REPORT

(SUBMITTED FOR THE DEGREE OF B.COM HONOURS IN ACCOUNTING & FINANCE

UNDER THE UNIVERSITY OF CALCUTTA)

TITLE OF THE PROJECT

“MERGER AND ACQUISTION”

SUBMITTED BY
NAME OF THE CANDIDATE : AYUSH BHALA
UNIVERSITY REGISTRATION NO. : 017-1111-2690-19
UNIVERSITY ROLL NO. : 191017-21-0378
NAME OF THE COLLEGE : THE BHAWANIPUR EDUCATION SOCIETY
COLLEGE
COLLEGE UID : 0101190795

SUPERVISED BY
NAME OF THE SUPERVISOR : PROF. VIVEK PATWARI
NAME OF THE COLLEGE : THE BHAWANIPUR EDUCATION SOCIETY
COLLEGE

MONTH AND YEAR OF SUBMISSION

MAY 2022

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ANNEXURE – IA

Supervisor’s Certificate

This is to certify that Mr. Ayush Bhala, a student of B.Com. Honors in Accounting & Finance of
The Bhawanipur Education Society College under the University of Calcutta has worked under my
supervision and guidance for his Project Work and prepared a Project Report with the title
MERGERS AND ACQUISITIONS which he is submitting, is his genuine and original work to the
best of my knowledge.

Signature

Name : Prof. Vivek Patwari

Designation: Lecturer
Name of the College : The Bhawanipur Education College

Place: Kolkata
Date: May 2022

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ANNEXURE – IB

Student's Declaration

I hereby declare that the Project Work with the title MERGERS AND ACQUISITIONS submitted
by me for the partial fulfilment of the degree of B.Com. Honors in Accounting & Finance under the
University of Calcutta is my original work and has not been submitted earlier to any other
University for the fulfilment of the requirement for any course of study.
I also declare that no chapter of this manuscript in whole or in part has been incorporated in this
report from any earlier work done by others or by me. However, extracts of any literature which has
been used for this report has been duly acknowledged providing details of such literature in the
references.

Signature :

Name : Ayush Bhala

Address : 110, Block – A, Bangur Avenue, Kol-55

University Registration No. – 017-1111-2690-19

Place: Kolkata
Date: May 2022

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 ACKNOWLEDGEMENT

I would like to express my sincere gratitude towards the University of Calcutta for incorporating
such an exercise as a part of the curriculum in the third year of our B.Com Honours course since it
has presented me with an excellent opportunity to explore my analytical and report-writing skills,
consequently preparing me for my corporate future.

Secondly, I would like to thank my supervisor – Prof. Vivek Patwari, special thanks to my mentor -
Prof. Chandan Jha, Prof. Minakshi Chaturvedi [Co-ordinator B.com Morning], Prof. Dilip Shah
[Dean of student affairs] for giving me a step-by-step guidance and tremendous support on the
project work based on Merger and Acquisition. Without his encouragement this project would not
have materialized.

Thirdly, I would like to show my greatest appreciation to all the people who very courteously
answered the questionnaire without which successful completion of this project was not possible.

Last but not the least; I am grateful to my family and friends for supporting me throughout.

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 INDEX

CHAPTER NAME SUB-CHAPTER PAGE NO.

1. INTRODUCTION 1.1 Introduction to Merger and 6
Acquisition
1.2 Objectives Behind Merger
and Acquisition 7-9

1.3 Benefits of Merger and 10-11

Acquisition
12
1.4 Limitations of Merger and
Acquisition 13-14
1.5 Procedure of Merger and
15
Acquisition
1.6 Merger and Acquisition
Valuation Method 16
1.7 Participants to Merger and
Acquisition
1.8 Factors Resposible for 17-18
Successful Merger and 19
Acquisition
1.9 Factors Resposible for
Failure Merger and
Acquisition

2. CONCEPTUAL 2.1 National Scenario 20-24

FRAMEWORK 2.2 International Scenario
25-27

3. PRESENTATION OF 3.1 Data Analysis and Findings 28-33

DATA ANALYSIS & (Secondary)
FINDINGS

4. CONCLUSION & 4.1 Conclusion 34

RECOMMENDATIONS
35-36
4.2 Recommenations

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 5. ANNEXURE I 5.1 Bibliography 37

6. ANNEXURE II 6.1 Questionnaire 38-39

CHAPTER 1:

1.1 INTRODUCTION TO MERGER AND ACQUISITION

A merger is a combination of two or more companies into one company, wherein the merging
entity loses its identity. No fresh investment is made through this process. However, an exchange of
shares takes place between the entities involved in such a process. Generally, the company that
survives is the buyer which retains its identity and the seller company is extinguished. And in a
scheme involving a merger, where under the scheme the undertaking, property and liabilities of one
or more companies, including the company in respect of which the compromise or arrangement in
proposed are to be transferred to another existing company, it is a merger by absorption.
In a ‘cash merger’, also known as a ‘cash-out merger’, the shareholders of one entity receives
cash instead of shares in the merged entity. This is effectively an exit for the cashed out shareholders.
And “triangular merger” is often resorted to, for regulatory and tax reasons. As the name suggests, it
is a tripartite arrangement in which the target merges with a subsidiary of the acquirer. Based on
which entity is the survivor after such merger, a triangular merger may be forward (when the target
merges into the subsidiary and the subsidiary survives), or reverse (when the subsidiary merges into
the target and the target survives).
An acquisition, on the other hand, is aimed at gaining a controlling interest in the share capital
of the largest company. It can be executed through an agreement with the persons holding a majority
interest in the company’s management, such as members of the board or shareholders commanding a
majority of the voting rights or through purchasing shares in the open market or purchasing new
shares by private treaty or by making a takeovers offer to the shareholders. Based on the objective
profile of an offer, business combinations such as mergers, acquisitions or takeovers could be
categorized as vertical, horizontal, circular, or conglomerate mergers.
The term ‘amalgamation’ is an arrangement or reconstruction by a legal together to form a new
company and as a consequence the amalgamation companies loses their existence and their
shareholders becomes the shareholders of new company or the amalgamated company. In the case of

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an amalgamation, a new company may come into existence or an old company may survive while
amalgamated company may lose its existence.

