Tuesday, April 22, 2008

"Jet Airways acquired Air Sahara"




On Jan 20, 2006 the biggest deal in the Indian civil aviation history was announced with Jet Airways taking over Air Sahara for nearly $500 million (about Rs. 2,300 crore) in an-all cash deal, executed on late Wednesday night.

Announcing the deal through a joint statement, Jet Airways Chairman Naresh Goyal and Sahara group Chairman and Managing Worker Subrata Roy said they were "pleased to announce the execution of a share purchase agreement for acquisition by Jet Airways India Limited of the entire capital of Sahara Airlines Limited subject to regulatory approvals.''

The Indian Civil Aviation Ministry gave approval in principle, but the deal was eventually called off over disagreements over price and the appointment of Jet chairman Naresh goyal to the Air Sahara board. Following the failure of the deal, the companies filed lawsuits seeking damages from each other

A second, eventually successful attempt was made on april 12, 2007 with Jet Airways agreeing to pay 1,450 crore rupees ($340 million). The deal gave Jet a combined domestic market share of about 32%.

On april 16th Jet Airways announced that Air Sahara will be renamed as JetLite. The takeover was officially completed on april 20th, when Jet Airways paid Rs. 400 crore.

The company is named as "JET LITE"....



"Air Deccan and Kingfisher Airlines" merger



On May 3 2007) The Vijay Mallya's Kingfisher was eyeing a controlling stake in Air Deccan, the boss of the budget airline, Capt G R Gopinath, responded by saying, "Mallya's from Venus, I'm from Mars."

Well, it would now appear that Venus and Mars can co-exist. UB Groups flamboyant Mallya, who's been on a takeover binge, made an offer that Gopinath couldn’t refuse. Mallya said he could come in as an investor in Air Deccan. Mallya's UB Holdings will board Deccan as controlling shareholder.

For Mallya, who came late to the party in the skies, the deal puts him in deadheat with Naresh Goyal for the airline industry’s numero uno position, with the Kingfisher-Deccan and Jet-Sahara combines staking out market shares of 31-34% each. Clearly, this is wedding season in aviation: Jet-Sahara, Air India-Indian Airlines and now this. Size matters in this cut-throat business and consolidation is the only way to stay afloat.

In their coming together, the two players are a study in contrast. Kingfisher is known to lavish its customers with the best of cuisine and comfort on board while Deccan would want its passengers to even pay for water. Deccan is a no-frills airline while Kingfisher would like to be known for luxury.

The board of Air Deccan issued in-principle approval for UB Holdings to invest up to 26% in the low-cost carrier. UB will spend Rs 550 crore for this stake, at a price of Rs 155 per share, roughly valuing Deccan, which has the second largest market share (after Jet but before Indian Airlines) at Rs 2,200 crore. (Jet paid Rs 1,450 crore for the whole of Sahara.)

In return, UB will get a preferential allotment of equity shares. Air Deccan has already received a pay order worth Rs 150 crore, with the rest of the money expected to come within the next four weeks. As per SEBI guidelines, UB will now make an open offer to the other investors (including the public and the non-promoters) to buy additional stake in Air Deccan.

The basic reason is looking to exploit all opportunities to save costs and reap the benefits of synergistic operations at the earliest. Addressing the media Vijay Mallya, Chairman, UB Group, said, "the Kingfisher-Air Deccan group will work closely to save on costs and, in fact, in our first full year of operations, we will save up to Rs. 300 crore on costs."

Thursday, April 17, 2008

TATA acquiring "Land Rover and jaguar"




Creating history, India's top corporate giant Tatas acquired luxury auto brands -- Jaguar and Land Rover -- from Ford Motor Co for $2.3 billion, stamping their authority as a takeover tycoons.

Beating compatriot Mahindra and Mahindra for the prestigious brands, just a year after acquiring steel giant Corus for $12.1 billion, Tatas announced the deal they signed with Ford, which on its part would chip in $600 million towards JLR's pension plan.

The deal was announced after protracted negotiations that Tatas had with JLR union workers.

"We are very pleased at the prospect of Jaguar and Land Rover being a significant part of our automotive business," Tata group chairman Ratan Tata said after making the deal public.

"We have enormous respect for the two brands and will endeavour to preserve and build on their heritage and competitiveness, keeping their identities intact," he said.

As part of the transaction, Ford will continue to supply Jaguar and Land Rover for differing period with powertrains, stampings and other vehicle components in addition to a variety of technologies such as environmental and platforms.

Ford has also committed to providing engineering support, including Research and Development plus information technology, accounting and other services.

