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M & A Session at MDI 170110 Manoj Mishra, CEO, Gen Next Business Consultants.

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Presentation on theme: "M & A Session at MDI 170110 Manoj Mishra, CEO, Gen Next Business Consultants."— Presentation transcript:

1 M & A Session at MDI 170110 Manoj Mishra, CEO, Gen Next Business Consultants

2 Industry Verticals  Transportation –Automobile- OEM, Assembly/aggregates and Component manufacturer –Earth moving and construction equipments  Engineering, Metal & Infrastructure –Metal ( Ferrous-Non Ferrous) –Capital Goods, Machines –Consumer durable-home appliances –Infrastructure  Retail –Space design –Facility/fixture/infrastructure support –Franchisee support-identification (MBO/EBO), contract, setting up, Software & IT, Warehousing, Logistics support,  Energy, Oil and Gas –Energy audits and conservation –Downstream and retail operation establishing –Renewable energy (Solar, Wind, Thermal, Biomass, waste recycling) –CDMA, Carbon Credits –Bio fuel  Trading –LCC/ EEC, Global Sourcing ( In & Outbound), Export support, Global Foot print

3 Service domains  Business Strategy and Growth  New Business/ Plant establishment  Competitiveness Building, Performance excellence and monitoring  IT Consulting  Materials and Purchasing  Strategic HR and Support  Recruitments-CxO, Senior- Middle and Junior mgmt.  Business Intelligence and knowledge resource  Corporate Training  Wealth Management and Corporate Finance Advisory

4 Our Network and Locations India: GurgaonIndorePune Overseas:SingaporeMalaysia Opening soon:India: Chennai Overseas: DubaiKenya Hong Kong 1) Corporate Office Gen Next Business Consultants-Gurgaon 402, Ramses Tower, Omaxe The Nile, Sector 49, Sohna Road, Gurgaon(Haryana)122002 Phone-+91-124-6787003, Cell:+919899996287 Contact: Mr. Manoj Mishra Email-

5 Structure M&A Scenario- Indian and Global Merger Motives and Drivers Assessing performance of M&A Success Rates Key Success Factors and contributors Key aspects in M&A Learning from International Researches Indian examples and learning from each case Some Indian Deals Other examples Valuation methods-brief

6 M&A scenario-India Indian M&A stats 2003200420052006200720082009 Deals #87103158225676454267 Value, Bn$910120036002030051.13110 Inbound,M n$ 15.512.63.1 Outbound, Mn$ 32.813.21.1 Domestic Sectors wise B/up-% 2009 IT/ITES7 Real estate8 Pharma10 Telecom18 Oil & Gas25 Others32

7 M&A scenario-Global Global M&A 2003200420052006200720082009 Deals #2276528884315343010930369454267 Value, Bn$996144019082556282550002400 USA Bn$/# 1432/134591445/12156 Europe 1162/118721491/12863 Asia-Pacific 458/8935551/9340

8 Top 10 M&A Advisors and fees-2008 JP Morgqan818 Bn $ Goldman Sachs 755 Citi Group 671 Marril Lynch 580 UBS 576 Morgan Stanley 543 Deutche Bank503 Credit Suisse453 Barclays 273 Lazard 266

9 Merger Motives/ Drivers Growth stagnating in home market Accelerated Growth –revenue, price range, cost, mkt. share, reach, Mfg. reach Market Reach Competitiveness Buyer-Supplier power R&D/ Technology Product access, Cross selling Diversification Long term RM access De-risk Buy underperforming brands Tax savings Talent Pool Exit Asset Monetization

10 Assessing performance of M&A Share prices of acquirer Joint Mkt. Cap Combined revenue Combined PAT Combined EBIDTA Combined Market Share

11 Success Rates Overall 33% EU 47% US 49% Asia Pacific 39% Value errossion in few big ticket M&A 40 to 79% –Vodaphone-Mannesman 190Bn –AOL-Time Warner 160Bn –Worldcom-Sprint 100Bn –Daimler-Chrysler 38Bn –Deutche Telecom-Voice stream 51Bn –French Telecom-Orange 37Bn