1.2 OBJECTIVES BEHIND MERGERS & ACQUISITIONS

There are many reasons or factors that motivate companies to go for mergers and
acquisitions such as growth, synergy, diversification etc.

1. Growth: One of the most common reasons for mergers is growth. There are two broadways
a firm can grow. The first is through internal growth. This can be slow and ineffective if a
firm is seeking to take advantage of a window of opportunity in which it has a short-term
advantage over competitors. The faster alternative is to merge and acquire the necessary
resources to achieve competitive goals.

2. Synergy: Another commonly cited reason for mergers is the pursuit of synergistic benefits.
The most commonly used word in Mergers & Acquisitions is synergy, which is the idea of
combining business activities, for increasing performance and reducing the costs.
Essentially, a business will attempt to merge with another business that has complementary
strengths and weaknesses. This is the new financial math that shows that 1 + 1 = 3. That is, as
the equation shows, the combination of two firms will yield a more valuable entity than the value of
the sum of the two firms if they were operating independently.

3. Diversification: Other reasons for mergers and acquisitions include diversification. A

company that merges to diversify may acquire another company engaged in unrelated
industry in order to reduce the impact of a particular industry's performance on its
profitability. The track record of diversifying mergers is generally poor with a few notable
exceptions. A few firms, such as General Electric, seem to be able to grow and enhance
shareholders wealth while diversifying. However, this is the exception rather than a norm.
Diversification may be successful, but it needs more skill and infrastructure than some firms
have.

4. Economies of scale: Yes, size matters. Whether it's purchasing stationery or a new
corporate IT system, a bigger company placing the orders can save more on costs. Mergers
also translate into improved purchasing power to buy equipment or office supplies - when

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 placing larger orders, companies have a greater ability to negotiate prices with their
suppliers. Lowering the costs of the company relative to theoretically the same revenue
stream increases the profit.

5. Increase Market Share & Revenue: This reason assumes that the company will be
absorbing a major competitor and increasing its power (by capturing increased market share)
to set prices. Companies buy companies to reach new markets and grow revenues and
earnings. A merge may expand two companies' marketing and distribution, giving them new
sales opportunities. A merger can also improve a company's standing in the investment
community: bigger firms often have an easier time raising capital than smaller ones.

Example-Premier and Apollo Tyres,

6. Increase Supply-Chain Pricing Power: By buying out one of its suppliers or one of the
distributors, a business can eliminate a level of costs. If a company buys out one of its
suppliers, it is able to save on the margins that the supplier was previously adding to its
costs; this is known as a vertical merger. If a company buys out a distributor; it may be able
to sale its products at a lower cost.
7. Eliminate Competition: Many mergers and acquisitions deals allow the acquirer to
eliminate future competition and gain a larger market share in its product's market. The
downside of this is that a large premium is usually required to convince the target company's
shareholders to accept the offer. It is not uncommon for the acquiring company's
shareholders to sell their shares and push the price lower in response to the company paying
too much for the target company.

8. Acquiring new technology: To stay competitive, companies need to stay on top of

technological developments and their business applications. By buying a smaller company
with unique technologies, a large company can maintain or develop a competitive edge and
vice versa.

9. Procurement of production facilities: Procurement of production facilities may be the

reason for acquiring company to go for mergers and acquisition. It is a kind of backward
integration. Acquiring Firms will take the decision of merging with another firm who
supplies raw material to acquiring firm in order to safeguard the sources of supplies of raw
material or intermediary product. It will help acquiring firm to bring economies in
purchasing of raw material. It will also help to cut down the transportation cost.

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10. Market expansion strategy: Many firms go for mergers and acquisitions as a part of
market expansion strategy. Mergers and acquisitions will help the company to eliminate
competition and to protect existing market. It will also help the firm to obtain new market
for promoting their existing or obsolete products.
11. Own development plans: The purpose of mergers & acquisition is backed by the acquiring
company's own developmental plans. A company thinks in terms of acquiring the other
company only when it has arrived at its own development plan to expand its operation having
examined its own internal strength where it might not have any problem of taxation, accounting,
valuation, etc. but might feel resource constraints with limitations of funds and lack of skill
managerial personnel. It has to aim at suitable combination where it could have opportunities to
supplement its funds by issuance of securities; secure additional financial facilities eliminate
competition and strengthen its market position.
12. Corporate friendliness: Although it is rare but it is true that business houses exhibit
degrees of cooperative spirit despite competitiveness in providing rescues to each other from
hostile takeovers and cultivate situations of collaborations sharing goodwill of each other to
achieve performance heights through business combinations. The combining corporate aims
at circular combinations by pursuing this objective.
13. Financial synergy: Financial synergy may be the reason for mergers and acquisitions.
Following are the financial synergy available in case of mergers and acquisitions;
I. Better credit worthiness- This helps companies to purchase good on credit, obtain bank
loan and raise capital in the market easily.
II. Reduces cost of capital- The investors consider big firms as safe and hence they expect
lower rate of return for the capital supplied by them.
III. Increase debt capacity- After the merger the earnings and cash flows become more
stable than before. This increase the capacity of the firm to borrow more funds.
IV. Rising of capital- After the merger due to increase in the size of the company, better
credit worthiness and reputation the company can easily raise the capital at any time.
14. General gains:

I. To improve its own image and attract superior managerial talents to manage its affairs.
II. To offer better satisfaction to consumers or users of the product.

15. Taxes: A profitable company can buy a loss maker to use the target's loss as their advantage
by reducing their tax liability. In the United States and many other countries, rules are in

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 place to limit the ability of profitable companies to "shop" for loss making companies,
limiting the tax motive of an acquiring company.

1.3 BENEFITS OF MERGERS & ACQUISITIONS

BENEFITS
Mergers and acquisitions is the permanent combination of the business which vest management
in complete control of the business of merged firm. Shareholders in the selling company gain
from the mergers and acquisitions as the premium offered to induce acceptance of the merger or
acquisitions. It offers much more price than the book value of shares. Shareholders in the buying
company gain premium in the long run with the growth of the company.
Mergers and acquisitions are caused with the support of shareholders, managers and promoters of
the combing companies. The advantages, which motivate the shareholdersand managers to give
their support to these combinations and the resulting consequences they have to bear, are briefly
noted below.

