MnA_Module_12

MODULE 12

CASE STUDIES OF MERGERS AND ACQUISITION

12.1 Flipkart acquiring Myntra

12.1.1 Flipkart:

7 years back a PC design from a main Indian foundation helped to establish the biggest
online business organization in India today. We are discussing the simple understand
organization Flipkart established by Mr. Sachin Bansal and Mr. Binny Bansal in 2007.
With a venture of just Rs.4 lakhs altogether, they began the organization that today
creates crores consistently. When it was only four years of age, the organization offered
15 items every moment. It took a considerable measure of diligent work and time in
coming there. "We didn't draw our compensations (from the business) for just about 18
months," says Binny. The thought behind the webpage was a "value correlation site" yet
they at long last settled on an internet business gateway.

Flipkart began as an online book retailer. Later they extended themselves in territories
like form and innovation. Different zones are additionally in pipelines like furniture and
white products. "In March 2011, we reported that by 2015, we needed to hit USD 1
billion in GMV. By then, our run rate was USD 10 million. Today, we are extremely
pleased and eager to report that we have hit a run rate of USD 1 billion GMV one year
before our objective," Flipkart fellow benefactors Sachin Bansal and Binny Bansal in an
announcement.

12.1.2 Strengths of Flipkart:

Flipkart has standard entrance in every single conceivable zone. They began with books,
entered later in form, gadgets, clothing and so on.

• The inflow of investment- They have taken seven round of venture from
financial specialists like Naspers, Tiger Global, Accel Partners, Dragoneer,
Morgan Stanley, Sofina and Vulcan Capital.

• Excellent service: They convey the item inside a range of 24 hours.
• Procuring Customer`s trust: Easy returns approach which helped purchasers to

confide in them more.

• Internet reach: Indian adolescents have turned out to be so dynamic on the web
in the previous decade thus tends to shop on the web.

• Convenience: It's amazingly advantageous to shop internet, looking at the item
value highlights sitting in the solace of your home.

It currently utilizes innovation to offer everything from clothes to buyer durables, and has its
very own coordination’s firm and is esteemed at about Rs. 10,000crores. Presently the inquiry
is the reason obtain

12.1.3 Myntra: Online Fashion Store:

Myntra was established around the same time (2007) when Flipkart. It began with T-shirts,
mugs, welcoming cards, date-books, scratch chains, journals and so forth and later in 2010
extended itself to retail mold and way of life items. Myntra gain a great deal of fame as an
online design retail location.

It picked up subsidizing from organizations like Tiger, Kalaari, Premji Invest, IDG, and
Accel Partners. In February 2014, Myntra raised an extra $50 Million Funding from Premji
Invest and couple of other Private Investors. It was established by Mukesh Bansal,
Ashutosh Lawania and Vineet Saxena. Myntra got a ton of honors additionally in web-
based business.

12.1.4 Strengths of Myntra.com:

• Excellent service: They kept their conveyance time 24 hours which ended up
being an integral explanation behind their ubiquity.

• Return Policies: They have kept a simple merchandise exchange which is
essential in web-based shopping. They give a 30 days return and trade ensure.

• Schemes & Discounts: They furnish rebates during the time with an alluring
point framework for faithful Clients accordingly expanding reliability.

• Convenience: They offered the comfort of purchasing web-based, attempting
and returning which was a moment hit among enthusiastic online customers.

12.1.5 The Merger of two major players:

For what reason did Flipkart1 pay about 330 million $ for Myntra.com? The two were
viewed as opponents. Attire and mild industry works in an altogether different manner.
Flipkart`s show was mass offering while in Fashion uniqueness is vital. The primary
explanation for Flipkart needing to assume control Myntra is that Flipkart tried to enter in
Apparel and Fashion however it couldn't make that space. Myntra`s conveyance benefit has
been incredible. Myntra with its arrival approaches, offers, premium focuses and
conveyance benefit increased numerous clients.