In addition, Ford Motor Credit Company will provide financing for JLR dealers and customers during a transitional period, which can vary by market, for up to 12 months.

Ford Motor CEO and president Alan Mulally said: "Jaguar and Land Rover are terrific brands. We are confident that they are leaving our fold with the products, plan and team to continue to thrive under Tata's stewardship.

"Now it is time for Ford to concentrate on integrating the Ford brand globally, as we implement our plan to create a strong Ford Motor Co that delivers profitable growth for all," he said.

List of major acquisitions by TATA









A list of major acquisitions

Following are some of the major acquisitions by the Tata Group in recent years.

* Jan 2008 - Tata Chemicals acquires US-based General Chemical Industrial Products for $1.01 bn


* Jun 2007 - TRF acquires control of Singapore's York Transport Equipment


* Jun 2007 - Tata Power picks 30% stake in Indonesia's PT Kaltim Prima Coal and PT Arutmin


* Apr 2007 - VSNL acquires Transtel Telecoms of South Africa


* Apr 2007 - Tata Tea acquires Poland's Vitax and Flosana * Apr 2007 - Indian Hotels acquires Campton Place Hotel in US for $58 mn


* Mar 2007 - Tata Power picks stake in Indonesia's PT Bumi Resources for $1.3 bn


* Jan 2007 - Tata Steel acquires Anglo-Dutch steel maker Corus for $12.1 bn, essaying the largest overseas takeover by an Indian company


* Aug 2006 - Tata Tea acquires 30% in US' Glaceau (Energy Brands) for $677 mn. Later sells it to Coca-Cola for $1.2 bn


* Jun 2006 - Tata Tea acquires US-based Eight'O Clock coffee company for $220 mn


* Dec 2005 - Tata Chemicals picks up 63.5% stake in UK's Bruner Mond Group for Rs 508 cr


* Dec 2005 - Tata Steel acquires Millennium Steel of Thailand for $404 mn


* Nov 2005 - TCS buys Chilean BPO firm Comicorn for $23 mn


* Oct 2005 - Tata Technologies purchases INCAT Int'l, UK for $91 mn


* Oct 2005 - Tata Tea acquires Good Earth Corp for $32 mn


* July 2005 - VSNL acquires Teleglobe Int'l for $239 mn


* Aug 2004 - Tata Steel buys Singapore's NatSteel for over Rs 1,300 cr


* Mar 2004 - Tata Motors acquires South Korean Daewoo's Commercial Vehicle Company for Rs 459 crore


* Feb 2000 - Tata Tea buys Tetley for Rs 1,870 cr

Friday, April 11, 2008

How to negotiate a merger..?

How to Negotiate a Merger

So you’ve shopped for the ideal company to acquire, and on paper both companies look like perfect mates. Now brace yourself for the harsh reality of corporate marriage: Just as in real life, roughly half the time it ends in divorce. More than 50 percent of mergers fail. Many more would succeed, of course, if both sides knew how to bargain before either signing or aborting a deal. In this BNET Crash Course, we’ve boiled down what many M&A experts preach about the hard process of M&A negotiating into four basic steps that more companies ought to practice.

Things you will need:

  • Fortunately, you already set aside sufficient assets in the planning stage.
  • Varies widely, from two days to much longer.
  • War room: A conference room with file cabinets – both under lock and key. You’ll need a place where your team can work on negotiations and due diligence without worrying about rumor control or leaks.
  • Investment Banker: Your banker will be your primary intermediary during the negotiations, especially when somebody needs to play bad cop. Your banker also serves as a constant “reality check” on whether the deal makes financial sense.
  • Acquisitions Lawyer: Acquisitions often involve public stock, which is heavily regulated. There are complicated rules for what you can say or do during an acquisition, lest you do damage to investors. Counsel can ensure you don’t blurt out something that could botch the deal or unwittingly break the law.
  • HR Pro: You’re acquiring a group of people, not just a company, so you’ll need someone to plan for relocations, orientation, changes in compensation and probably some layoffs.

Make Your Initial Offer

GOAL: Define the ballpark parameters under which a deal is possible

Just as a first impression often frames the future of a negotiation, the initial meeting frames the discussion to follow. As the acquiring firm, it’s in your interest to make the first offer – after all, the acquisition is an expression of your overall strategy, and you’ll be the company responsible for the merged entity’s success.

“Before we negotiate, we always establish why we want to do this acquisition and the value it will provide, then we let those analytics drive the negotiating,” explains Smith McKeithen, general counsel at Cadence Design Systems, a $1.5 billion software firm that has acquired dozens of companies in the last decade. “You want to be certain the conversation takes place within the parameters you’ve defined for the deal.”