From Shareholders point of view: - Shareholders are the owners of the company so they must
get be benefited from the mergers and acquisitions. Mergers and acquisitions can affect fortune
of shareholders. Shareholders expect that investment made by them in the combining companies
should enhance when firms are merging. The sale of shares from one company's shareholders to
another and holding investment in shares should give rise to greater values. Following are the
advantages that would be generally available in each merger and acquisition from the point of
view of shareholders;

1. Face value of the share is increased.

2. Shareholders will get more returns on the investments made by them in the
combining companies.

3. Sale of shares from one company's shareholder to another is possible.

4. Shareholders get better investment opportunities in mergers and acquisitions.

From Managers point of view: - Managers are concerned with improving operations
of the company, managing the affairs of the company effectively for all round gains and
growth of the company which will provide them better deals in raising theirstatus, perks

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and fringe benefits. Mergers where all these things are the guaranteed outcome get
support from the managers.

From Promoters point of view: -

1. Mergers offer company's promoters advantages of increase in the size of their

company, financial structure and financial strength.

2. Mergers can convert closely held and private limited company into public limited
company without contributing much wealth and losing control of promoters over the
company.

From Consumers point of view: - Consumers are the king of the market so they must
get some benefits from mergers and acquisitions. Benefits in favor of the consumer will
depend upon the fact whether or not mergers increase or decreasecompetitive economic
and productive activity which directly affects the degree of welfare of the consumers
through changes in the price level, quality of the products and after sales service etc.
Following are the benefits that consumers may derive from mergers and acquisitions transactions;

1. Low price &superior quality goods: - The economic gains realized from mergers
and acquisitions are passed on to consumers in the form of low priced and superior
quality goods.

2. Improve standard of living of the consumers: - Low priced and superior quality
products directly improves standard of living of the consumers.

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 1.4 LIMITATIONS OF MERGERS & ACQUISITIONS

Merger or acquisition of two companies in the same field or in diverse field may involve
reduction in the number of competing firms in an industry and tend to dilute competition in
the market. They generally contribute directly to the concentration of economic power and
are likely to lead the merger entities to a dominant position of market power. It may result
in lesser substitutes in the market, which would affect consumer's welfare. Yet another
disadvantage may surface, if a large undertaking after merger because of resulting
dominance becomes complacent and suffers from deterioration over the years in
itsperformance. Following are some disadvantages of mergers and acquisitions;

• Creates monopoly- When two firms merged together they get dominating position in the market
which may lead to create monopoly in the market.
• Leads to unemployment- Raiders shouldn't have the right to buy up firms they have no idea how
to run the employees who have spent their lives building up the firm should be making the
decisions.
• Raiders become filthy rich without producing anything, at the expense of hardworking people
who do produce something.
• M&A damages the morale and productivity of firms.

• Corporate debt levels have risen to dangerous levels.

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• Managers pressured to forego long-term investment in favor of short-term profit.

• Shareholders may be payed lesser dividend if the firm is not making profits. There may be a
possibility that shareholders would be paid less return on investment if the company is not
earning enough profit.
• Corporate raiders use their control to strip assets from the target, make a quick profit, destroying
the company in the process, throwing people out of work.

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 1.5 PROCEDURE OF MERGER

1. Search for merger partner-The first step in mergers is to search for merger partner.
The top management may use their own contact in the same line of economic activity or
in the other diversified field which could be identified as a better merger partners. Such
identification should be based on the detail information of the merger partners collected
from public and private sources.

2. Agreement between the two companies-The beginning of actual merger procedure

starts with agreement between the merging companies, but mere agreement does not
provide legal cover to the transaction unless it is sanctioned by the Court under section
391 of Companies Act 1956.

3. Scheme of merger -The scheme of merger should be prepared by the companies which
have taken decision of merging. There is no specific form prescribed for scheme of
merger but scheme should contain following information;

• Particulars about the merging companies.

• Main terms of transfer of assets and liabilities from transferor to transferee.

• Conditions of conducting business.

• Particulars about share capital of merging companies specifying authorized capital

issued capital and paid up capital.

• Description of proposed profit sharing ratio and any condition attached to it.

• Conditions about payment of dividend.

• Status of employees of the merging companies and also status of provident fund,
gratuity fund or any funds created for the benefits of existing employees. •Treatment
of debit balance of merging companies.

• Miscellaneous provisions covering income tax dues, contingencies and other

accounting entries.

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4. Approval of Board of Directors for the scheme- The scheme for merger must be approved
by the respective Board of Directors of transferor and transferee companies.
5. Approval of scheme by financial institutions- The Board of Directors should in fact
approve the scheme after it has been approved by the financial institutes, debenture
holders, banks which have granted loans to the companies. Approval of Reserve Bank
of India is also needed.

6. Application to the Court-The next step is to make an application under section 39(1)
of Indian Companies Act 1956 to the High Court for getting permission for merging
between companies.

7. Approval of scheme by the Court-On the receipt of the application for merger the
Court will decide whether to approve the scheme of merger or not. Once the Court has
approved the application then firms can merged.

8. Transfer of assets and liabilities-The High Court has the power to give order for
transfer of any property from Transferor Company to Transferee Company. By the
virtue of such order assets and liabilities of the Transferor Company shall automatically
stand transferred to Transferee Company.

9. Allotment of shares to shareholders of transferor company- By the virtue of

sanctioned scheme of merger, the shareholders of Transferor Company are entitled to
get shares in Transferee Company in the exchange of ratio provided under the said
scheme.

10. Intimation to stock exchanges-After merger is effected; the company which takes over
assets and liabilities of the Transferor Company should apply to the Stock Exchanges
where its securities are listed, for listing the new shares allotted to the shareholders of
the company.

