UNITED KINGDOM

Subject -MERGERS AND

ACQUISITIONS

INTRODUCTION : EUROPE

Europe is one of the world's seven continents Europe is the world's second-smallest continent by surface area Europe is the third-most populous continent after Asia and Africa, with a population of 733 million or about 11% of the world's population Europe, in particular Ancient Greece, is the birthplace of Western culture It played a predominant role in global affairs from the 15th century onwards, especially after the beginning of colonialism European markets are the best markets to invest in

EUROPE : MAJOR COUNTRIES

Main countries by area: Russia France Ukraine Spain Sweden Main countries by population: Russia Germany France United Kingdom Italy Main countries by influence on the world: United Kingdom Spain France Russia Portugal

UNITED KINGDOM
United Kingdom (UK) and Britain, is a sovereign state located off the north-western coast of continental Europe Form of government - constitutional monarchy with a parliamentary system Capital city - London UK is a developed country and has the world's 6th largest economy by nominal GDP and 8th largest economy by purchasing power parity World's first industrialized country UK is still referred to as a great power and retains considerable economic, cultural, military, scientific and political influence internationally Recognized nuclear weapons state and its military expenditure ranks 4th in the world UK is the member of United Nations Security Council European Union

UK : REGIONS AND MAJOR CITIES

REGIONS England Northern Ireland

Scotland
Wales

MAJOR CITIES London Manchester Liverpool Birmingham Bristol Leeds Belfast Glasgow Edinburgh Aberdeen Inverness Perth Dundee Cardiff

UK : POLITICS
United Kingdom is a unitary state under a constitutional monarchy Queen Elizabeth II is the head of state of the UK as well as of fifteen other independent Commonwealth countries Monarch has "the right to be consulted, the right to encourage, and the right to warn Constitution of the United Kingdom consists mostly of a collection of disparate written sources including statutes, judge-made case law and international treaties, together with constitutional conventions Political power to change or abolish almost any written or unwritten element of the constitution No Parliament can pass laws that future Parliaments cannot change

UK : GOVERNMENT
UK has a parliamentary government based on the Westminster system Palace of Westminster has two houses an elected House of Commons and an appointed House of Lords All bills passed are given Royal Assent before becoming law Government is led by the Prime Minister, who selects all the remaining Ministers Monarch selects the Prime Minister as the leader of the party most likely to command a majority in Parliament UK's 3 major political parties (1) Conservative Party (2) Labour Party (3) Liberal Democrats Current Prime Minister is David Cameron, leader of the Conservative Party Up to three layers of elected local authorities (such as County, District and Parish Councils) exist throughout all parts of the United Kingdom

UK : CULTURE
Culture of the United Kingdom refers to the patterns of human activity and symbolism associated with the British people and the United Kingdom. Arts - include famous English Literature, poetry's by William Shakespeare, English novels Theatre Music - UK was one of the two main countries in the development of rock music, and has provided bands; 1st to pioneer electronic band Broadcasting at the forefront of developing films, radio and television Visual arts and olden architectured monuments

UK : BUSINESS CULTURE
Humor Indirect communication Patient Friendly Tips for UK Business Culture
English is official language Time is money

Main British peoples main culture

Working relationship can be informal

The British prefer facts and figures in your presentation Always polite and quiet when they work

For some countries, being late for work or an appointment is acceptable, they will not be severely punished. But for most of European, they are clock conscious, time is money, being late for work or an appointment is a very rude thing.

Time is money
The British are known for their
punctuality. So arrive

time.

on

Working relationship can be Compared with other informal countries, relationships

in the UK workplace can be a reasonable relax and informal. The way they talk between colleagues or boss can be flexible, most people can call their boss and other colleagues by their first names and tutors usually expect students to address them by their first names as well. The way they dress depends more on personal preference than on position or rank.

The British prefer facts and figures in your presentation.

When the British people are meeting, they prefer to heart the facts and figures in presentation and try to avoid too much theory and idealism.

