Sushanth .E .R
Motives and Reasons behind mergers and Acquisition
In today’s fast changing competitive business, world even leading organisations are insecure about their future in business world. Due to aggressive competition in business, organisations are now using M&A activities as their survival strategy to secure their long-term business goal.
There are various reasons due to which organisations get in to M&A activities. The objectives of doing M&A is to create Synergy, Diversification , Sharpening Business Focus, Growth, Eliminate Competition, Increasing capabilities, Gaining a competitive advantage or larger market share, Diversifying products or services, Replacing leadership, Cutting costs, Surviving, Rapid growth,Market power,Unique capabilities, personal incentives for managers, Tax Issues, Unlocking Hidden value, International goals.
As per latest data on M&A activities done during year 2017 by top leading IT organisations ,it seems the main objective in recent time of M&A activities is to survive in business for long term and due to this organisations are merging and acquiring organisations who are providing really advanced services(Artificial Intelligence, science, Cloud Business Management, Cloud HPC,Virtual reality ) which will be a huge business market in future.
Few Examples of M&A Activities.
MAJOR TOP 10 MERGERS AND ACQUISTION DEALS IN INDIA
SL. NO. | DEALS | BUSINESS DOMAIN | PURPOSE |
1 | TATA STEEL-CORUS: | Tata Steel -Indian’s biggest steel company ,Corus -Europe’s secon d largest steel company | Achieve potential synergies in the areas of manufacturing, procurement, R&D, logistics, and back office operations. |
2 | VODAFONE-HUTCHISON ESSAR | Vodafone India Ltd. is the second largest mobile network operator , After Airtel. Hutchison Essar Ltd (HEL) was one of the leading mobile operators in India | Expanding into emerging and high growth markets like India. |
3 | HINDALCO-NOVELIS | Hindalco industries Ltd. is an aluminum manufacturing company and is a subsidiary of the Aditya Birla Group.Novelis is the world leader in aluminum rolling, producing an estimated 19percent of the world’s flat-rolled aluminum products | Making the combined entity the world’s largest rolled-aluminum Novelis operates as a subsidiary of Hindalco. |
4 | RANBAXY-DAIICHI SANKYO | Ranbaxy Laboratories Limited is an Indian multinational pharmaceutical company.Daiichi Sankyo is a global pharmaceutical company, the second largest pharmaceutical company in Japan. | Achieve potential synergies in the areas of pharmaceutical. |
5 | ONGC-IMPERIAL ENERGY | ONGC-National oil company of India.Imperial Energy Group is part of the India National Gas Company. | Diversification ,Potential synergies |
6 | MAHINDRA & MAHINDRA- SCHONEWEISS | Mahindra & Mahindra Limited is an Indian multinational automobile manufacturing corporation .Schoneweiss, a leading company in the forging sector in Germany. | The deal took place in 2007, and consolidated Mahindra’s position in the global market. |
7 | STERLITE- ASARCO | Sterlite is India’s largest non-ferrous metals and mining company with interests and operations in aluminum.Asarco, formerly known as American Smelting and Refining Company, is currently the third largest copper producer in the United States of America. | After the finalization of the deal Sterlite would become third largest copper mining company in the world. |
8 | TATA MOTORS-JAGUAR LAND ROVER | Tata Motors Limited (TELCO), is an Indian multinational automotive.Jaguar Land Rover Automotive PLC is a British multinational automotive company. | Tata Motors entry in to luxury car maker. |
9 | SUZLON-REPOWER | Suzlon Energy Limited is a wind turbine supplier based in Pune.RePower systems SE (now Senvion SE) is a German wind turbine company founded in 2001 | To achieve potential synergies |
10 | RIL-RPL MERGER | Reliance Industries Limited (RIL) is an Indian Conglomerate holding company.Reliance Petroleum one of India’s largest private sector companies based in Ahmedabad. | Production of gas and oil from KG D6 to double India’s gas availability– Investment in a world-class, complex refinery assetIndia’s most valuable company. |
MERGER AND ACQUISITION DETAILS DONE BY LEADING ORGANISATIONS.
ORGANISATION NAME | MERGERS AND ACQUISITIONS | STAKES | DIVESTITURES | SPINOFFS |
Microsoft | 207 | 64 | 32 | – |
Google(Alphabet) | 213 | – | – | – |
Amazon | 82 | – | – | – |
Facebook | 65 | – | – | – |
Walmart | 19 | – | – | – |
Oracle | 125 | – | – | – |
IBM | 165 | – | – | 32 |
Hewlett-Packard | 124 | – | – | – |
VMWare | 23 | – | – | – |
Different types of business organisations acquired by Microsoft in year 2017: Artificial Intelligence, 3D Gaming,Container Management,Collaborative Productivity Platform,Cybersecurity, Cloud Business Management,Cloud HPC,Virtual reality, Cinemagraphic photo app.
Different types of business organisations acquired by Google(Alphabet)in year 2017: Voice communication, Cr
ash Analytics, Data science, Productivity suite, Virtual reality studio, Artificial Intelligence, Artificial Intelligence (Computer vision), Mobile app developer, Talent and intellectual property licenses, Single sign-on and identity management.
ash Analytics, Data science, Productivity suite, Virtual reality studio, Artificial Intelligence, Artificial Intelligence (Computer vision), Mobile app developer, Talent and intellectual property licenses, Single sign-on and identity management.
Different types of business organisations acquired by Facebook in year 2017: Artificial Intelligence, Anonymous social media app.
Different types of business organisations acquired by Amazon in year 2017: Artificial Intelligence, Software, Food Industry, Gaming, Semantic technology embeddable visualizations and information, professional services, 3D Technology, Artificial Intelligence, Computer Vision, Developer APIs, Machine Learning.
Different types of business organisations acquired by IBM in year 2017: Information security, Collaboration software, Innovation Consultancy.
CHALLENGES FOR MERGERS AND ACQUISITIONS
· Communication challenges, Employee retention challenges, Cultural Challenges.
· 5 Key Challenges HR Faces during a Merger or Acquisition
o Deciding who stays and who goes.
o Comparing benefits, compensation and union contracts and deciding on HR policies and practices.
WHAT PROBLEMS CAN A CORPORATION MERGER HAVE?
· Differences: differences between those attempting the merger in the first place. Differences in opinion or management style may cause potential partners to fail to see eye-to-eye.
· Legal Issues: Legal issues present another major problem the companies may run into during the merger process.
· Culture: Differences in corporate culture from one organization to the next also can pose problems for businesses looking to combine efforts and resources.
· Integration: One of the most significant problems that occurs in relation to a corporate merger is the post-merger integration that must take place.
Conclusion:
Conclusion:
Many organisations are mainly using Mergers and acquisition as a survival strategy. If we just observe a pattern of M&A activities done during 2017 by leading IT organisations, we will know all these organisations are done Mergers and acquisitions with organisations who are providing future business services. Organisations don’t want to waste their time and efforts on creating these services in their organisations they are just using M&A Activities to be prepared to capture future business opportunities. Organisations are now using M&A activities as their survival strategy to secure their long-term business goal.
References:
Chandra, P. (2017). Fixed Income Securities. In P. Chandra, Investment Analysis and Portfolio Management (pp. 11.3-12.23). McGraw Hill Education.
Pratap G Subramanyam, Investment Banking Concepts ,Anlalyses and Cases.CFM –Mc Graw Hill Publications.
