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LEADERSHIP THROUGH

WEALTH CREATION BYMERGERS AND

ACQUISITIONS

Presented by: Group 7

Tisha Gugliani D05

Shraddha Tripathi D08

Pankaj Ishpujani D30

Rishabh Jain D48

Gaurav Goel D53

Karan Malhotra D59

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Mergers and Acquisitions

Merger - A Merger may be defined as the combination

of two or more independent business corporations into

a single enterprise, usually involving the absorption of

one or more firms by a dominant firm.

Mergers may be broadly classified as Horizontal,

Vertical or Conglomerate

Acquisition may be defined as an act of one enterprise

of acquiring, directly or indirectly of shares, voting

rights, assets or control over the management, of

another enterprise .

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Mergers

STRUCTURE 1

A = Amalgamating Company: Ceases to Exist

B = Amalgamated Company

B receives all of As assets and liabilities

Shareholders of A receive shares in B and maybe other benefits

like debentures, cash

Transfer assets and liabilities

A B

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4

Mergers

STRUCTURE 2 A, B and C = Amalgamating Companies: Cease to exist

D = Amalgamated Company: may or may not have existed

before Merger

All assets and liabilities of A, B and C transferred to D

Shareholders in A,B and C get shares in D.

A

DB

C

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5

Why M&A?

Underlying Principle for

M&A Transactions2 + 2 4

Additional Value of Synergy

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6

Mergers and Acquisitions

Reasons for mergers & acquisitions:

Strategic: The combined FCFs (Free Cash Flows) of

the merged operation are greater than the sum of

the individual cash flows.

Financial: The cash flows and also the market

value of the target are below their true value, due

to perhaps inefficient management. Such firmsare typically restructured after the acquisition.

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Types of Takeovers

How the Deal is FinancedCash Transaction

The receipt of cash for shares by shareholders inthe target company.

Share Transaction The offer by an acquiring company of shares or a

combination of cash and shares to the targetcompanys shareholders.

Going Private Transaction (Issuer bid) A special form of acquisition where the

purchaser already owns a majority stake in thetarget company.

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ESSAR COMMUNICATIONS

Essar Communications operates in four businesssegments: Telecom, telecom retail, telecom

infrastructure and Aegis Services.

It has a joint venture with Vodafone, a chain of telecom

retail outlets, a nationwide telecom tower network and apresence in IT enabled services.

Essar Telecom Infrastructure Private Limited (ETIPL) is

one of the largest independent telecom infrastructure

service provisioning companies in the country. It builds telecom site infrastructure and shares it with

multiple telecom operators in India.

It has already set up over 3,500 towers in India, with

plans to build 20,000 towers.

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Why Hutch was willing to sell its stake in

HutchisonEssar?

Aid in creating value in emerging mobile markets and

realizing the same for the benefit of shareholders at the

right time

Will be able to generate huge cash for launch of

operations in Vietnam and Indonesia

HTIL Suffers loss of HK$768 million in 2005

The Company did not declare any dividends for the

year ended 31 December 2006.

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WhyVodafone interested to

acquire control inHutchEssar??

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Hutch Essar andVodafone

Controlling interest in a major, fast growing market

Meets twin financial investment criteria

Strong management team with good cultural fit

Vodafone and Essar will derive greater value together

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India: A very large market

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IndianMobile Market

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Oneofonly 4 major mobileoperators

inIndia

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Sep

tembe

r 21, 2007

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THE DEAL In the year 2007, the worlds largest telecom company in

terms of revenue, Vodafone Plc (Vodafone) made a majorforay into the Indian telecom market by acquiring a 52% stakein the Indian telecom company Hutchinson Essar Ltd., througha deal with the Hong Kong based HutchinsonTelecommunication International Ltd. It was the biggest dealin the Indian telecom market. Vodafones main motive goingin for the deal was its strategy of expanding into emerging andhigh growth markets like India. In 2007, India has emerged asthe fastest growing telecom market in the world outpacingChina. But it still had low penetration rates, making it themost lucrative market for global telecom companies.

British telecom giant vodafone has bagged the 67% HTIL at anenterprise value of $19.3 billion (approx. Rs. 86000 crore)which comes to $794 per share.

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PRINCIPLE BENEFITS

Accelerates Vodafones move to a controllingposition in a leading operator in the attractiveand fast growing Indian mobile market

India is the worlds 2nd most populated countrywith over 1.1 billion inhabitants

India is the fastest growing major mobile marketin the world, with around 6.5 million monthly netadds in the last quarter

India benefits from strong economicfundamentals with expected real GDP growth inhigh single digits

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Contd.

Increases Vodafones presence in higher growth

emerging markets

proportion of Group statutory EBITDA from the

EMAPA region expected to increase from below

20% in the financial year ending 31 March 2007

(FY2007) to over a third by FY2012

As of 31st July 2010, Vodafone has 111,465,260numbering strong customer base.

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What isWealth ?

Net Worth that is the accumulation of your residualincome over time. Therefore, to create constant andlasting wealth, you need to add value to all yourfinancial resources. These financial resources are simply

utilized to create added residual value over time.

Steps in wealth creation:

-Create wealth

-Accumulate wealth

-Monitor and grow the wealth

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Leadership through wealth creation

The purpose of business leadership is to create

wealth financial and material, human and

social in the face of external developments

that are never entirely foreseeable.

Vodafone India reported revenues ofRs 69

billion, a growth of 13.2 per cent QoQ and

26.4 per cent YoY, one of the strongest growthin last 5 quarters.

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Attaining leadership Indias second largest telco by sales, Vodafone Essar, posted its strongest

growth in the last six quarters with a better-than-anticipated 26.4%

revenue jump in the three months ended June 30, 2010.

Vodafone Essar had turned cash-positive.

Posted revenues of 954 million for the June quarter, up 26.4% from the

same period last year.

It showed an impressive rise of 13.2%.

The improvement was driven by continued strong customer growth and

better usage trends in India where there have been no recent significant

price reductions by market leaders. Significant price declines have been successful and seeing minutes return

to operators with strong brands and performing networks.

Vodafone added 8.2 million new users in India during this period taking

its customer base to over 109 million. India accounted for over 75% of

customer additions globally during this quarter.

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Conclusion

Vodafone creating value in India

Controlling position in a leading operator with nationwide presence

Strong existing platform for growth

Additional value under Vodafone ownership

Increased Vodafones presence in high growth markets

Increased presence of big Global Players in India

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References

http://www.trai.gov.in

http://www.vodafone.com

http://www.afaqs.com/perl/news/case_studies/index.html?mid=13

http://www.indiaprwire.com/pdf/news/20188.pdf

http://www.vodafone.com/start/media_relations/news/local_press_releases/india/vod

afone_essar_press/vodafone_is_here_.html

http://www.tonsetelecom.com/pdf%20

files/B_E_Feb07

.pdf

http://www.rediff.com/money/2007/mar/08hutch.htm

http://www.domain-b.com/companies/companies_v/vodafone/2 0070212_control.htm

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