Mergers
Acquisitions
Process
Overview of the M & A Process
• Merger & Acquisition process is normally
proceeded by formulation of strategy,
identification of cost benefit analysis,
carrying out due diligence, conducting
valuation and considering the aspects of
stamp duty and other applications.
Moreover, the integration issue after the
merger exercise is also to be taken care of.
Step – I
• Develop an acquisition strategy –
Developing a good acquisition strategy revolves
around the acquirer having a clear idea of what
they expect to gain from making the acquisition –
what their business purpose is for acquiring the
target company (e.g., expand product lines or
gain access to new markets)
Step – 2
• Set the M & A search criteria –
Determining the key criteria for identifying
potential target companies (e.g., profit
margins, geographic location, or customer
base)
Step – 3
• Search for potential acquisition
targets –
The acquirer uses their identified
search criteria to look for and then
evaluate potential target companies
Step – 4
• Begin acquisition planning – The acquirer makes
contact with one or more companies that meet its search
criteria and appear to offer good value; the purpose of
initial conversations is to get more information and to see
how amenable to a merger or acquisition the target
company is
Step – 5
• Perform valuation analysis – Assuming
initial contact and conversations go well,
the acquirer asks the target company to
provide substantial information (current
financials, etc.) that will enable the acquirer
to further evaluate the target, both as a
business on its own and as a suitable
acquisition target
Step – 6
• Negotiations –
After producing several valuation models
of the target company, the acquirer should
have sufficient information to enable it to
construct a reasonable offer; Once the
initial offer has been presented, the two
companies can negotiate terms in more
detail
Step – 7
• M & A due diligence –
Due diligence is an exhaustive process that
begins when the offer has been accepted;
due diligence aims to confirm or correct the
acquirer’s assessment of the value of the
target company by conducting a detailed
examination and analysis of every aspect of
the target company’s operations – its
financial metrics, assets and liabilities,
customers, human resources, etc.
Step – 8
• Purchase and sale contract – Assuming due diligence is
completed with no major problems or concerns arising,
the next step forward is executing a final contract for sale;
the parties make a final decision on the type of purchase
agreement, whether it is to be an asset purchase or share
purchase
Step – 9
• Financing strategy for the acquisition – The acquirer
will, of course, have explored financing options for the
deal earlier, but the details of financing typically come
together after the purchase and sale agreement has been
signed
Step – 10
• Closing and integration of the acquisition – The
acquisition deal closes, and management teams of the
target and acquirer work together on the process of
merging the two firms
RECENT MERGERS AND ACQUISITIONS IN
INDIA
Vodafone India and Idea Cellular Vodafone India and Idea
Cellular decided to merge and form country’s largest telecom
operator ‘Vodafone India Ltd.’ worth of more than $23 billion
with a 35 per cent market share and it is the top M&A deal of
2017-18. Vodafone and the Aditya Birla Group will have a joint
control of this combined company. Combining the Vodafone and
idea customers, the merged entity is the biggest telecom
company in India. The merged entity have over 408 million
customers, nearly 42% customer market share (CMS) and nearly
33% revenue market share (RMS), leaving it stronger placed to
take on competitive pressures triggered by Jio, with 160 million
subscribers and over 16% CMS and 15.3% RMS. Airtel has a CMS
of 29.5% and an RMS of 31.5%.
The Idea-Vodafone merger has been cleared by the stock exchanges, Securities and Exchange Board of India,
Competition Commission of India, foreign direct investment clearance from the department of industrial policy and
promotion, approval given by DoT as licensor and the merger after approval of NCLT is complete in August 2018.
RECENT MERGERS AND ACQUISITIONS IN
INDIA
Flipkart and eBay Indian e-commerce major
Flipkart acquired the Indian wing of eBay. The
transaction was announced in April 2017 and
completed in August 2017. eBay and Flipkart have
also entered into an agreement for cross-border
sale. In exchange of equity stake in Flipkart, eBay
had made cash investment of $500 million and sold
its eBay. in business to Flipkart.
As a result, Flipkart customers get expanded product choices with the wide array of global inventory available on
eBay while eBay customers will have access to a more unique Indian inventory from Flipkart sellers.
Difference between a Merger and an
Acquisition
Merger Acquisition
A merger occurs when two separate entities, usually of An acquisition refers to the purchase of one entity by
comparable size, combine forces to create a new, joint another (usually, a smaller firm by a larger one)
organization in which both are equal partners
Old company cease to exist and a new company A new company does not emerge
emerges
It occurs when one company takes over all of the
It requires two companies to consolidate into a new operational management decisions of another
entity with a new ownership and management
structure If the takeover is hostile, it is called as an acquisition
It the takeover is friendly, it is called merger