This acquisition2 brought about the inclusion of the main zone left viz. clothing and design.
With the development of the web in India, internet business is probably going to see a
powerful improvement. Presently Flipkart is an e-rear with an extensive variety of items.
They are probably going to utilize the Myntra`s client base, item associations, and
conveyance administrations, despite the fact that they have wanted to keep everything
discrete and work as individual substances.

Then again, according to one of the prime supporters of Myntra.com, it was smarter to hold
hands with the greatest player and afterward battle against alternate contenders.

12.2. Lenovo's acquisition of Motorola

12.2.1 Lenovo:

It has not been even a long time since Lenovo's incorporation (1988) and it has
developed to end up the biggest PC maker of the world. Today, Lenovo isn't only a
standout amongst the most perceived brand names in the realm of PC and PCs, however,
it has likewise gotten a substantial piece of the overall industry. Aside from PCs and IT
arrangements, it makes a few other electronic items.

It makes Tablets, cell phones, and smart TVs as well. It has developed its product
offering to incorporate capacity arrangements and applications. It focuses to end up one
of the main innovation organizations on the planet. Lenovo has relied on mechanical
development and a more brilliant procedure to develop its image. Be that as it may, there

1 Alok Singh, Everything you wanted to know about the Flipkart-Myntra deal (May 22, 2014)
https://yourstory.com/2014/05/flipkart-myntra-acquisition/
2Case Study: Indian e-commerce giant Flipkart acquiring Myntra, Jagran Josh (July 2, 2014)
https://www.jagranjosh.com/articles/case-study-indian-ecommerce-giant-flipkart-acquiring-myntra-
1404300029-1

are as yet real difficulties ahead. Aside from a declining PC advertising, money
unpredictability in significant economies of the world is additionally a noteworthy test.
In any case, the brand has developed some real qualities.

12.2.2 Strengths of Lenovo3:

• Brand Recognition – Lenovo has turned into an outstanding name in the PC
industry. It is viewed as a reliable brand and has collected gigantic brand
steadfastness dependent on item nature of its products and innovation. Another
reason prompting flooding in the fame of Lenovo is its aggressive valuing
technique. It is currently known to be the largest PC producer of the world
which makes incredible individualized computing arrangements at aggressive
costs.

• Large range of products – The large product offering of Lenovo is likewise
one of its real strengths. Its business is separated into a few business
gatherings or divisions. These gatherings incorporate PC and savvy gadget
business gathering, Mobile business gathering, and the Datacenter business
gathering. It makes a large range of products including PCs, workstations,
tablets, cell phones, brilliant TVs and even capacity arrangements.

• Impressive market share – Lenovo has gained an impressive market share
after some time dependent on a shrewd technique. It has possessed the
capacity to advance beyond others and procure the main position in the
business through its attention on more quick-witted innovation and aggressive
valuing. Its market shares in 2015/16 was an impressive 21%.

• Stronghold Asian markets – The Asian markets are rising quick and they are
Lenovo's stronghold. Its products are exceptionally prevalent in both China
and India. A large piece of its business originates from the Asian markets.

• Growing strength through mergers and acquisitions – Overtime Lenovo
has additionally developed its strengths through mergers and acquisitions. Its
fast development in the PC business has been fuelled by a progression of

3 Abhijeet Pratap, LENOVO SWOT ANALYSIS (May 27, 2017) https://www.cheshnotes.com/lenovo-swot-
analysis/

forceful acquisitions by the brand. After the securing of IBM's PC division,
Lenovo likewise incorporated Motorola versatility and framework X to fuel
future development.

12.2.3 Motorola: Motorola Inc is a technology and communications company based out of
Illinois, USA. The company was started in 1926 by two brothers Paul & Joseph Galvin. The
company following a massive crash in revenue split into two Motorola Mobility and
Motorola Solutions in January 2011.

12.2.4 Strengths of Motorola:

• Product portfolio: The Company has a differing product portfolio that
contains communication infrastructure, gadgets, accessories, software, and
administrations. These products can cater to an extensive variety of customers,
for example, government, open safety agencies, crisis administrations,
municipalities, and commercial and industrial clients who require private
communications organize and manage an immense workforce who are high on
versatility.