11. Public announcement-Public announcement shall be made at least in one national English
daily one Hindi daily and one regional language daily newspaper of that place where the
shares of that company are listed and traded. Public announcement should be made within
four days from finalization of negotiations or entering into any agreement of merger. Public
announcement should contain following information;

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 1.6 MERGERS AND ACQUISITIONS VALUATION METHODS

Following are some methods that are employed by the merging firms;

1. Comparative Ratios - The following are two examples of the many comparative
metrics on which acquiring companies may base their offers:

• Price-Earnings Ratio (P/E Ratio) - With the use of this ratio, an acquiring
company makes an offer that is a multiple of the earnings of the target company.
Looking at the P/E for all the stocks within the same industry group will give the
acquiring company good guidance for what the target's P/E multiple should be.
• Enterprise-Value-to-Sales Ratio (EV/Sales) - With this ratio, the acquiring
company makes an offer as a multiple of the revenues, again, while being aware of
the price-to-sales ratio of other companies in the industry.

2. Replacement Cost - In a few cases, acquisitions are based on the cost of replacing the
target company. For simplicity's sake, suppose the value of a company is simply the
sum of all its equipment and staffing costs. The acquiring company can literally order
the target to sell at that price, or it will create a competitor for the same cost. Naturally,
it takes a long time to assemble good management, acquire property and get the right
equipment. This method of establishing a price certainly wouldn't make much sense in a
service industry where the key assets - people and ideas - are hard to value and develop.

3. Discounted Cash Flow (DCF) - A key valuation tool in mergers and acquisitions,
discounted cash flow analysis determines a company's current value according to its
estimated future cash flows. Forecasted free cash flows (net income +
depreciation/amortization - capital expenditures - change in working capital) are
discounted to a present value using the company's weighted average costs of capital
(WACC). Admittedly, DCF is tricky to get right, but few tools can rival this valuation
method.

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 1.7 PARTICIPANTS TO MERGERS AND ACQUISITIONS

Mergers and Acquisitions process requires highly skilled and qualified group of advisers.
Each advisor specializes in a specific aspect of the merger and acquisition process. The role
played by such advisers or professional experts are as follows;

1. Investment bankers: Investment banking is one of the most important departments in

the process of mergers and acquisitions. It is fee based adviser department which works
with the company that wish to acquire other company or with industries that wish to
purchase a smaller industry. The main role of investment banks is to provide finance for
mergers and acquisitions transactions.
2. Lawyers: The legal framework surrounding a typical transaction has become so
complicated that no one individual can have sufficient expertise to address all the
issues. In large and complicated transactions, legal teams consists of more than one
dozen lawyers each of them represents specialized aspects of law. Lawyers are expected
to perform all legal proceedings.
3. Accountants: Services provided by accountants include advice on the optimal tax
structure, financial structuring and performing financial due diligence. A transaction
can be structured in many different ways, with each having different tax implications
for the parties involved. Tax accountants are vital in determining the appropriate tax
structure. Accountants also perform the role of auditors by reviewing the transferor
company's financial statements and operations through a series of interviews with
senior and middle level managers.
4. Valuation experts: They may be appointed either by the bidder or the Transferor
Company to determine the value of the transferor company. They build models that
incorporate various assumptions such as costs or revenue growth rate.
5. Institutional investors: They include public and private pension funds, insurance
companies, banks, mutual funds. Collection of institutions can influence firm's action.
They invest their money in the company.

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1.8 FACTORS RESPONSIBLE FOR SUCCESSFUL MERGERS AND
ACQUISITIONS

I. Strategy- Strategy is the basis for any merger and acquisition. Company should be
able to express in one sentence the motive behind merger and acquisition. If the
transferor company is not able to express the motive for doing a deal for merger
thenthe deal should not be done. There are many strategic reasons to buy a
company some of them are listed as follows;
• Acquire Innovative technical skills.

• Obtain new markets and customer.

• Enhance product line.

II. Motive- Buying company i.e. transferor company does not know reasons why
another company is being sold. It should ask reasons for selling the company.
Transferor Company should also try to know what selling company knows about
the business that they are not telling potential buyers. After knowing all reasons for
selling a company buying company would be in a position to decide whether to go
for a deal or not. If they are going for deal then buying company should decide
appropriate price for the deal. Buying company should also examine its own
motive for wanting to acquire the company, whether it is good asset for the
company that would enhance the market of buying company.

III. Price- A low price does not always equate to a good deal, but higher the price; it is
fewer cushions for unexpected problems. Buying company is often forced to pay
more price than they want to pay for the deal. In a competitive situation the buying
company needs to decide how much it is willing to pay and not exceed that level,
even if it means losing the company. However, in any merger and acquisition there
is a pricing range, based on different assumptions of the future performance of the
merger and acquisition. The buying company has to decide the price to offer for
the deal, or how risk will be divided between shareholders of merging company.

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IV. Post Merger Management- For a merger to succeed much work a remains after
the deal has been signed. The strategy and business model of the old firms may no
longer be appropriate when a new firm is formed. Each firm is unique and presents
its own set of problems and solutions. It takes a systematic effort to combine two
or more companies after they have come under a single ownership.

V. DUE DILIGENCE- Due diligence means, "A large part of what makes a deal
successful after completing it, is what is being done before completing it". Before
the closing of the deal, the buyer should engage in a thorough due diligence review
of the sellers business. The purpose of the review is to detect any financial and the
business risk that the buyer might inherit from the seller. The due diligence team
can identify ways in which assets, process and other resources can be combined in
order to realize cost saving and other expected synergies. The planning team can
also try to understand the necessary sequencing of events and resulting pace at
which the expected synergies may be realized.

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1.9 FACTORS RESPONSIBLE FOR FAILURE OF MERGERS AND
ACQUISITIONS

As there are many factors responsible for success of mergers similarly there are many
factors responsible for failure of the merger. The main factor is buying wrong company at
wrong time, at wrong place and by paying wrong price. If the process through which
merger is executed is faulty then it will affect merger adversely. Historical trends show that
roughly two thirds of big mergers will disappoint on their own terms, which means they
will lose value on the stock market. Some of reasons for failure of mergers and acquisitions
are listed below;
I. Payment of high price- The merger fails when the maximum price is paid to buy
another company. In such situation shareholders of Transferee Company will
receive more cash but the shareholders of Transferor Company will pay more
cash. As a result of this deal for merger will fail.
II. Culture clash- Lack of proper communication, differing expectations and
conflicting management styles due to differences in corporate culture contribute
to failure in implementing plan and therefore, failure of mergers and acquisitions.
III. Overstated synergies: - An acquisition can create opportunities of synergy by
increasing revenues, reducing costs, reducing net working capital and improving
the investment intensity. Over estimation of such synergies may lead to a failure
of this merger. Inability to prepare plans leads to failure of mergers and
acquisitions.
IV. Failure to integrate operations- Once firms are merged management must be
prepared to adapt plans in favor of changed circumstances. Inability to prepare
plans leads to failure of mergers and acquisitions.
V. Inadequate due diligence- The process of the due diligence helps in detecting
any financial and business risks that the buyer might inherit from the seller.
Inadequate due diligence results in the failure of the mergers and acquisitions.

