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AGENDA
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1. ACQUIRER
2. TARGET
3. CASE : ARCELOR MITTAL MERGER
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1. MAJOR FACTORS
2. REASONS FOR FAILURE AT DIFFERENT STAGE
3. CASE : DAIMLER CHRYSLER MERGER
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Strategic management is an ongoing process that evaluates and
controls the business and the industries in which the company is
involved; assesses its competitors and sets goals and strategies to meet
all existing and potential competitors; and then reassesses each
strategy annually or quarterly [i.e. regularly] to determine how it has
been implemented and whether it has succeeded or needs replacement
by a new strategy to meet changed circumstances, new technology, new
competitors, a new economic environment., or a new social, financial, or
political environment.µ (Lamb, 1984:ix)
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1. Integration process
2. Due Diligence
3. Organizational dynamics created by M&A
4. Organizing, involving coordinating task force
5. Honest communication
6. Retaining key people
7. Structure and staffing decision
8. Merger measurement
9. Cultural integration
10. Human capital Integration and HR functions
11. Merger repair
12. Recommendation for success
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i. Motives
ii. Threats
iii. Impact of mergers
iv. Steps in Mergers
v. Stages of Mergers
: Growth and diversification
: Synergy
: Fund raising
: Tax consideration
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:
- layoffs
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- clash of egos
- variation in culture
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-most affected, they are harmed by the same degree to which
target firm shareholders benefitted
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-benefitted the most
-acquiring company usually pays a little excess than it what
should
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: Tough decisions
: Focus on customers
1. Service is suffering
2. Customers are confused and defecting
3. Performance targets have not been achieved
4. Stock prices falling
5. ey integration activities are behind
schedule
6. Analysts comments
7. The organisation cannot handle additional
acquisition
8. ey executives and employees are leaving
and many more.
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V Conduct due diligence analyses in financial and human
capital related areas
V Determine require/desired degree of integration
V Speedy(not reckless) decisions
V Gain the support and commitment from senior managers
V Clearly defined approach of integration
V Select highly respectable and capable integration leader
V Dedicated capable people for the integration core team and
task force
V Use best practices
V Set measurable goals and objectives
V Continuous communication and feed back
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O M)*+, :
a) If negotiations go successful- move on with
implementation step for friendly merger.
b) But if negotiations are not successful- Hostile
takeovers, Tender offers, Dawn Raid
#$!:
a) If happy with the deal , accept the offer OR
b) Negotiate the terms of Deal or
c) If the target finds the valuation to be very low
or if there is some unconscionable flaw in the
deal then they may reject the deal ,then
dangers of hostile takeover arise.
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1. 1!,#"
This is an unfriendly
takeover attempt by a
company or raider that is
strongly resisted by the
management and the
board of directors of the
target firm. These types of
takeovers are usually bad
news, affecting employee
morale at the targeted
firm, which can quickly
turn to animosity against
the acquiring firm
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: '((:An offer to
purchase some or all of
shareholders' shares in a
corporation. The price
offered is usually at a
premium to the market
price. Tender offers may be
friendly or unfriendly.
Securities and Exchange
Commission laws require
any corporation or
individual acquiring 5% of
a company to disclose
information to the SEC,
the target company and
the exchange
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This measure discourages an unwanted takeover by offering lucrative benefits
to the current top executives, who may lose their job if their company is taken
over by another firm. Benefits written into the executives· contracts include
items such as stock options, bonuses, liberal severance pay and so on. Golden
parachutes can be worth millions of dollars and can cost the acquiring firm a
lot of money and therefore act as a strong deterrent to proceeding with their
takeover bid.
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This is a tactic by which the target company issues a large
number of bonds that come with the guarantee that they will be
redeemed at a higher price if the company is taken over. Why is
it called macaroni defense? Because if a company is in danger,
the redemption price of the bonds expands, kind of like
macaroni in a pot! This is a highly useful tactic, but the target
company must be careful it doesn't issue so much debt that it
cannot make the interest payments.
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This is a company (the
good guyµ) that gallops in to make
a friendly takeover offer to a target company that is facing
a hostile takeover from another party (a
black knightµ).
The white knight offers the target firm a way out with a
friendly takeover.
X Tender offer
X Poison pill
X Dawn raid Saturday night special
X Golden parachute
X Greenmail
X Macaroni defense
X People pill
X Sand bag
X white knight
X Hostile takeover
X Antitrust
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REASONS FOR FAILURE AT DIFFERENT
STAGES OF MERGER(SUMMED UP)
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1. Lack of research
2. Incomplete and Inadequate Due
Diligence
3. Excessive premium
4. Size Issues
5. Striving for Bigness
6. Faulty evaluation
7. Merger between Equals
8. Mergers between Lame Ducks
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1. Lack of Proper Communication
2. Diversification
3. Diverging from Core Activity
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1. Poor Cultural/organisation Fits
2. Ego Clash
3. Failure of Leadership Role.
4. Poorly Managed Integration
5. Inadequate Attention to People Issues
6. Loss of Identity
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X In 1926, the merger of two German automobile manufacturers
Benz & Co. and Daimler Motor Company formed Stuttgart-based,
German company Daimler-Benz. Its Mercedes cars were arguably
the best example of German quality and engineering.
X The merged entity ranked third (after GM and Ford) in the world
in terms of revenues, market capitalization and earnings, and
fifth (after GM, Ford, Toyota and Volkswagen) in the number of
units (passenger-cars and commercial vehicles combined) sold.
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X The Daimler Chrysler merger proved to be a costly mistake for both the
companies. Daimler was driven to despair, and to a loss, by its merger
with Chrysler. In 2006, the merged group reported a loss of 12 million
euros.
X The good results this quarter have come after selling the Chrysler
division in the U.S. and cutting jobs at Mercedes-Benz Cars.