joint ventures and mergers

MERGER & AQUISITIONS

About Merger..

When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition.

Need for merger

Gain market share. Economics of scale. Enter new market. Acquire technology. Utilization of surplus funds. Managerial effectiveness. Strategic objectives. Horizontal integration.

Mergers between Tata Motors and Jaguar-Land Rover.

Ford Motors Company

• Location: Dearborn, Michigan

• Founded: 1903 by Henry Ford

• Competitors: General Motors, Toyota

• Brand names: Lincoln, Mercury, Volvo,

Mazda, Jaguar and Land Rover.

• CEO: Alan Mulally.

TATA MOTORS

TATA GROUP – 150 YEAR OLD

Previously Tata Engineering and Locomotive

Company, Telco

Tata Motors’s break-even point for capacity

utilization is one of the best in the industry

worldwide

listed on the New York Stock Exchange in 2004

THE DEAL…….

The Deal Process

July 2007- Announcement from Ford that it plans to sell

Land Rover and Jaguar.

August 2- India’s Tata Motors and M&M arrive as top

bidders ($ 2.05b & $ 1.9b)

Jan 2008 – Ford announces Tata as the preferred bidders

March 2008 - Ford agreed to sell their Jaguar Land Rover

operations to Tata Motors.

June 2008 – The acquisition is complete.

Why acquire JLR?

Long term strategic commitment to automotive sector.

Opportunity to participate in two fast growing auto segments.

Increased business diversity across markets and product.

Jaguar offers a range of “performance/luxury” vehicles to

broaden the brand portfolio.

Graph of Jaguar and Land Rover

Vodafone and Hutchison Essar limited

Vodafone Company

Group : Vodafone P/C HEADQUATERS: Berkshire, UK Industry : mobile telecommunication Presence : equity involvement in 25 countries

and network partner in 42 countries Strength : 2,30,000 employee Revenue : 35478 million pounds (14.1%

growth) Net income : 10047 million pounds (10.1%

growth)

Hutchison Essar Ltd.

Background : Hutchisson Essar ltd. Founded in 1992 Circle :16+ license for 6 circles Revenue : US $1282 million EBITDA :US $415 million Operating profit : US $315 million

Why and how the deal came to?

Telecom business in Japan and Belgium were not performing up to the world market.

Market including the US market were maturing and were not growing in a big way.

Stiff competition among almost all major player in industry, global telecom giants like BT, O2 of UK version from US, maxis telecommunication of Malaysia

As a example:- reliance and bharti airtel from india

Profit of Vodafone

Vodafone became no.1 for tele communication in india (source: business standard, edition 16th april, 2010).

India is the world’s 2nd most populated country, with over 1.1 billion people.

India benefits from strong economic fundamentals with exceeded real GDP growth in high single digits.

Increases Vodafone presence in higher growth emerging markets.

Graph of Vodafone

TATA STEEL AND CHORUS

Introduction of Tata steel

1. Founder- J.N. Tata2. 102 yrs. In Steel Market3. World’s 56th largest4. Capacity of 30 million5. Presence in 26 nations

Introduction of Chorus steel

1. World’s 6th largest2. 2nd in Europe & 1st in U.K.3. 3…1st rank in fortune list4. Presence in 50 nations5. 40000 people worldwide

Financing the deal

Tata- Chorus deal – US$ 12.2 billion Equity contribution from Tata Steel –

US$ 3.88 billion.

After merger workings of Tata Chorus

Augmented its crude steel capacity to 27 million tonnes per annum

The combined entity forms the 6th largest steel company

Capacity to produce 56 million tonnes per annum by 2015.

JOINT VENTURES

INTRODUCTION

A joint venture is an entity formed between two organizations to undertake economic activities together. Both of them contribute equity and then they agree to share the revenues, expenses and control of the newly formed enterprise.

Before entering a Joint Venture..

Both partners should appreciate the need for the joint venture.

The partners should clearly agree on the way the joint venture will be managed. 

It is important that both partners work towards a system based on trust and transparency.

Need to have a clear long term goal and set the terms and conditions of the venture.

Hyundai Motor Company – Beijing Automotive Joint Venture

Introduction

In 2003, Hyundai has an investment of $250 million in China in conjunction with Beijing Automotive to produce 100,000 units per year .

Hyundai projects and plans production to be 200,000 units per year by 2005.

Hyundai - History & Development

Established in 1967, Hyundai is presently South Korea’s #1 carmaker, manufacturing dozens of models of cars, vans, and minivans.

Throughout the past two decades, Hyundai introduced various models: Pony, Excel, Sonata, and Accent.

In 1990, Hyundai introduced its own engine design, the Alpha. Two years later, it introduced its second-generation engine, the Beta.