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 CHAPTER 2:

2.1 Mergers & Acquisitions Activity in India

(National Scenario)

The news about Indian companies acquiring foreign based companies was new few years
back but the present times have changed. The situation about Indian companies venturing abroad and
taking foreign companies has become very frequent. Some of the well known deals which have made
India famous the world 23 over have been the merger of Tata Steel and Corus Group. Second biggest
merger was between the metal giant Hindalco and Novelis. Videocon and Daewoo Electronics
Corporation from Korea was the third largest overseas deal. In the pharmaceutical sector, Doctor
Reddys Laboratories acquired Betapharm from Germany.

The top mergers and acquisitions originating from India itself value to be close to USD
21,500 million. One of the biggest mergers of all times is in talks from the telecommunication sector.
The Indian telecom giant Bharti Airtel is in talks for a merger with South African MTN. This merger
would create waves in the global telecommunication market. Among the recent mergers mention
must be made of acquisition ING Vysya Bank by Kotak Mahindra for INR 50,000 crores on
April,2015; acquisition of Jaiprakash Associates by UltraTech Cement for INR 16,500 crores. In
2015, India’s largest oil producing company, Cairn India Limited (Cairn), merged with the metals
and mining giant Vedanta Limited (Vedanta) in an all-share deal amounting to 2.5 billion USD,
whereby the public shareholders of Cairn would be allotted equity and preference shares of Vedanta.

In May 2016, JSW Energy Limited (JSW), a listed company engaged in power generation,
acquired 1 GW power plant from the heavily debt-laden Jindal Steel and Power Limited (JSPL) for
0.98 billion USD (6,500 crore INR) by way of slump sale by JSPL into its wholly owned subsidiary
and share acquisition by a special purpose vehicle of JSW. Indian M&A ended the year 2017 with
1,022 deals with a disclosed value of USD 46.8 billion. While the deal volume reached a record high
(as compared to 895 deals in 24 2016) since 2010, the deal value was lower by 12 per cent from
USD 53.2 billion in the previous year. Sector-wise, telecom led with the highest yearly deal value

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(USD 14.7 billion) recorded in the last 10 years -- a more than five-fold increase as compared to
2016.

MERGER OF VODAFONE & IDEA

Introduction
On March 20, 2017, India’s third-largest telecommunications company, Idea Cellular
announced US $ 23 billion, to merge with the world’s second-largest company, Vodafone India
Limited (Vodafone), to build India’s most lucrative company estimated at US $ 12.5 billion.
The company will have a subscription base of 394 million and a customer market share of
35% and 41% respectively. As the merger is expected to take 24 months to complete, both
companies have agreed to operate as separate companies until then. Together, Kumar Mangalam
Birla, Chairman of Aditya Birla Group said, “Idea and Vodafone will build a very important
company when we look at our mutual power.” The merger of fierce competitors in the Indian
telecommunications industry came after India’s largest company Reliance Industries Limited,
owned by Mukesh Ambani, and launched Reliance Jio Infocomm Limited (Jio) in September
2016. Jio came up with prices, offering free voice and the lowest prices in the world. It has
disrupted the telecommunications industry in the country where telecom operators receive 70%
of their revenue through voice telephony.

Valuation
Until the merger is completed, Vodafone and Idea will be operating separately and after
merger they may use both brand names for at least a few years until a full customer migration.
The transaction values Vodafone at Rs.82, 800 crore (EV) and Idea for Rs.72, 200 crore (EV)
and debt of Rs.55, 200 and Rs.52, 700 crores respectively. Opinions are far more limited than the

22
current market price and are also reflected in the declining price of Idea Cellular post
announcement. Vodafone’s high ratings are supported by high revenue, customer base and full
spectrum capture compared to Idea.
However, the markets did not respond well to the merger. After the announcement, Idea’s
price range began to decline. The share price dropped from Rs.97.70 on March 20, 2017 to
Rs.81.80 on September 06, 2017. In other words, the feeling of competing with two leading
brands (Airtel and Jio) for two different brands could be a daunting task.

Valuation Until the merger is completed, Vodafone and Idea will be operating separately
and after merger they may use both brand names for at least a few years until a full customer
migration. The transaction values Vodafone at Rs.82, 800 crore (EV) and Idea for Rs.72, 200
crore (EV) and debt of Rs.55, 200 and Rs.52, 700 crores respectively. Opinions are far more
limited than the current market price and are also reflected in the declining price of Idea Cellular
post announcement. Vodafone’s high ratings are supported by high revenue, customer base and
full spectrum capture compared to Idea. While Airtel is diverse with additional services and
presence in South Asia and Africa it has a market capitalization by Rs.1, 36,570 / – crores and
debts of Rs.96, 078 / – crores. Vodafone’s concept is equally balanced and note that the Aditya
Birla team made a fixed amount of dollars of Rs.109 per share to receive a share of 4.9% at the
end of the merger (2018) from Vodafone Group. Also, there is an option to get a stake of 9.5%
for Rs.130 per share over a 4-year period to bring about equality

Conclusion
The merger between Idea and Vodafone will make them a top player. For the benefit of
cooperative management, synergies of up to INR 670 billion can be acquired & INR 140 billion
on operating costs for 4th year. It will also bring credit for the sale of Towers Assets to a
consolidated business.
The concept of consolidation seems to save costs and financial opportunities that aid financial
performance. And whether the company will be able to monetize the remaining spectrum must be
seen.
Aditya Birla Group’s promoters are smart enough to integrate with Vodafone in this price war
and at the same time they have the rights to measure the pole in stages. So far, there is no benefit
for public shareholders and they will hope to benefit from the long-term merger.