Leaving yourself some bargaining room is obvious but crucial. Assuming you have done all the financial due diligence in valuation, a first offer generally should represent between 75 and 90 percent of the firm’s true value. If an initial bid is rejected outright, it is likely the bargaining won’t end in a contract anyway, so an acquiring company can save itself a great deal of time and effort with a smart bid.

Hot Tip

Practice Extreme Diplomacy

Creating goodwill at the bargaining table is a crucial first step. Randall Murphy, founder of the Dallas-based consulting firm Acclivus R3 Solutions, has trained executives in negotiating for more than 20 years. When it comes to backroom etiquette, he suggests that potential buyers:

  • Set a positive tone. The relationship will evolve long after the negotiation; don’t take positions or behave in ways that might later make it difficult for everyone to work together. Small comments that smack of bluster or derision could undermine big issues and a burgeoning relationship.
  • Don’t sweat the small stuff. The negotiation isn’t just about inking a deal, it’s also creating conditions under which both firms can thrive. Visualize what the alliance is intended to accomplish and use that as the basis for figuring out the details.
  • Build bridges between opposing positions. Find creative ways to make everyone’s objectives emerge from the final agreement. The last thing you want is for one side to feel that it “lost” a battle.
  • Don’t forget the employees. Don’t underestimate the long-term importance of earning the goodwill of employees – on both sides.

Negotiate the Terms

GOAL: Generate a detailed agreement that will lead to successful integration

Once the initial offer is made, more complicated bargaining begins. What’s important isn’t just the final dollar figure the two parties zero in on but the rationale presented — particularly by the selling company — with each offer and counteroffer. For the acquiring firm, those rationales act as a critical valuation tool, according to Vancouver, British Columbia-based investment banker Doug Brockway, who as managing director at Innovation Advisors has helped a dozen mid-market technology companies negotiate and execute mergers.

“Because the business of the seller’s firm must be described in detail in order for negotiations to be meaningful,” Brockway says, “the negotiation becomes an extension of due diligence, allowing you to better assess whether your original impression of the firm and its value were correct.”

Financial negotiations also allow the buying firm to probe issues that might affect the success of the merger, such as unexplained variations in the other company’s revenues.

“You should emerge from the financial discussion with a very clear picture of exactly what you’re buying,” says Lance Urbas, CEO of Westwood, Mass.-based security software firm IntelliReach, who has completed several acquisitions throughout his career.

As you learn more about the selling company during the negotiations, do constant fact-checking of everything presented. Edward Weiss, who served as general counsel for Lanham, Md.-based Group 1 Software when it acquired several firms and was later acquired by Pitney Bowes, explains: “The more critical the piece of information, the more skeptical you should be.”

The Legalese

Do They Really Own Their Products?

If you don’t already have lawyers doing this for you, here is a do-it-yourself list of tasks to ensure that the company you’re buying has legal rights to all their products:

  • Check the U.S. Copyright Office for any registrations that conflict with what the seller is offering.
  • Check the U.S. Patent and Trademark Office for any trademarks that conflict with their brand names and to ensure that any patents they’ve filed don’t have obvious problems.
  • Do a LexisNexis search for liens, litigation, or legislation that could affect acquired assets.
  • Create a list of every employee and contractor who designed any product or process in the selling firm. Confirm that there is contractual ownership of all contributions.

Source: Edward Weiss, counsel at Bregman, Burbert, Schwartz, and Gilda

Negotiate the Personnel Issues

GOAL: Ensure that the talent you’re acquiring remains in place and productive

Two general rules should govern negotiations about how many and which types of jobs will make up the final agreement, according to Dennis Weldon, director of corporate development and investor relations for Mentor Graphics, an Oregon-based software firm with revenues of $825 million, which has acquired more than 20 companies over the past ten years.

1. Avoid pressure tactics. A merger negotiation can often be an emotionally charged process from the start. Overly aggressive tactics can end up alienating the very people you’ll need to make the acquisition work. When acquiring much smaller firms, for instance, Weldon says he’ll often help the seller find better representation at the bargaining table.

2. Use time to your advantage. Often the seller isn’t really ready when you first enter negotiations, so you should plan for breaks in the negotiations so that all the parties can consider the wisdom of going forward.

Danger! Danger! Danger!