Industry Standards Systems: All Motorola gadgets adhere to stringent industry
standards, for example, APCO P25, TETRA, and DMR.

• Global nearness: The Company has a nearness in more than 180 nations with
more than 12,500 systems with an outstanding timeframe of realistic usability.

• A long-standing relationship with the federal government: Motorola has a
long-standing relationship with the U.S. Federal government and has executed
various contracts with its various branches and agencies, and the Home Office
of the United Kingdom. The deals account for around 9% and 8% of our
consolidated net sales in 2016, individually.

• Focus on long-term contracts: Since many of the customers of Motorola are
government customers their contracts are long terms which thus guarantees
consistent inflow of income.

• Focus on research and development: Motorola gives a considerable measure
of importance to research and development and their R and D use was 553
million USD in the year 2016. A large portion of their research focuses on
innovation patterns to watch out for and related product modifications.

12.2.5 For Motorola:

The arrangement is a blended pack for Motorola. It would never again be a Google-
possessed organization and every one of the advantages that accompany it. Google, it
appears, has not sold off the R&D division headed by previous DARPA Director, Regina
Dugan. That office was dealing with future items including shrewd tattoos, savvy pills and
even a particular telephone codenamed Ara. Motorola is well on the way to lose all the
Google-ness under Lenovo.

On a positive note, Motorola will at long last have the capacity to scale up with Lenovo.
The Chinese hardware mammoth as of now has a worldwide deal and conveyance organize.
On the cell phone side, it has a flourishing business in China, India, and Indonesia – the
absolute biggest and quickest developing cell phone advertises on the planet.

12.2.6 For Lenovo:

It is the organization that gains the most in this arrangement, which at $2.91 billion is a
deal. Indeed, even the terms – about $660 million in trade and $750 million out offers at the
season of settling the negotiations and the rest of the $1.5 billion spread more than three
years – it couldn't have requested more great terms.

Aside from the budgetary perspective, Lenovo gets an incredible designing group and also
a permit to Motorola's licenses that Google would hold and 2,000 licenses it will get. It will
likewise get the opportunity to keep the trademark and copyright for the Motorola mark
name. We have seen Lenovo do stunning things with the ThinkPad mark it got in the wake
of gaining IBM's PC business in 20054.

Procuring Motorola will likewise give Lenovo access into the US and Latin American
markets, where it doesn't have a solid cell phone nearness right now. Motorola's

4 Rajat Agrawal, Lenovo's acquisition of Motorola explained (Jan 30, 2014) https://www.bgr.in/news/lenovos-
acquisition-of-motorola-explained/

associations with bearers will come into a great degree convenient. The arrangement could
sling Lenovo as the third biggest cell phone seller after Samsung and Apple, surpassing
Huawei and LG.

Be that as it may, most essential detract from everything is the sort of access it purchases
Lenovo inside Google. More than whatever else, Lenovo would treasure that the most for
its future.

12.3. Sun Pharmaceuticals acquires Ranbaxy

12.3.1 Strengths of Ranbaxy:

• Top 10 Global Generic Company with a spread over 125 countries
• Over 13,000 well-trained Employees, over 50 nationalities
• Strong presence in the International market with a major share and a strong

presence in India as well
• It has operations in nearly 50 countries and has 7 manufacturing plants

12.3.2 Strengths of Sun Pharma:

• Strong growth in emerging market business.
• Introduction of Pantoprazole & Eloxatin in the US market has very limited

competition.
• They have strong marketing & sales force of over 12,000 employees.
• They have successfully acquired Taro pharma which has further consolidated

their position in Indian markets.
• Strong brand presence in India and US markets.

12.3.3. The deal has been completed: The companies have got the approval of the merger
from different authorities.

This is a classic example of a share swap deal. According to the deal, Ranbaxy shareholders
will get four shares of Sun Pharma for every five shares held by them, leading to 16.4%
weakening in the value-capital of Sun Pharma (total value is USD3.2bn and the deal measure
is USD4bn (valuing Ranbaxy at 2.2 times last 12 months’ sales).

