A PROJECT REPORT ON A PROJECT REPORT ON

ACQUISITION
SUBMITTED IN PARTIAL FULFILLMENT OF THE SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE OF REQUIREMENT FOR THE AWARD OF THE DEGREE OF

BACHEOR OF MANAGEMENT STUDIES

UNDER THE GUIDENCE OF UNDER THE GUIDENCE OF PROF.. NAINA BHATIA.. PROF NAINA BHATIA

S..S..T COLLEGE OF ARTS & COMMERCE S S T COLLEGE OF ARTS & COMMERCE ULHASNAGAR 421004.. ULHASNAGAR 421004

SUBMITTED

BY

NAMES AMES Nutan K. Ghutkule. Roshni P. Verma. Sharwari K. Thombre. Kavita J. Chikne. Pallavi M. Birari. Alka B. Sonwane. Amir Mohan. Prakash Pardeshi.

ROLL NO. ROLL NO

60. 40. 47. 49. 39. 02. 21. 32.

Acknowledgement
We take this opportunity to express our sincere thanks and deep gratitude to all those people, who helped us in completing this project successfully, this work of creation wouldnt have been possible without their kind help, cooperation and extended support. First and most sincere thanks to our respected guide Prof. Naina Bhatia for providing the necessary facilities to carry out this work. We also take the opportunity to express our profound sense of gratitude for his guidance which leads us to the successful completion of this major project. Our sincere thanks to all the coordinators, whose valuable suggestions and supports and motivation provided us the required strength for the accomplishment of this major project.

Date 21st August 2010.

INDEX

SR NO: 1. 2. 3. 4. 5. 6. 7. 8.

PARTICULARS INTRODUCTION TYPES OF ACQUISITION REASONS FOR ACQUISITION PROBLEMS WITH ACQUISITION GRAPHICAL REPRESENTATION RECENT TRANSACTIONS CONCLUSION REFERENCE

PAGENO: 5-7 8-9 10-13 14-15 16-20 21-23 24-25 26-27

INTRODUCTION

ACQUISITION ACQUISITION
An acquisition is similar to merger, but involves the purchase of one organization by another. In this the large firm buys the small firm. Global Trust Bank was acquired by Oriental Bank of Commerce. Reliance Petroleum is acquired by Reliance Industries Ltd. Acquisition means strategy where one firm buys a controlling or 100% interest in another firm with the intent of making the acquired firm a subsidiary within its portfolio. Takeover means an acquisition where the target firm did not ask for the bid of the acquiring firm. A corporate action in which a company buys most, if not all, of the target company's ownership stakes in order to assume control of the target firm. Acquisitions are often made as part of a company's growth strategy whereby it is more beneficial to take over an existing firm's operations and slot compared to expanding on its own. Acquisitions are often paid in cash, the acquiring company's stock or a combination of both. Acquisitions can be either friendly or hostile. Friendly acquisitions occur when the target firm expresses its agreement to be

acquired, whereas hostile acquisitions don't have the same agreement from the target firm and the acquiring firm needs to actively purchase large stakes of the target company in order to have a majority stake. In either case, the acquiring company often offers a premium on the market price of the target company's shares in order to entice shareholders to sell. For example, News Corp.'s bid to acquire Dow Jones was equal to a 65% premium over the stock's market price. One of the most important things you will learn when trading the currency market is that the world is interconnected. The stock, bond, commodity and currency markets all have a hand in each other's business. There is no rule written in stone about which market has a leading or lagging effect on another. Rather, any one of the markets can lead or lag the other markets. In the article Bond Spreads: A Leading Indicator for Forex, we looked at how movements in the bond market can be used to trade in the forex (FX) market. Here we will focus on how the stock market can impact the currency market and how traders can use this information to identify trading opportunities.

TYPES OF ACQUISITION

1. 2. 3.

HORIZONTAL ACQUISITION ORIZONTAL CQUISITION

The acquisition of a company competing in the same industry in which the acquiring firm competes. VERTICAL ACQUISITION ERTICAL CQUISITION A firm acquiring a supplier of distributor of one or more of its goods or services. RELATED ACQUISITION ELATED CQUISITION The acquisition of a firm in a highly related industry.

