1. THE SYLVANIA ACQUISITION DECISION
HAVELLS INDIA:
THE SYLVANIA ACQUISITION DECISION
By: Group 11
25. Aditya Kothawale
23. Ashish Khandalgoankar
41. Dhawal Prajapati
55. Amol Thorat

2. AGENDA INTRODUCTION Industry Havells Sylvania CASE SYNOPSIS
PORTER’S 3 TESTS
STRATEGY FOR ACQUISITION
CURRENT FINANCIAL SCENARIO
CONCLUSION
Aditya Kothawale

3. INTRODUCTION - INDUSTRY
Electrical & lighting Industry
Electrical Components
Lighting
Safety & Distribution
Aditya Kothawale

4. INTRODUCTION – HAVELLS INDIA
Leading manufacturer in India in electrical industry
Sales in the excess of Rs 10 Billion (2006)
Overall market share of 35% in India for MCB
Largest manufacturer of MCBs
An entire range of electronic and electro-magnetic switchgear products
People & channel management key strengths for the company
Foray into Exports market to ease challenges in the Indian market
Exporting to 45 countries in Europe, Middle East, Far East and Africa
Aditya Kothawale

5. INTRODUCTION – SYLVANIA
Started as a small entrepreneurial firm
Went through several ownership changes
3rd Largest market share compared to GE & Philips
Generated Annual Sales of US $600 Million across 30 countries
30 Manufacturing Plants, Sales Offices, Distribution facilities in more than 28 countries
The revenue by 2006 was €473 Million
Aditya Kothawale

6. CASE SYNOPSIS
Havells, an electrical company, seeking to diversify into new products and geographies through the acquisition route
Leveraging the synergy in electricals and lighting products businesses of common distribution channels
Growth in emerging markets and improvement in standards of living was expected to give a boost to lighting industry
Manufacturing shifting to Asia due to availability of automation and low-skilled labor
R&D intensive industry with many firms focused on new technologies viz. LED lamps
Dhawal Prajapati

7. CASE SYNOPSIS…
Havells was unsuccessful in acquiring Electrium in 2005 pipped to the post by Siemens by less than £10M
However, Havells learnt valuable lessons in M&A
Evaluating near bankrupt Sylvania for diversifying in lighting industry
Sylvania had the third largest market share in the US
Annual sales of €473 M in 2006
The deal was expected to cost more than $200MM
SLI’s turnover more than twice that of Havells
Challenge of integrating two diverse teams

8. PORTER’S 3 TEST Dhawal Prajapati
Test of attractiveness
Industry chosen must be structurally attractive or capable of being made attractive
Improvement in living standard
Growth in emerging market
The Cost of Entry Test
Cost of entry must not capitalize all future profits
Distribution Channel
Quality standard
The Better Off Test
Either the acquired company must gain competitive advantage from parent or vice versa
Global Presence
Extension of Product line
Dhawal Prajapati

9. STRATEGY FOR ACQUISITION
Europe, though sluggish, continues to be a large market with attractive margins for a low cost manufacturer
It is a tough market to access without an established brand and distribution network
The low cost product cannot be a sole penetration criterion as reflected in absence of any Chinese or Indian products in these markets
The Sylvania acquisition provides Havells a platform to introduce more products in particular, switchgears
Sylvania R & D practices can transform Havells
Havells can use Sylvania multi brand strategy for different markets
Ashish Khandalgaonkar

10. CURRENT FINANCIAL SCENARIO
Havells decided to retain the current management & to continue with day-to-day operations
In FY08, Sylvania clocked revenues of Rs 2,948 crore and profit after tax of Rs 17 crore. .
By the end of 2008 due to global recession Sylvania had notched up accumulated losses of €47 million
Havells decided to go with turnaround strategies: Project Phoenix & Project Prakram
Ashish Khandalgaonkar

11. CONTD.

12. How different are these Industries, how different are these geographies (understand industry – country differences)
Lighting and Electrical components are two distinct Industries with different market dynamics.
In European and US market, Lighting products are sold through large format retailers while, electrical components are sold through different channel. In a country like India, the similarity lies in Sales channel. Sales and distribution channel for Electrical and Lighting Industry is same.
This has helped Havells to a large extent as they could leverage on existing Sales and distribution capabilities for promoting Lighting products along with their electrical components.
Another major difference in India and western market was in the penetration of CFL’s and LED lights. While European markets were near saturated, Indian market had a very low base and potential to grow.
This has made proposition of entry into Lighting more attractive for Havells.
In European and US market, the end consumer is decision maker for Electrical components, Products etc. In India “Electricians” or skilled labors play a role of Influencer in process of decision making.
Amol Thorat

13. Diversification
Havells is not shy of investing in unrelated field. In November 2007, the company acquired 70% stake in a 140-bed super specialty hospital - Central Hospital and Research Centre, Faridabad.
With Sylvania Havells diversified into Lighting segment.
Amol Thorat

14. Diversification continued…
UPSIDE:
Havells can keep existing manufacturing facilities in Europe , but will create additional capacities in low cast India 
Havells substitute Chinese export to Sylvania
Havells will leverage Sylvania distribution in Europe , USA and Latin America for margin rich switch gear products
Sylvania R & D practices can transform Havells
Havells can use Sylvania multi brand strategy for different markets
DOWNSIDE:
Sylvania was a loss making company
Amol Thorat

15. Risk Management framework at Havells
Amol Thorat

16. Amol Thorat

17. CONCLUSION
Finally it can be said that Havells is one of the finest examples of entrepreneurship and turnaround business.
Havells has simply followed the four golden principles of family business management:
Form a firm foundation
Continuous communication among members
Follow a proper process in dealing with business and family
Go by merit in introducing next generation.
It is not a case with Havells; its real growth came after the introduction of the generation next.
Other can also follow Havells and be like them, otherwise Bhagirath place, from where Guptas started, still see traders opening and closing the same shops for the last fifty years or more.
Amol Thorat

18. References http://www.havells.com/overview.htm

19. THANK YOU