Beijing Automotive Group

Beijing Automotive Group (officially Beijing Automotive Industry Ltd.) is a holding company of several Chinese automobile and machine manufacturers such as Beijing Automobile Works Co Ltd. etc. It is commonly known as Beiqi.

2011 production of 1,526,300 whole vehicles made Beiqi the fifth largest, in terms of units manufactured, vehicle-maker in China that year.

Hyundai Current Market Share

Venture Agreement

Hyundai agreed to pay $250 million in a joint venture with Beijing Automotive. Starting at 1,00,000 units in 2003, plans

to expand to 200,000 units by 2005. If the production is a success, Hyundai

will invest $1.1 billion to increase productivity to 5,00,000 by 2012.

Productive Output

Production : Starting at 1,00,000 units, production increased by

50,000 till 2005, ultimately producing 2,00,000 units.

From 2005 to 2011, production increased 60,000 units per year.

Venture Outlook

In order to be successful : Must form synergies on all levels with China and

Beijing Automotive. Hyundai must use their experience in investing in 4

other plants in China. Take advantage of the first mover opportunity in

China’s de-regulated auto market.

Relevance

Great opportunity for Hyundai’s business development.

Tremendous global growth potential.

Bottom line : There is lots of money to be discovered and made in the emerging markets of Korea and China !!!

Joint Venture Company – Maruti Suzuki India Ltd.

Introduction

Maruti Suzuki India Limited , commonly referred to as Maruti, is a subsidiary company of Japanese automaker Suzuki Motor Corporation. It has a market share of 44.9% of the Indian passenger car market as of March 2011.

Maruti Suzuki offers a complete range of cars from entry level Maruti 800 and Alto, to

hatchback Ritz, A-Star, Swift, Wagon-R, Estillo and sedans DZire, SX4, in the 'C' segment Maruti Eeco, multi purpose vehicle Ertiga and sports utility vehicle Grand Vitara.

It is the market leader in India, and on 17 September 2007, Maruti Udyog Limited was renamed as Maruti Suzuki India Limited. The company's headquarters are on Nelson Mandella Rd, New Delhi.In February 2012, the company sold its 10th million vehicle in India.

Maruti Suzuki is India and Nepal's leading automobile manufacturer and the market leader in the car segment, both in terms of volume of vehicles sold and revenue earned. Until recently, 18.28% of the company was owned by the Indian government, and 54.2% by Suzuki of Japan.

Maruti Suzuki will be introducing new 800cc model by Diwali in 2012.The model is supposed to be fuel efficient, hence more expensive.

Benefits of Joint venture

For Maruti :-

Suzuki Motor Corporation,the parent company,is a global leader in mini and compact cars for three decades.

Suzuki’s technical superiority. Lightweight engine that is clean and fuel efficient. Near 75000 people are employed directly by Maruti Suzuki

and its partners.

For Suzuki:

Large Indian market. Monopolistic Trade in the Indian automobile

market. Availability of resources.

Market share

NTPC and COAL INDIA LTD.

National Thermal Power Company (NTPC Ltd.)

Type:- Public company Founded:- 1975 Headquarters:- Delhi, India Services:- Electricity generation & distribution of natural gas exploration. Revenue:- Rs.620.53 billion (US$11.23 billion) (2011-2012) Net income:- Rs.92.23 billion (US$1.67 billion) (2011-12). Employees:- 26,000 (2012)

Coal India Limited

Type:- Public Founded:- 1975 Headquarters :- Kolkata, West Bengal, India Product :- Coal, Bituminous Revenue:- Rs.624.15 billion (US$11.3 billion)

(2012) Profit :- Rs.147.88 billion (US$2.68 billion)

(2012) Owner(s) :- Government of India Employees:- 383,347 (April 2011)

After Joint Venture

Coal India feeds 82 out of 86 coal based thermal power plants in India.

Joint venture has been signed between NTPC & Coal India Ltd. For development of Brahmini & Chichro coal mine with 50:50 equity participation.

NTPC is ramping up its generation capacity & is expected to increase its market share from about 19% today to around 25% by 2017. During 11th plan your company has already commissioned 3240 mega watt capacity.

Strategic Alliance

STRATEGIC ALLIANCE

INDEPENDENT ORGANIZATIONS HAVING A CRITICAL BUSINESS DEAL.

Introduction

SA is a kind of partnership between two entities in which they take advantage of each other’s core strengths like proprietary processes, intellectual capital, research, market penetration, manufacturing and/or distribution capabilities etc. They share their core strengths with each other. They will have an open door relationship with another entity and will mostly retain control.