Always polite and quiet when they work

In UK workplace, it is polite to shake hands before and after a meeting. Unless you meet frequently. Also, they are very quiet and do not talk so much when they work

UK : SCIENCE AND DEVELOPMENT

Science and technology in the United Kingdom has a long history, producing many important figures and developments in the field Major theorists from the UK include Issac Newton, Charlis Darwin Penicillin by Alexander Fleming, and the structure of DNA, by Francis Crick UK include the steam locomotive, Jet Engine and World Wide Web Major technological sectors include the aerospace, motor and pharmaceutical industries World's first working television system, and colour television Universities in UK have established science parks to facilitate production and co-operation with industry

UK: TECHNOLOGY AND DEVELOPMENT:

Rolls-Royce playing a leading role in the aero-engine market; BAE Systems acting as Britain's largest and the Pentagon's sixth largest defence supplier GlaxoSmithKline and AstraZeneca, ranked in the top five pharmaceutical companies in the world for adopting most innovative technologies UK companies have discovered and developed more leading medicines than any other country apart from the US UK remains a leading centre of automotive design and production, particularly of engines, and has around 2,600 component manufacturers

UK : CURRENT ECONOMIC SCENARIO

Economy of the UK is 6th largest national economy in the world measured by nominal GDP and 8th largest measured by purchasing power parity, and the 2nd largest in Europe measured by both nominal GDP and PPP (after Germany in both cases UK has one of the world's most globalised economies London is the world's largest financial centre alongside New York and has the largest city GDP in Europe UK economy has been weak in recent years following the late 2000s recession with growth largely flat since 2010 UK experienced a double dip recession between Q2 2008 and Q2 2012 which was the longest and deepest in 50 years In February 2013, the UK lost its top AAA credit rating for first time since 1978 Inflation - adjusted wages in the UK fell by 3.2% between Q3 2010 and Q3 2012 Since the 1980s, economic inequality has grown faster in the UK than in any other developed country. Bank of England is the UK's central bank and its Monetary Policy Committee is responsible for setting interest rates. The currency of the UK is the pound sterling, which is also the world's third-largest reserve currency after the U.S. dollar and the euro

UK : MERGERS AND ACQUISITION RELATED LAWS

Mergers and acquisitions in United Kingdom law refers to a body of law that covers companies, labour, and competition, which is engaged when firms restructure their affairs in the course of business. COMPANY LAW Schemes of arrangement City code or Takeover code LABOUR LAW Transfer of Undertakings (Protection of Employment) Regulations COMPETITION LAW prohibiting agreements or practices that restrict free trading and competition between business entities banning abusive behaviour by a firm dominating a market, or anticompetitive practices that tend to lead to such a dominant position

UK : INDUSTRIES AND SERVICES

Electricity, gas and water supply Manufacturing- aerospace industry of the UK, UK automotive manufacturing sector, BAE Systems, GlaxoSmithKline and AstraZeneca Mining and quarrying Service industries Creative industries Education, health and social work Financial and business services- London Stock Exchange, London International Financial Futures and Options Exchange, London Metal Exchange, Lloyds of London, and the Bank of England, Barclays Bank, Citigroup and HSBC Wholesale and retail trade- motor trade, auto repairs, personal and household goods industries, Asda(owned by Wal-Mart Stores) and Tesco Hotels and restaurants, Real estate and renting activities Tourism, Public administration and defence

UK : PRODUCT REQUIREMENTS
Most important manufactured products required are : Computer, Electronic and Optical Products Transports Equipment Chemical Products Food and Beverages Apparel, Textiles and Leather Basics Metals Refined Petroleum Products

LARGEST INDIAN ACQUISITION IN UK

TATA-CORUS
Tata acquired Corus, which is four times larger than its size and the largest steel producer in the U.K. The deal, which creates the world's fifthlargest steelmaker, is India's largest ever foreign takeover and follows Mittal Steel's $31 billion acquisition of rival Arcelor in the same year.

Tata acquired Corus on the 2nd of April 2007 for a price of $12 billion. The price per share was 608 pence, which is 33.6% higher than the first offer which was 455 pence.

ACQUISITION FINANCIALS
Particulars Corus Currency: Rupee Millions TATA Steel Ltd Currency: Rupee Millions Year 2006 2005 2004 2006 2005 2004

ASSETS

582750.00

533925.00

467775.00

205,450.70

177,033.10

147,988.70

DEBTS

98100.00

105525.00

96000.00

45,932.70

42,073.10

39,982.90

LIABILITIES

231300.00

178425.00

155475.00

30492.10

33146.80

32665.90

REVENUE

760500.00

699900.00

596475.00

202,444.30

159,986.10

111,294.40

NET INCOME

33900.00

33450.00

-22875.00

37,346.20

36,032.60

17,887.80

PROCESS OF ACQUISITION
1. 2. 3. 4. 5. 6. Finding A Target Business Appointing Advisors Negotiating terms Due Diligence Exchange of Contracts Completion

(1) Finding A Target Business

Synergy of Operations Help the Organizations to Achieve Strategic Objectives Enter new markets Vertical Integration

(2) Appointing Advisors

The Right Chemistry The Right Experience Size is not Everything Talk Your Language
CORUS
J P MORGAN CAZENOVE HSBC