REASONS FOR ACQUISITION

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REASONS FOR ACQUISITION EASONS OR CQUISITION

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 INCREASED MARKET POWER: Acquisition intended to reduce the competitive balance of the industry Example:-Alcans purchase of Pechiney OVERCOME BARRIERS TO ENTRY: Acquisitions overcome costly barriers to entry which may make start-ups economically unattractive Example:-Best Buys purchase of Future Shop LOWER COST & RISK OF NEW PRODUCT DEVELOPMENT: Buying established businesses reduces risk of start-up ventures Example:-Pharmaceutical firms access new products through acquisitions of other drug manufacturers INCREASED SPEED TO MARKET: Closely related to Barriers to Entry, allows market entry in a more timely fashion Example:- British Telcoms Acquisition of Irelands East Telecom

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 INCREASING DIVERSIFICATION AND COMPETITIVE SCOPE: Firms may use acquisitions to restrict dependence on a single or a few products or markets Example:- Torontos Onex Corporation AVOIDING EXCESSIVE COMPETITION: Firms may acquire businesses in which competitive pressures are less intense than in their core business Example:- The Jim Pattison Group of Companies LEARN & DEVELOP NEW CAPABILITIES: Acquiring firms with new capabilities helps the acquiring firm to learn new knowledge and remain agile. Example:- Angiotech: a Vancouver based research lab. RESHAPE THE FIRMS COMPETITIVE SCOPE: Reducing a firms dependence on specific markets alters the firms competitive scope. Example:- The Jim Pattison Group of Companies

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PROBLEMS WITH ACQUISITION: ROBLEMS WITH ACQUISITION

INTEGRATION DIFFICULTIES: Differing cultures may make integration of firms difficult. Example:- EG TD Banks acquisition of Canada Trust INADEQUATE EVALUATION OF TARGET: Winners Curse causes acquirer to overpay for firm. Example:-Dynegys near purchase of Enron LARGE OR EXTRAORDINARY DEBT: Costly debt can create onerous burden on cash outflows. Example:- TransCanadas acquisition of Nova Corp INABILITY TO ACHIEVE SYNERGY: Justifying acquisitions can increase estimate of expected benefits. Example:- Vivendis purchase of Seagram Co. Ltd. OVERLY DIVERSIFIED: Acquirer doesnt have expertise required to manage unrelated businesses. Example:- prior to selling businesses and refocusing

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 MANAGERS OVERLY FOCUSED ON ACQUISITIONS: Managers lose track of core business by spending so much effort on acquisitions. Example:- Futurelink TOO LARGE: Large bureaucracy reduced innovation & flexibility.

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GRAPHICAL REPRESENTATION

FIGURE 1

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Figure 1 is an illustration of the price action in the GBP/CHF following an announcement by Holcim Ltd Reg (a Swiss company) that it planned to acquire Aggregate Industries (a U.K. company) for 2.2 billion ($4.1 billion) cash, which means that Holcim would need to sell Swiss francs and buy British pounds. On the day of the announcement, GBP/CHF rallied 150 pips. Two weeks later, GBP/CHF was at least 450 pips higher.

Figure 1 - Holcim Ltd Reg announces acquisition of Aggregate Industries PLC for 2.6 billion ($4.1 billion) .

FIGURE 2
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Figure 2 is an illustration of the price action in EUR/GBP following an announcement by Pernod-Ricard (a European company) that it would be acquiring Allied Domecq PC (a U.K. company) for 9.6 billion ($17.8 billion) through a combination of 80% cash and 20% stock. This was a huge deal, and even though EUR/GBP rallied 40 pips on the day of the announcement, it ended up more than 125 pips lower over the next week and 194 pips, or 2.8%, lower at the end of 50 days. For EUR/GBP, this was a big move.

Figure 2 - Pernod-Ricard announces acquisition of Allied Domecq PLC for 7.5 billion ($17.8 billion) FIGURE 3

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The next example, seen in Figure 3, is the announcement by Procter & Gamble (a U.S. company) of a 77% acquisition of Wella AG (a European company) for US$4.5 billion. On the day of the announcement, the EUR/USD jumped over 100 pips, and in the week following the announcement, the currency pair was 200 pips higher.

Figure 3 - Procter & Gamble announces 77% acquisition of Wella AG for US$4.5 billion <+EUR/USD>. FIGURE 4

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The last example of a large cross-border transaction having an impact on the currency market is Great West Life's (a U.S. company) acquisition of Canadian Life (a Canadian company) for US$4.7 billion. As we can see in Figure 4, on the day of the announcement, USD/CAD dropped approximately 50 pips, but in the week following the announcement, the currency pair was more than 250 pips lower. Three weeks after the announcement, it was close to 600 pips lower.

Figure 4 - great west life co announces acquisition of canada life for us$4.7 billion .

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RECENT TRANSACTIONS

RECENT TRANSACTIONS ECENT RANSACTIONS

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CONCLUSION

CONCLUSION: ONCLUSION

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The preceding examples all serve to illustrate the interconnectedness of the markets. Major cross-border M&A activity can have a considerable impact on the currencies involved in the transaction. Perceptive FX traders can use this information to identify trading opportunities that others might miss. We got an enormous knowledge about acquisition. It has also helped us in adopting an analytical approach to problem solving.

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REFERENCE

REFERENCE :: REFERENCE
Yahoo Finance and CNN Money (NEWS PAPERS) www.investopedia.com

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 www.google.com www.livemint.com

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