12 KSF Low cost of acquisition Profitable company Size which you can swallow Speed of integration Risk Mitigation Quick Turnaround Management Bandwidth War- chest: Funding, etc Contributors to Success Synergy Evaluation- 28% Selecting Mgmt Team 26% Integrating project planning 13% Internal/External Communication 13%

13 Some Key aspects Takeover-Acquisition, In-Out-CB acquisition Deal Phases– Pre-During and Post Deal Structuring- SPV, Subsidiary, Holding company, Takeover, Reverse Merger Deal Funding- LBO, Debt funding, Deferred Payout, Equity Swap Merger Motives/Drivers Good will/IP Valuation- Price, Brand, IP, Talent Due diligence scope-Mkt., Product, Legal, IT, Environment, HR, Taxes, Goodwill, IP Legal and Tax regulations Risk Synergy assessment Integration- HR/Cultural/Legal/Environment

14 Some Key aspects Integration- HR/Cultural/Legal/Environment Insurance-Warranty-Liability Timing of deal Agency problem – Manager and Stake holder White Night, Platinum, Golden and Silver parachute Poison Pill Competition Commissioner of India HHI -Harbinder Index– Industry concentration, sum of square of market share of top 3, (In US, HHI of,1000 is perfect competition, 1000-1800 Oligopoly and.1800 is monopoly/ highly concentrated

15 Learning from International M&A HHI -Herfindhal Index– Industry concentration, sum of square of market share of top 3, (In US, HHI of,1000 is perfect competition, 1000-1800 Oligopoly and.1800 is monopoly/ highly concentrated Divestment stats-20 yrs period— New Business Entry done through  USA, n=2500) Porter –Unrelated field74% –Start ups44% –JV46% Strategic Fit- Success and divestments are proportional to degree of fit: –Related supplementary –Related complimentary –Identical –Unrelated

16 Learning from International M&A researches Higher the % of Acquirer’s value to acquired, higher chances of divestment/ un-success (n=1103) Reasons for Divestments: –Change in Strategic Focus43% –Mistake/ Unprofitable22% –Sale to finance further acquisition thru leveraged restructuring 29% Higher similarity =lower chances of divestment/un-success (n=271) ---86% success if highly related field acquisition Integration: –Market related integration reduces Financial Performance –Speed is proportional to success Serial M&A for face saving or Corp. strategist or Agency formation For better deals (Premium,Valuation, Payout, Deal Structure) M&A to be cold blooded Range of Association Hostile Tender offer-  Tender offer  Friendly Tender  Acquisition  Friendly Merger  Amalgmn

17 Few Indian Cases and Learnings Sona-Thyssen- Growth,Integration, Synnergy M&M-Systech- Inorganic accelerated growth, Integration BFL- Duel shoring, Growth-top line Amtek- Duel Shoring, New business entry Motherson Sumi- Top and Bottom line growth GE– Invest-Divest-New areas, diversify Tata Corus- Deal Heat, Gut feel Mico- Kill competitors Kingfisher-Air Deccan- LCcEntry and Kill competitor UB-Whitnet Scotch- Catch Them young, product range LNM– Global and Areclor-Mittal- Low cost acquisition RIL- preparing war chest Eicher-Volvo,PTL,Mphasis- Asset Monetisation Kinetic Mahindra- Low Entry gestation Ranbaxy-Daichi- Asset Monetisation, Diversification Rico auto- Global Reach, De-risk

18 Big Indian Deals Tata -Corus 12.7 Bn $ AB Nuvo-Novelis 6.1 Bn $ Ranbaxy -Terepia Romania 372 Mn $ Dr Reddy-Betaform Germany 571 Mn $ Tata Motors-JLR 2.4 Bn

19 Other Examples Biocon M&M-Aircraft parts mfg Renault- Nissan Tata Docomo 2.7 Bn Vodafone-Essar Amtek-KTM castings Rs 1700 Crs M&M-VCST Belgium Gr Mfg 275 Mn Euro ONGC Videsh- Imperil Energy 2.8 Bn Bharti –MTN Sterlite-Asarco, US 1.7 Bn (Cash 1.1 Bn and Deferred Payout 9 yrs 0.6 Bn)

20 Valuation methods for Payout DCF Mkt. based-competitors and bench mark co. Budget IRR Multiple of PE/BV/Revenue/EBIDTA

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