23
 Acquisition of Ranbaxy by Sun Pharma

Introduction
In April 2014, Sun Pharmaceutical acquired 100% of Ranbaxy Laboratories for $4
billion to create world’s fifth largest specialty generic pharma company. Under these
agreements, Ranbaxy will merge into Sun Pharma and the shareholders of Ranbaxy will
receive 0.8 shares of Sun Pharma for each share of Ranbaxy. The exchange ratio represents an
implied value of Rs 457 for each Ranbaxy share, a premium of 18% to Ranbaxy’s 30-day
volume-weighted average share price and a premium of 24.3% to Ranbaxy’s 60-day volume-
weighted average share price as of the close of business on April 4, 2014.
Drug maker Sun Pharmaceuticals has put on the block a few Ranbaxy brands which are a
low priority in its domestic market. This was reported in the Economic Times. While Sun
Pharma is a major global specialty pharma company with expertise in complex and niche therapy
areas and a proven record of turning around its acquisitions, Ranbaxy has a strong global
footprint and presence in the generic segment. The combined entity’s manufacturing footprint
covers five continents, with products sold in over 150 countries. Sun Pharma estimates $250
million of synergies accruing from the merger in three years. Sun Pharma acquired Ranbaxy
from Japan’s Daiichi Sankyo for $3.2 billion in stock in addition to assuming $800 million of
debt. Sun Pharma has made nearly 20 acquisitions since its inception in 1983.

24
Valuation
This exchange ratio represents an implied value of Rs 457 for each share of Ranbaxy, a
premium of 18% to Ranbaxy’s 30-day volume-weighted average share price and a premium of
24.3% to Ranbaxy’s 60-day volume-weighted average share price, in each case, as of the close of
business on April 4, 2014.
Daiichi Sankyo paid 61% more for Ranbaxy five years ago at Rs.737 a share.
The transaction has a total equity value of approximately US$ 3.2 billion. And along with the
additional net debt of about US$0.8 billion, the total transaction value comes to around US$4
billion. The transaction value implies a revenue multiple of 2.2 based on 12 months ended
December 31, 2013. In connection with the transaction, Daiichi Sankyo has agreed to indemnify
Sun Pharma and Ranbaxy for, among other things, certain costs and expenses that may arise
from the recent subpoena which Ranbaxy has received from the United States Attorney for the
Toansa facility.

Conclusion

The valuation of Ranbaxy is attractive at this point in time when USFDA and regulatory
issues are at a peak. Sun Pharma has followed a strategy of acquiring poorly performing
companies and turning them around. Hence, the success of the deal would depend on how
quickly Sun Pharma is able to resolve the regulatory issues of Ranbaxy improve the operating
margins of Ranbaxy and achieve the synergies. The merger won’t have too many cultural and
integration issues since both companies are Indian. Besides, an all-stock deal, Sun Pharma has
also been able to avoid any open offer possibility to the minority shareholders. Given the large
diversified operations of Ranbaxy and potential synergy benefits, we find the transaction more
value accretive for Sun Pharma shareholders.

25
26
 2.2 Mergers & Acquisitions Activity Around the World
(International Scenario)

Mergers and acquisitions have been taking place since last 100 years. Between 1895 and
1905 over 1800 mergers took place in US alone. This phase was names as the ‘The Great Merger
Movement’. However large sized billion dollar merger deals have seen spurt in the last two decades.
Between 1991 and 2000 some of the top mergers and acquisitions have been Vodafone Air touch
PLC and Mannesmann valuing $183 billion (CNN, 2000). In the pharmaceutical sector merger
between Pfizer and Warner-Lambert was valued at $90 billion. In 1998 Exxon combined its business
with Mobil and the deal was valued at $77 billion. Other such large sized mergers took place
between Citicorp and Travelers Group, WorldCom and MCI Communications, BP and Amoco.
The year 2000 also saw some of the biggest deals like America Online Inc (AOL) with Time
Warner valued at $164 billion and in the same year Glaxo Wellcome Plc merged with SmithKline
Beecham Plc valuing at 75 billion. The year 2004 saw one of the largest mergers between Royal
Dutch Petroleum and Shell Transport. In the same year JP Morgan Chase and Company took over
Banc One Corp (CNN, 2004). The year 2008 saw the merger of Inbev Inc and Anheuser-Busch
Companies Inc valued at $52 billion. The year 2015 saw merger of Charter Communications with
Time Warner Cable for $78.7 billion; it was the largest deal in dollar size in 2015. Other major deals
of 2015 includes purchase by Specialized semiconductor manufacturer Avago Tech its rival
Broadcom in a $31 billion deal, Intel acquiring Altera in a deal worth $16.7 million etc. 22 The era
of volatility has made it inevitable for a business to grow only through organic means.
The global M&A highlights sourced from Dealogic10 suggest that after three consecutive
year-on-year increases, global M&A dropped to 3.84 trillion USD in 2016 from 4.66 trillion USD in
2015, namely a decline of 18% year-on year. Although cross-border M&A was down by 3% globally
year-on-year, China’s outbound volume hit a record high (225.4 billion USD) as did US inbound
M&A (486.3 billion USD)? October 2016 was the biggest month on record for global M&A, with
600.8 billion USD. As per the EMIS (a Euromoney Institutional Investor company) Report on Asia
Markets,11 in the first nine months of 2016, activity surged in India, with a total of 712 deals and an
increase of 135 deals year on-year. The report also suggests that, in Asian markets, the increase in
the volume of deals was the highest in the IT and Internet sector; however, the increase in value of
deals was the highest in the finance and insurance sector. Interestingly, the withdrawn M&A volume
of 606.4 billion USD was the highest total on record in the first half of 2016 and the second highest
full year since 2009.

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MERGERS
Heinz and Kraft

A merger between H.J. Heinz Co. and Kraft Foods Group created a new organization (The Kraft
Heinz Company) in 2016 that was expected to enter the world's top 10 largest food companies.
The deal between Heinz and Kraft cost approximately $100 billion and stakeholder expectations
were high. However, the reality has been disappointing. The company has run out of steam and
experts put the problems down to missed opportunities due to changing consumer preferences.

