This article is written by Surbhi Agarwal, a student of UPES, Dehradun.
Till the year 1988, the concept of Merger and Acquisition in India was not much popular. During that period a very small percentage of businesses in the country used to come together, mostly into a friendly acquisition with a negotiated deal. The key factor contributing to fewer companies involved in the merger is the regulatory and prohibitory provisions of MRTP (Monopolistic and Restrictive Trade Practices) Act, 1969. According to this Act, a company or a firm has to follow a pressurized and burdensome procedure to get approval for the merger and acquisitions. Merger and Acquisitions (M&A) have been a very important market entry strategy as well as an expansion strategy. The concept of mergers and acquisitions is very much popular in the current scenario. Consolidation through mergers and acquisitions is considered as one of the best ways of restructuring structure of corporate units. M&A gives a new life to the existing companies.
WHAT IS A MERGER AND ACQUISITION?
Merger is defined as a combination of two or more companies into a single company where one survives and the other loses their corporate existence. The survivor acquires the assets as well as liabilities of the merged company or companies. It is simply a combination of two or more businesses into one business. Laws in India use the term ‘amalgamation’ for merger. It usually involves two companies of the same size and stature joining hands. There are different types of concept in which merging of the companies take place like, Horizontal Merger, Vertical Merger, Conglomerate Merger, and Reverse Merger.
Acquisition in a general sense means acquiring the ownership in the property. It is the purchase by one company of controlling interest in the share capital of another existing company. Even after the takeover, although there is a change in the management of both the firms, companies retain their separate legal identity. The Companies remain independent and separate; there is only a change in control of the Companies.
TOP MERGER & ACQUISITION DEALS IN INDIA
- TATA STEEL-CORUS: Tata Steel is one of the biggest ever Indian’s steel company and the Corus is Europe’s second largest steel company. In 2007, Tata Steel’s takeover European steel major Corus for the price of $12.02 billion, making the Indian company, the world’s fifth-largest steel producer. Tata Sponge iron, which was a low-cost steel producer in the fast developing region of the world and Corus, which was a high-value product manufacturer in the region of the world demanding value products. The acquisition was intended to give Tata steel access to the European markets and to achieve potential synergies in the areas of manufacturing, procurement, R&D, logistics, and back office operations.
- VODAFONE-HUTCHISON ESSAR: Vodafone India Ltd. is the second largest mobile network operator in India by subscriber base, after Airtel. Hutchison Essar Ltd (HEL) was one of the leading mobile operators in India. In the year 2007, the world’s largest telecom company in terms of revenue, Vodafone made a major foray into the Indian telecom market by acquiring a 52 percent stake in Hutchison Essat Ltd, a deal with the Hong Kong based Hutchison Telecommunication International Ltd. Vodafone main motive in going in for the deal was its strategy of expanding into emerging and high growth markets like India. Vodafone’s purchase of 52% stake in Hutch Essar for about $10 billion. Essar group still holds 32% in the Joint venture.
- HINDALCO-NOVELIS: The Hindalco Novelis merger marks one of the biggest mergers in the aluminum industry. Hindalco industries Ltd. is an aluminum manufacturing company and is a subsidiary of the Aditya Birla Group and Novelis is the world leader in aluminum rolling, producing an estimated 19percent of the world’s flat-rolled aluminum products. The Hindalco Company entered into an agreement to acquire the Canadian company Novelis for $6 billion, making the combined entity the world’s largest rolled-aluminum Novelis operates as a subsidiary of Hindalco.
- RANBAXY-DAIICHI SANKYO: Ranbaxy Laboratories Limited is an Indian multinational pharmaceutical company that was incorporated in India in 1961 and Daiichi Sankyo is a global pharmaceutical company, the second largest pharmaceutical company in Japan. In 2008, Daiichi Sankyo Co. Ltd., signed an agreement to acquire the entire shareholders of the promoters of Ranbaxy Laboratories Ltd, the largest pharmaceutical company in India. Ranbaxy’s sale to Japan’s Daiichi at the price of $4.5 billion.
- ONGC-IMPERIAL ENERGY: Oil and Natural Gas Corporation Limited (ONGC), national oil company of India. Imperial Energy Group is part of the India National Gas Company, ONGC Videsh Ltd (OVL). Imperial Energy includes 5 independent enterprises operating in the territory of Tomsk region, including 2 oil and gas producing enterprises. Oil and Natural Gas Corp. Ltd (ONGC) took control of Imperial Energy UK Based firm operating in Russia for the price of $1.9 billion in early 2009. This acquisition was the second largest investment made by ONGC in Russia.
- MAHINDRA & MAHINDRA- SCHONEWEISS: Mahindra & Mahindra Limited is an Indian multinational automobile manufacturing corporation headquarters in Mumbai, India. It is one of the largest vehicles manufacturer by production in India. Mahindra & Mahindra acquired 90 percent of 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.
- STERLITE- ASARCO: Sterlite is India’s largest non-ferrous metals and mining company with interests and operations in aluminum, copper and zinc and lead. Sterlite has a world class copper smelter and refinery operations in India. Asarco, formerly known as American Smelting and Refining Company, is currently the third largest copper producer in the United States of America. In the year 2009, Sterlite Industries, a part of the Vedanta Group signed an agreement regarding the acquisition of copper mining company Asarco for the price of $ 2.6 billion. The deal surpassed Tata’s $2.3 billion deal of acquiring Land Rover and Jaguar. After the finalization of the deal Sterlite would become third largest copper mining company in the world.
- TATA MOTORS-JAGUAR LAND ROVER: Tata Motors Limited (TELCO), is an Indian multinational automotive manufacturing company headquartered in Mumbai, India and a subsidiary of the Tata Group and the Jaguar Land Rover Automotive PLC is a British multinational automotive company headquarters in Whitley, Coventry, United Kingdom, and now a subsidiary of Indian automaker Tata Motors. Tata Motors acquisition of luxury car maker Jaguar Land Rover was for the price of $2.3 billion. This could probably the most ambitious deal after the Ranbaxy won. It certainly landed Tata Motors in a lot of troubles.
- SUZLON-REPOWER: Suzlon Energy Limited is a wind turbine supplier based in Pune, India and RePower systems SE (now Senvion SE) is a German wind turbine company founded in 2001, owned by Centerbridge Partners. Wind Energy premier Suzlon Energy’s acquisition of RePower for $1.7 billion.
- RIL-RPL MERGER: Reliance Industries Limited (RIL) is an Indian Conglomerate holding company headquartered in Mumbai, India. Reliance is the most profitable company in India, the second-largest publicly traded company in India by market capitalization. Reliance Petroleum Limited was set up by Reliance Industries Limited (RIL), one of India’s largest private sector companies based in Ahmedabad. Currently, Reliance Industries taking over Reliance Petroleum Limited (RPL) for the price of 8500 crores or $1.6 billion.