TATA
ABN AMRO DEUTSCHE BANK STANDARD CHARTERED

(3) Negotiating Terms

The nature of the fit Commonality of client base Financial strength Strategic intent Sharing of resources Applicable Benefits

Negotiation By Tata
September 20, 2006 : Corus Steel has decided to acquire a strategic partnership with a Company that is a low cost producer October 5, 2006 : The Indian steel giant, Tata Steel wants to fulfill its ambition to Expand its business further. October 6, 2006 : The initial offer from Tata Steel is considered to be too low both by Corus and analysts. October 17, 2006 : Tata Steel has kept its offer to 455p per share. October 18, 2006 : Tata still doesnt react to Corus and its bid price remains the same. October 20, 2006 : Corus accepts terms of 4.3 billion takeover bid from Tata Steel October 23, 2006 : The Brazilian Steel Group CSN recruits a leading investment bank to offer advice on possible counter-offer to Tata Steels bid.

 October 27, 2006 : Corus is criticized by the chairman of JCB, Sir Anthony Bamford, for its decision to accept an offer from Tata. November 3, 2006 : The Russian steel giant Severstal announces officially that it will not make a bid for Corus November 18, 2006 : The battle over Corus intensifies when Brazilian group CSN approached the board of the company with a bid of 475p per share December 18, 2006 : Within hours of Tata Steel increasing its original bid for Corus to 500 pence per share, Brazil's CSN made its formal counter bid for Corus at 515 pence per share in cash, 3% more than Tata Steel's Offer. January 31, 2007 : Britain's Takeover Panel announces in an e-mailed statement that after an auction Tata Steel had agreed to offer Corus investors 608 pence per share in cash April 2, 2007 : Tata Steel manages to win the acquisition to CSN and has the full voting support from Corus shareholders

(4) Taxation and Accountancy Considerations

Tension between Acquisition / sale of shares or assets. Due Diligence Tricky areas Accounting issues Accounting policies of the Target Accounting for Goodwill Fair value accounting Earnings per share Other Matters

(5) Legal Documentation

(A) Share sale Agreement
The shares being sold The Price Restrictive Agreements Warranties Conditions to the Deal Transferring tangible assets Transferring Intangible assets Transferring Liabilities Transferring Employees

(B) The Tax Deed

(C) The Disclosure Letter

(6) Financing the Deal

TATA- CORUS Deal - $12 billion
Equity Contribution from Tata Steel- $3.88 billion Credit Suisse leaded, joined by ABN AMRO and Deutsche Bank in the consortium. Of the $ 8.12 billion of financing , Credit Suisse provided 45% and ABN AMRO and Deutsche provided 27.5% each.

DEVELOPING A POST-ACQUISITION STRATEGY: 1. The first 100 days 2. In-house systems synergy

(1) First 100 Days: Conflict Points

1. 2. 3. 4. 5. 6. 7. Time Factor Leadership style differences Whos in charge? (Who won?) Organic vs. bureaucratic cultures Open vs. closed communication Decision making speed & style Structures that dont match

(2) In-house systems synergy

Product Leadership (best product)

Operational Excellence (low cost producer)

Customer Intimacy (best total solution)

Strategy: Disciplines, Priorities

Operational Excellence
Competitive price Error free, reliable Fast (on demand) Simple Responsive Consistent information for all 'Once and Done' Product Leadership New products or services Risk takers Meet volatile customer needs Never satisfied obsolete own and competitors' products Learning organization Customer Intimacy Easy to do business with Have it your way (customization) Market segments of one

Proactive, flexible
Relationship and consultative selling Cross selling

Global Steel Ranking - Ranking of Tata steel

before deal- 55
Company Capacity (in million tonnes) 110.0 32.0

Arcelor - Mittal Nippon Steel

Posco
JEF Steel Tata Steel - Corus

30.5
30.0 27.7

After the acquisition 6th position

Bao Steel China US Steel Nucor

23.0 19.0 18.5

Riva
Thyssen Krupp

17.5
16.5

Conclusion
With Corus in its fold, Tata Steel can confidently target becoming one of the top-3 steel makers globally by 2015. The company would have an aggregate capacity of close to 56 million tones per annum, if all the planned Greenfield capacities go on stream by then.

We can conclude that if the acquisitions well planned , Executed and the necessary precautions taken for the deal a company can achieve its strategic objectives and thus ensure its growth through Acquisition.

M&A activity is a mode of entry for vertical integration and diversification strategies A firms M&A strategy should satisfy the logic of corporate level strategy M&A activity can create economic value at announcement, but target firms usually capture that value M&A activity can create value over the long term for the acquiring firm