BOEING AND AIRBUS

INTRODUCTION OF BOEING

Boeing is the world’s leading aerospace company and the largest manufacturer of commercial jetliners and military. It was established by William Boeing in 1916 in Seattle, Washington. Its international headquarters now has been located in Chicago, Illinois. The major products are commercial airliners, military aircrafts, munitions, space systems and computer services. With respect to its commercial airplanes, this company has launched into the world market models like 737, 747, 767, 777, and the latest one is 787 Dream-liner (Commercial Airplanes).

INTRODUCTION OF AIRBUS

The European Aeronautic Defense and Space Company EADS N.V. (EADS) is the largest European aerospace corporation and was founded on July 10, 2000 from the merger among Aerospatiale-Marta of France, Construcciones Aeronautic as SA (CASA) of Spain and DaimlerChrysler Aerospace AG (DASA) of Germany. This company mainly focuses on developing and producing the civil and military aircrafts, missiles, space rockets, satellites and related systems. Airbus is one of its important divisions. This branch has penetrated into the global market the five big aircraft families including A320 family , A300/A310 family, A330/A340 family, A350 family and the newest one-A380 (Airbus).

ALLIANCE STRATEGY

In order to take advantage of the other nations’ comparative advantages in technology and to achieve the economies of scale and to reduce excess capability, Airbus and Boeing apply the “strategic alliance” including joint R&D efforts and joint production of a particular component. It means they did not produce all the components of their planes. Instead, they share their jobs to their partners or concentrate on the activities in low-cost or high skills countries to increase their productivity and reduce costs.

Reasons for failure of a strategic alliance

• Inadequate pre-planning for the strategic alliance.

• The desired technology never developed. • Agreements could not be reached on

alternative approaches to solve the basic objectives of the strategic alliance.

• People with expertise in one company refused to share knowledge with their counter-parts in the strategic alliance.

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Why?

  To develop communications and infrastructure solutions that combine Cisco's industry-leading network solutions and products with Wipro's infrastructure and managed services expertise.

BASIC PROFILE

WIPRO :- Azim Premji,

chairman, has led WIPRO since 1966. Today it is a US$5 billion revenue IT, BPO and R&D services organization with a presence in over 50 countries.

CISCO :- Leonard Bosak and

Sandy Lerner founded CISCO in 1984. Today it has a revenue of US$ 46.06 billion on the networking equipment.

VISION

To provide innovative solutions that deliver business value to customers.

To create industry specific solutions for sectors such as banking, finance, retail, energy & utilities and healthcare & life sciences.

To become the leading 360 degree strategic partner.

STRATEGY

To attain technological leadership. To create differentiated joint

offerings. To adopt next generation

engagement models which enable customer's business

outcomes.

Wipro-Cisco 360 degree relationship:-

BUSINESS FOCUS

Developing an integrated value proposition.

Board level governance to ensure strategic organizational alignment.

Market collaboration and GTM strategies.

Joint cloud strategy. Scalable business architecture.

Facebook & Microsoft

Facebook

Type of site:- Social networking service.

Users:- 955 million(active June 2012)Owner:- Facebook, Inc.Created by:- Mark Zuckerberg Eduardo Saverin Andrew McCollum Dustin Moskovitz Chris Hughes.Launched:- February 4, 2004Revenue :- $3.71 billion (2011)

Microsoft

Industry:- Computer software Online services Video games Founded:- Albuquerque, New Mexico,

United States (April 4, 1975)

Founder(s):- Bill Gates, Paul Allen Headquarters:- Microsoft Redmond

Campus, Redmond, Washington, U.S. Area served:- Worldwide Revenue:- US$ 73.72 billion (2012) Employees:- 94,000 (2012)

Why strategic Alliance?

Two companies expand advertising deal to cover international markets, Microsoft to take equity stake in Facebook. Microsoft took a US$ 240 million equity stake in Facebook. At the launch of Facebook, it was not used worldwide but in some places with the help of Microsoft he did the advertisement & as a result his users increased.

Facebook’s users increased from 50million to 750 million.

Present Position

 July 2012, the countries with the most Facebook users were:

United States with 155.6 million members Brazil with 52.8 million members India with 51.0 million members Indonesia with 44.0 million members Mexico with 36.2 million members All of the above total 309 million members

or about 38.6 percent of Facebook's 900 million worldwide members.

Campus Overview

907/A Uvarshad, GandhinagarHighway, Ahmedabad – 382422.

Ahmedabad

Kolkata

Infinity Benchmark, 10th Floor, Plot G1,Block EP & GP, Sector V, Salt-Lake, Kolkata – 700091.

Mumbai

Goldline Business Centre Linkway Estate, Next to Chincholi Fire Brigade, Malad (West), Mumbai – 400 064.

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