Merger & Acquisition/ Entry Strategy Strategic Alliance: Group 6
Merger & Acquisition/ Entry Strategy Strategic Alliance: Group 6
Merger & Acquisition/ Entry Strategy Strategic Alliance: Group 6
Entry Strategy
Strategic Alliance
GROUP 6
Ayesha
Komal
Nikhat
Sohail
Anurag
Vijay
Tanmoy
Entry Strategies
MODE OF ENTRY •Depending upon •Wholly owned •Joint venture •Rep. Office
risk •Joint venture •R&D centre •Global HQ
•All modes of entry •Long term •observatory •Regional HQ
may apply •Logistic centre
•Training centre
•Financial HQ
Entry Decisions
Low Risk, Investment and Control
Joint
Exporting Venture
Contract Direct
Manufacturing Investment
Strategic
Licensing
Alliance
COMPETITIVE
ADVANTAGES
GOVERNMENT
COUNTRY RISK
POLICIES
MARKET
STRATEGIC
ATTRACTIVENE
OBJECTIVES
SS
Tata Nano entry in Nigeria
Where in Ansoff’s matrix does it fit?
Demographic Overview of Nigeria
2010 2015
Economic: Nigerians are mostly low income earners which explain the fact
that about 85% of cars on the road purchased are used. Transporters
purchase old vehicles, but these wear out quickly making it difficult to obtain
adequate returns. Fuel costs about $0.5 per litre.
Social: Everyone wants a car, and the newer and bigger the better. However, the
younger generation tends towards smaller Japanese cars due to fuel
efficiency (25 to 35mpg) and low price. In the less urban towns, bikes and 3‐
wheelers are the main transportation means – commercial and private.
• A chance for those who can’t afford cars at all for the following
reasons:
To outsource business
functions
To share risk
Types of Strategic Alliances
Joint
venture
Outsourcing
Licensing- Technology & Product
Franchising
Third-party logistics (3PL)
Fourth-party logistics (4PL)
Distribution Relationships
Stages of Strategic Alliances
Alliance strategy formulation
Partner selection-
Developing screening criteria
Agreeing on candidates
Establishing initial contacts
Formulating letter of content
Alliance structuring & start up-
proper corporate governance structure
relational quality
Alliance operation & adjustment-
• eg- Fuji-Xerox joint venture
Merger & Acquisition
MERGER-In a merger,companies come together to
combine and share their resources to achieve common
objectives.The shareholders of the combining
companies often remain as joint owners of the
combined entity.
ACQUISITION –An acquisition resembles more of an
arm’s-length deal,with one firm purchasing the assets
or shares or both of another,and with the aquired
firm’s shareholders ceasing to be owners of firm.
DIFFERENCES
MERGER ACQUISITION
Merger is defined as a combination of two or Acquisition involves buying the assets of
more companies into a single company. A another company. These asset may be
merger can take place either as an amalgamation
tangible asset like manufacturing unit or
or absorption.
intangible asset like brands.
Amalgamation: This form is generally applied
to combinations of firms of equal size. Example: Tangible asset acquisition Example:
the merger of Brooke Bond India Ltd. With The acquisition of the cement divisions of
Lipton India Ltd. Resulted in formation of a Tata Steel by Lafarge of France. Lafarge
new company Brooke Bond Lipton India Ltd. acquired only the 1.7 millions tones
Absorption: This type of merger involves cement plant and its related assets from
fusion of a small company with a large company. Tata steel.
Intangible Asset acquisition Example:
Example: The recent merger of HDFC Bank
and Times Bank. After the merger Times Bank
Coca Cola paid Rs 170 crore to Parle to
ceases to exists while the expanded HDFC bank acquire its soft drinks brand like Thumps
continued. Up,Limca,Gold Spot ,etc.
The NPV of Merger
Cash Deal:
Example: Suppose A Co.(value Rs 60 lakhs)is acquiring B Co.(value Rs 20 lakhs)
at cost of Rs 27 lakhs. The value of synergy as a result of merger=Rs 10 lakhs.
Therefore,NPV to A Company shareholders=90-60-27=3lakhs.
Npv to B Company share holders= 27-20=7 lakhs.
Since, Npv of the merger to both the companies is positive, they should go for
the merger.
Stock Deal:
Suppose in the previous problem, the no of outstanding shares of A & B co. are 3
lakhs and 2 lakhs respectively and an exchange of .3 is agreed between them.
The common base used to exchange ratio are: 1. EPS 2. Book value per share
3.Market value per share.
TYPES OF M & A
TYPES OF MERGER
Horizontal merger
Vertical merger
Conglomerate merger
Concentric merger
Other types of mergers include:
Product-extension merger
Market-extension merger
Congeneric merger
Purchase merger
Consolidation merger
Reverse merger
Major Acquisitions
Overly Diversified
Acquirer doesn’t have expertise required to
manage unrelated businesses