Exxon and Mobil

The Exxon and Mobil deal is the perfect example of a successful merger. In 1998, Exxon and
Mobil made headlines after announcing their plans to merge. At the time, the companies were
already the first and second-largest oil producers in the United States.
The deal closed at a whopping $80 billion and since then, investors have quadrupled their money
and shares have gone up 293% with dividends reinvested. Despite initial skepticism, the merger
is looked back on as one of the most successful in history.

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ACQUISITIONS
Pfizer and Warner-Lambert

In 2000, Pfizer acquired Warner-Lambert for $90 billion. Both companies operated in the
pharmaceutical drug industry and the deal between them became known as one of the most
hostile acquisition examples in history.
This infamy is because Warner-Lambert was originally to be acquired by American Home
Products, a consumer goods company. American Home Products walked away from the deal,
resulting in large break-up fees and Pfizer swooped in.
The acquisition created the second-largest drug company in the United States and Pfizer obtained
control of the profits of a highly sought after drug (Lipitor), which amounted to over $13 billion.

AT&T and Time Warner

Two organizations that were already familiar with mergers and acquisitions joined forces in
2018. This acquisition was so massive the U.S. legal department had to interfere to sort out the
issue.
AT&T first showed its interest to buy Time Warner in 2016 and, following actual government
opposition, AT&T and Time Warner completed an $85.4 billion merger after receiving approval
from the regulatory body.
The U.S. Department of Justice who opposed the deal said the government would not prevent the
deal between them.

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 CHAPTER 3:

3.1 DATA ANALYSIS & FINDINGS

1. How strong will the overall Indian M&A market be during the next 12
months?

STRONG NEUTRAL WEAK

4%

32%

64%

64 percent of survey respondents saw the future of the M&A market as strong or somewhat
positive. Advisors were slightly more confident than company respondents on the future of
the Indian M&A market. 38 percent of respondents had a neutral view of the market.

2. Which of the following is most responsible for fueling current IndianM&A

active?

30
 In a continued trend, about 48 percent of respondents feel current M&A activity is being
fueled by private equity buyers. However, 26 percent of respondents said strategic buyers
have the most influence. Foreign buyer currently just at a 10% is playing an important role
in this matter, since they are in the race to establish themselves in the growing Indian
markets by merging with existing firms.

3. What is your outlook for the Indian economy, generally, over the next 12
months?

74 percent of respondents have a Positive outlook for the Indian economy in the next year,
considering that we are growing at a rate of 6 percent, making India stand amongst the
fastest growing economies in the world. India also has the youngest population and is the
main source for Human resources in an aging world. 20 percent have a Neutral outlook.

4. Which of the following buyers will INCREASE their presence the mostin
the Indian M&A Market over the next 12 months (as percentage of total
transactions)?

31
 Survey results indicate that there is more emphasis on Foreign Buyers since inflow of FDI's
is increasing at a rapid rate. Thus, fueling the economic growth in the country.

5. Which of the following types of buyers have been most responsible for high
company valuations over the past 12 months?

24 percent of respondents thought strategic buyers had the most influence driving up deal
valuations. Opinions regarding financial and foreign buyers were that 50 percent of
participants felt financial buyers were most responsible for high valuations and 10 percent
of participants felt foreign buyers had the most influence.

6. What sector will see the most M&A activity, globally, in the next 12
months?

32
20 percent of company respondents selected the automotive industry, 18 percent chose
Technology and 10 percent chose telecommunications and healthcare as the industry which will
see the most global activity in the coming year. 14 percent of respondents selected energy, 12
percent said manufacturing and financial services and just 4 percent named the biotechnology
and life sciences.

7. Where will the most foreign buyers in the Indian M&A market comefrom
in the next 12 months?

33
Respondents agreed that most foreign buyers in the Indian M&A market will come from China.
Survey analysts note that Chinese investors in the M&A market are generally more visible
shoppers because they tend to come to the market in groups. The second choice was the United
States of America (24 percent). After USA, respondents pointed to United Kingdom (14 percent).

8. What is the single biggest challenge you encounter when dealingwith

INBOUND cross-border mergers and acquisitions?

34
 Those respondents who felt that the most foreign buyers in the Indian M&A market will
come from China are most concerned about doing effective due diligence (36 percent),
followed by labor issues (30 percent).

9. In the next 12 months, do you believe your company will be involvedin an

acquisition?

60 percent of all respondents who identified themselves as a company officer or executive

felt they would be involved in an acquisition in the coming year.
10. In the next 12 months, do you believe your company will be sold,
downsized, or involved in a spinoff?

35
58 percent of all respondents who identified themselves as a company officer or executive
felt their company will be involved in a sale, downsizing, or spinoff in the coming year.

11. Do you feel the management and position of a company's employeesis

compromised upon after an acquisition take place

The majority of the respondents (74 percent) believed that Post merger or acquisition, their
place in the organization does get jeopardized. There could be many chances of either of
the two organizations employees not settling in with the other. This could lead to inefficient
functioning of the organization till the time a synergy is created.

36
 CHAPTER 4:

CONCLUSION & RECOMMENDATION

4.1 CONCLUSION

Mergers have been the prime reason by which companies around the world have been growing.
The inorganic route has been adopted by companies forced by immense competition, need to
enter new markets, saturation in domestic markets, thrust to grow big and maximize profits for
shareholders. In the changing market scenario, it has become very important for firms to
maximise wealth for shareholders. Many researchers have shown significant findings out of their
research.

One size doesn't fit all. Many companies find that the best way to get ahead is to expand
ownership boundaries through mergers and acquisitions. At least in theory, mergers provide
economies of scale by expanding operations and cutting costs. Investors can take comfort in the
idea that a merger will deliver enhanced market power.

Now a day, many companies are taking decision to go for merger and acquisitions to expand their
business. But, the procedure for merger is time consuming it almost takes 6 to 7 months.
Therefore, most of the mergers and acquisitions are not completed.

Mergers and acquisition transactions are often affected by government rules and regulations,
most of the countries do not allowed foreign companies to enter into local market alone. Such
foreign companies can enter only when they make merger with any local company.

The current trend shows that there is decline in the number of mergers and acquisitions.

