Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Logistics
Programme Manager & M&A track faculty- Reshma
Krishnan
Email: re.krishnan@gmail.com
INVESTMENT
BANKING
Capital
Raising
Debt
Equity
Advisory
Services
EQUITY &
CREDIT
RESEARCH
Analysis of
stock
markets
worldwide
Economic,
Strategy and
Commodities
Research
Analysis
M&A
Restructuring
Corporate
Debt
PROJECT
FINANCE
Project
Structuring
Portfolio
Monitoring
and
Collections
Risk Analysis
Debt, Subdebt, QuasiEquity
Funding,
Equity
Investments
FINANCIAL ANALYSIS
CONSULTING
Corporate
Finance
Advisory
Forensic and
Dispute
Services
M&A
Transaction
Services
Reorganisatio
n Services
Top
Line
Botto
m
Line
How do I
become
bigger?
Increase my
sales faster
and in a
sustained
manner?
How do I
make more
money?
Increase my
profitability in
a faster and
Vehicles of Growth
Make or
Buy?
OrganicGreenfield
Time
Resources
Brokerage
Firms
IPO Equity
Research
Analysts
Sellside
Inorgan
ic
M&A
Option
s
Market
Price
Equity
Capital
Markets
Financin
g
Private
Equity
Debt
Analy
st
IPO
Project
Finance
Hedge
Funds
Mutual
Funds
Insurance
Companies
HNI
Wealth
Managemen
t
Buyside
Startup
Grow
th
Maturity
Transformati
on
TIME
Start-up
Growth
Acquire
established
market
access and
track record
Acquire a
platform for
growth
Fill strategic
gaps
Geographic
expansion
Bulk-up of
revenues and
client base
Capability
augmentation
Land grab
Maturity
Market share
consolidation
Introduction of new
business lines
Block & Tackle
Transformation
Acquire a
platform in order
to reorient
business model
around that
Types of M&A
Horizontal
Mergers
Vertical
Conglomerat
e
Brokers &
Distributors
Preparing Rough
and reselling
Rough Production
and mining
Value Add:
Sorting roughs as
per colour, clarity
and size
Distributo
rs
Cutting and
Polishing
Jewellery
Manufacturing
Value Add:
Sizing the
diamond into shapes
that maximise
yield and
refraction of light
Value Add:
Setting
Cut & Polished
diamonds
into jewellery
Retail Sales of
Diamond Jewellery
Glitters presence across the value chain allows it to bypass the costs of middle men
and also control quality of raw material at each stage thereby leading to higher
margins.
Changing Industry structure: The disappearance of middle man is advantageous to players such as Glitter who do not depend
on them for raw materials and now have the opportunity to cater to major customers like jewellery manufacturers and
retailers on their own leading to a significant expansion in margins.
Inorganic Growth Opportunities: Glitter can focus its inorganic growth efforts across the value chain enabling it to spur its
growth exponentially over the coming years as the fragmented industry starts to consolidate.
Make or buy
Comparati
ve
Ratios/Co
mparables
Replacem
ent Cost
Transactio
n
Comparabl
es
Discounte
d Cash
Flow
(DCF)
Control Premium
For the most part, acquiring companies nearly always
pay a substantial premium on the stock market value of
the companies they buy. The justification for doing so
nearly always boils down to the notion of synergy; a
merger benefits shareholders when a company's postmerger share price increases by the value of potential
synergy.
Pre Merger value of both firms +Synergy = Pre
Merger Stock Price Post Merger Number of Shares
Domestic
Cross border
Inbound- No mega
deals
Outbound- Decline in
the
last few years
because of
Global M&A
the Global Crisis.
42,455 deals
Overestimate
Savings
Diligence
and
Implementation
exist.
their
Merging
two
different
cultures
transaction.
Underestimate
integration
own
personalities.
extremely
often
ordered by a U. S. Bankruptcy
traditional HP emphasized
Time Warner.
should be.
Corus, the merger between British Steel and Hoogovens in 1999, underestimated the
integration valuing the companies market cap at US$ 6 billion, but in 2005 the company
was worth US$ 250 million.
Corus was an attempt to revive the ailing British Steel which had incurred a net loss of 81
million in the March 1999.
Coruss Failure:
Wishful Thinking!
Chief among them being the cultural mismatch between the merged entities and the lack of
HR involvement when integrating the two entities.
Large scale labour unrest due to the downsizing and rationalization of various operations
seriously impacted the normal functioning of the new organization.
The high valuation of the British pound and stagnation in demand for steel was gradually
undermining the competitiveness of British Steel in the European market.
Tata Steel acquired Britains Corus for 5.75 billion ($11.3 billion now 12.1) in 2007.
Tata-Corus combine will become the fifth largest steelmaker in the world.
The ability to export surplus slabs either from Tata Steel's facilities or through
acquisitions in low-cost regions over the next few years will be the key driver of
this deal.
Wishful Thinking!
It is likely that over the next few years, Tata Steel will put through an extensive
restructuring of its underperforming units at Port Talbot and Scunthorpe in the UK,
though it has ruled out any job cuts. It may also prune down high-cost slab facility
at Teesside.
The ruling out of job cuts creates a better environment post integration unlike the
one seen in the earlier transaction.
For the first time since this deal surfaced, Tata Steel has quantified that it will
benefit to the tune of $300-350 million every year. However, the benefits from the
Winners Curse!
A tendency for the winning bid in an auction to exceed
the intrinsic value of the item purchased.
Tata Corus had quantified synergies but many reckon
that they might have bid almost
The acquisition by Tata amounted to a total of 608 pence
per ordinary share or 6.2 billion (US $12 billion) which was
paid in cash. First of all, the general assumption is that the
acquisition was not cheap for Tata. The price that they paid
represents a very high 49% premium over the closing mid
market share price of Corus on 4 October, 2006 and a
premium of over 68% over the average closing market
share price over the twelve month period. Moreover, since
the deal was paid for in cash automatically makes it more
expensive, implying a cash outflow from Tata Steel in the
amount of 1.84 billion.
Thank you
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