Beware of Cultural Landmines

Brockway, the investment banker and managing director at Innovation Advisors, cautions that M&A negotiations sometimes founder on cultural issues:

  1. What will be the title of the top manager of the selling firm after the merger? The titles CEO and president are big status symbols to employees of the selling firm – consider title changes carefully.
  2. Will the company name and brand name survive the merger? Employees can be fiercely loyal – not just to a company or a product but to their names as well.
  3. Where will the new headquarters be located? Unless the two companies are located very close together, the prospect of relocation can be a game-changer for many key employees.

Draw Up the Contract and Get It Signed

GOAL: Complete the process and move forward to the implementation

Negotiations don’t end when you go to contract; it’s often the negotiating of the specific terms that causes the biggest problems. The best way to ensure a smooth contract process is to document all those decisions and commitments made during the bargaining phase. Then, when verbal agreement is reached, review the main points and obtain an agreement from both parties not to surface additional issues.

To this end, it’s important to keep the corporate lawyers on a short leash, Brockway says. “It’s easy for a lawyer to turn a contract into a bone of contention, especially on minor issues,” he says. Thus, while details may emerge that weren’t anticipated, you should try to keep the discussion tracked to what was verbally agreed upon.

It’s also a good idea, well before signing, to get key individuals from both firms together to begin planning merger integration. Mentor Graphics, for example, aggressively courts its soon-to-be-acquired employees. “We find that they’re more likely to remain if we take the time and trouble to let them see that Mentor is basically a good company to work for,” explains Weldon

Four common deal-killers while mergers

Four Common Deal-killers

Merger negotiating rarely follows a predictable script, yet some of the same problems derail big deals every time. Here are four of the most common traps — and how to avoid them.

Problem 1: Unreasonable Preconditions

Example:

The CEO of the acquired firm insists there will be no merger unless you guarantee he’ll be able to run the combined firms.

Risk:

If the demand is real and not a bluff, you don’t have a deal.

Avoidance Plan:

Make it clear at the beginning of the negotiation that everything must be on the table if there’s going to be an eventual deal.

Problem 2: Strategic Leaks

Example:

While you’re still negotiating price, an article appears in the trade press quoting a “knowledgeable source” that the final deal will be in the high end of the negotiating range.

Risk:

Destroys trust on both sides.

Avoidance plan:

Insist that the negotiating teams be as small as possible. Point out, prior to negotiating, that untimely leaks may scuttle the entire discussion.

Problem 3: Delay Tactics

Example:

Key people from the seller’s negotiating team are unavailable when you want to have a substantive meeting.

Risk:

The seller’s company could be slowing the process down purposefully, perhaps seeking to generate another bid.

Avoidance plan:

Start the negotiation with an explicit timetable agreed to by both parties.

Problem 4: Musical Chairs

Example:

The people on the other negotiation team change from meeting to meeting.

Risk:

New faces can easily result in reneging of previously agreed-upon issues.

Avoidance Plan:

Obtain a commitment prior to the first meeting that the same players will be involved on both sides.

How to plan a merger..?

How to Plan a Merger

Once, the most common way to grow a business was to hire talent and expand gradually. Today it’s more common to grow by acquiring other firms, and what used to be called “merger mania” is simply business as usual. After all, why grow organically when an acquisition can help you leapfrog into new markets with a fraction of the time and trouble?

If only it were that easy. While mergers and acquisitions — or “M&A” — are popular, they’re not always successful. Apart from such well-publicized disasters as the Daimler-Chrysler debacle or Time Warner’s failed acquisition of AOL, there have been thousands of smaller mergers where the value of the acquired firm was basically squat within a couple years. In fact, more than 50 percent of all mergers fail.

What differentiates the triumphs from the disasters? Three things: groundwork, negotiation, and execution. In this Crash Course, we’ll explain how to lay the foundation for an acquisition by intelligently assessing and evaluating potential acquisition candidates.

Things you will need:

  • Sufficient assets (like cash on hand or company-held stock) to make an acquisition. In high-growth markets (like software), expect to pay two to five times the target’s yearly revenue. In more traditional markets, expect to pay five to ten times the target’s earnings before interest, taxes, and depreciation.
  • About three months.
  • War Room: A lockable conference room with lockable file cabinets — you don’t want the proposed acquisition to become public before you’re ready to make a deal.
  • An Investment Banker: Acquisitions are complicated, so you’ll need financial expertise to assess whether it’s possible to make the acquisition and analyze its upsides and downsides.
  • An Acquisitions Lawyer: Acquisitions often involve public stock, which is heavily regulated. Counsel can ensure that you don’t reveal something that could muff the deal or, worse, land you in jail.
  • Modesty: It’s very easy to rationalize bad decision-making with the desire to be a big shot who gobbles up other companies. Before you begin an acquisition, make sure your ego isn’t in the driver’s seat.