It is because of mergers and acquisitions transactions the needs of expertise persons have
increased. Expertise persons include valuation expert, lawyers, accountants, etc.

Merger and acquisition will give positive result only when it is executed properly.

37
4.2 RECOMMENDATIONS

1. Securing the value of the acquisition by reasonable decisions on staff - The acquisition of a
company will result in capital growth only if the value of the acquired company plus the value of
synergy effects on the one hand exceed the purchase price plus liabilities such as company pensions,
which are also passed on to the purchaser, on the other hand. Personnel issues are therefore relevant
in establishing a justified purchase price as well as in the realization of growth and cost synergy
effects. The personnel department plays an important role in the implementation of the acquisition
strategy and is therefore to be integrated at the right time into the acquisition process.

2. Effective implementation of the acquisition strategy - In order for synergies to take effect there
is the precondition of changes (new processes, new structures, new customers, new products) to take
place which means that requirements on employees change as well. Generally this fact applies to the
staff of the purchased company as well as to that of the buying company. It is up to the personnel
department to adjust the training of human resources to the objectives of the acquisition such that
employees are motivated to do what they are expected to do. In order to achieve this aim it is
important for the personnel department to be informed in due time about the M&A´s objectives.

3. M&As are teamwork - The determination of the purchase price in the course of a M&A is
usually made on the basis of extrapolations on business development. In this process important
assumptions are valuation periods and a plan fixing the times by which certain processes have to be
implemented. The contribution of the personnel department consists in providing these assumptions
with regard to the development of staff costs and other liabilities. At the same time it has to check
whether the timing is realistic. The quality of the assumptions does not least depend on the quality of
coordination between the several business units such as strategic planning, finance department,
personnel department, legal section and all other business units involved.

4. Rapidness count - The increase in value for the purchaser among other things also depends on
how quickly synergies will take effect. What is important in this respect is how much time is needed
to solve personnel issues such as staffing of executive posts, change management processes,
personnel restructuring, overcoming of cultural differences and communication issues. The
integration planning should therefore start already during the due diligence phase. Priorities have to
be set in accordance with the strategy and integration tools such as timetables and organizational
structures should already be in place.

38
5. Avoidance of disruptions of ordinary business - In order for M&A to be successful the smooth
running of ordinary business has to be ensured. The quality of relations with customers of both the
purchased as well as the purchasing company should not suffer from the M&A. This fact will be in
particular relevant, if staff are worried about their personal future. It is the task of the personnel
department to keep these disruptions to a minimum by taking recourse to a staff controlling adjusted
to this particular situation or by adapting an appropriate communication strategy.

39
 ANNEXURE I

5.1 BIBLIOGRAPHY

 CMIE Reports

 Economic Times

 https://mnacritique.mergersindia.com/

 Business Environment - Kale Ahmed

 www.investopedia.com

 http://en.wikipedia.org/wiki/Mergers_and_acquisitions"

 www.moneycontrol.com

 www.google.com

 www.hindubusiness.com

 www.yahoo.in

 Duncan, C., and M. Mtar. 2006. Determinants of international acquisition success:

Lessons from first group in North America. European Management Journal 24(6): 396-
410.

 Coontz, G. 2004. Economic impact of corporate merger and acquisitions on acquiring

firm shareholder wealth. The Park Place Economist 12: 62-70.

 Vanitha, S., and M. Selvam. 2007. Financial performance of Indian manufacturing

companies during pre-and post-merger period. International Research Journal of Finance
and Economics 12: 7-35.

 Beena, P. L. 2004. Towards understanding the merger wave in the Indian corporate
sector–A comparative perspective. Working Paper No. 355, (February), CDS,
Trivandrum: 1-44.

 Kumar, R. 2009. Post-merger corporate performance: An Indian perspective.

Management Research News 32(2): 145-57.

40
 ANNEXURE II

6.1 Questionnaire

Hello, I am Ayush Bhala, currently pursuing Bachelor of Commerce Honors (Accounting &
Finance) from The Bhawanipur Education Society College (Calcutta University), conducting a
Survey on Mergers & Acquisitions. Participation is voluntary and you are free to withdraw at any
point. It will not take more than 10 minutes of your valuable time. Your participation is of great
support and extremely valuable. Thank you in Advance!

1) Gender:
(a) Male (b) Female

2) Age group:
(a) < 20 (b) 21-30 (c) 31-40
(d) 41-50 (e) 51-60 (f) 60+

3) How strong will the overall Indian M&A market be during the next 12 months?
a) Strong b) Neutral c)Weak

4) Which of the following is most responsible for fueling current Indian M&A active?
a)Strategic Buyers b) Strong Economy c) Private Equity Buyers
d) Foreign Buyers e)Robust Financial Markets f)Others

5) What is your outlook for the Indian economy, generally, over the next 12 months?
a) Positive b) Neutral c) Negative

6) Which of the following buyers will INCREASE their presence the most in the Indian
M&A Market over the next 12 months (as a percentage of total transactions)?
a) Strategic Buyers b) Financial Buyers c) Foreign Buyers

41
7) Which of the following types of buyers have been most responsible for high company
valuations over the past 12 months?
a)Strategic Buyers b) Financial Buyers
c) Foreign Buyers d)None of the above

8) What sector will see the most M&A activity, globally, in the next 12 months?
a)Financial Services b)Telecommunications c)Manufacturing d)Technology
e)Healthcare f) Automotive g)Biotechnology & Lifescience h)Energy

9) Where will the most foreign buyers in the Indian M&A market come from in the next 12
months?
a) Australia b) Brazil c) China
d) France e) Germany f) United Kingdom g)USA

10) What is the single biggest challenge you encounter when dealing with INBOUND cross-
border mergers and acquisitions?
a) Effective Due Diligence b) Unpredictable Legal Environment
c) Corrupt legal compliance d) Impact on Employees and labour issues
e) Impact on Stakeholders

11) In the next 12 months, do you believe your company will be involved in an acquisition?
a) Yes b) No

12) In the next 12 months, do you believe your company will be sold, downsized, or involved
in a spinoff?
a) Yes b) No c) Maybe

13) Do you feel the management and position of a company's employees is compromised
upon after an acquisition take place.
a) Yes b)No (c) May be

42