12.3.4. Reason for the acquisition: This is a decent acquisition for Sun Pharma as it will
assist the company with filling in its therapeutic gaps in the US, show signs of improved
access to emerging markets and also strengthen its quality in the domestic market. Sun
Pharma will also become the number one nonexclusive company in the dermatology space.
(At present in the third position in the US) through this merger.

12.3.5. Objectives of the M&A:

• Sun Pharma goes into more up to date markets by filling in the gaps in the
offerings of the company, through the acquired company

• Boosting of items offering of Sun Pharma creating more permeability and
market share in the business

• The turnaround of a bothered business from the point of view of Ranbaxy
• Acquisition although will take time to consolidate, it ought to at the

appropriate time start indicating results through overall development portrayed
in Sun Pharma's best line and bottom-line detailing5.

12.4. CMC merges with TCS6

12.4.1 Strengths of TATA Consultancy Services (TCS)
• High command on the local and domestic market(India).
• Strong brand backing (TATA).
• Strong Ethics.
• Brand Image is quite strong in markets it serves.
• Employee strength of over 300000.

12.4.2. Strengths of CMC Ltd.

• The business model, combines both Hardware maintenance, IT services & IP
portfolio for international and domestic markets.

5 EduPristine, Sun Pharmaceuticals acquires Ranbaxy (June 16, 2015)
https://www.edupristine.com/blog/mergers-acquisitions 2013)
6 Rajesh Kurup, How TCS and CMC complement each other (Feb 18,
https://www.thehindubusinessline.com/info-tech/How-TCS-and-CMC-complement-each-
other/article20580119.ece

• Successful transition from hardware maintenance provider to a solution provider of
full cycle complex projects.

• Multi-faceted experience with over 10,000 employees.
• Leverage on domain skills to provide IT-centric solutions.
• Largest third-party maintenance company in India.
• Repository of ready packages/software that can be replicated.
• Large client base serviced over the years that can be efficiently leveraged for greater

wallet share through cross-selling.
• Trusted and Respected brand – Combination of ethics & culture of the TATA group

and positive PSU legacy.

12.4.3. Objectives:

CMC was strong on hardware and maintenance. TCS knew about hardware engineering and
they are strong in software.

So both combined these two capabilities and today it is one of the fastest growing groups
(verticals) within the company. We do R&D outsourcing for high-tech companies or
companies that want solutions for industrial control, office automation, and communications.

TCS is a natural partner for CMC to address such projects. CMC brings in Pan-India
infrastructure management capability, digitization, education and training, and core solutions
that we have developed. For example, TCS has conducted projects for Cochin and Bangalore
port trusts by leveraging the core solutions that CMC has. From the customer’s point of view,
it is one organization – either TCS or CMC bids for a project.

Revenue is shared on the basis of the work each company does. As CMC is also a listed
company, the interests of the shareholders are protected for both TCS and CMC.

This is a time when a lot of companies are struggling…

Niche areas where CMC is in, such as public transportation systems and shipping, mining,
and infrastructure and banking and insurance, continue to grow.

12.5. Microsofts’s Acquisition of Nokia

12.5.1. Strengths of MICROSOFT:
• Reputed Brand: Microsoft is one of the fortune 100 MNC operating through
regional backups to minimize social contrasts in excess of 100 nations. Microsoft
Corporation (Microsoft) is one of the leading suppliers of software, and hardware
products and administrations. The company centers around developing,
manufacturing, licensing, marketing and supporting software products
worldwide.

Technologically advanced company: Microsoft is constantly known as an impetus
in the tech world. Prioritizing innovation and optimization through strong
innovative work movement. It operates Microsoft Research, one of the world’s
largest computer science research organizations which work in close
collaboration with top universities around the world to advance the state-of-the-
art in computer science sector.

• Product Portfolio: Microsoft offers a thorough scope of software,
administrations, and hardware solutions across various client classes, which
empower it to appreciate a leading business sector position. Microsoft produces
income by developing, manufacturing, licensing, and supporting software and
administrations across a wide assortment of computing gadgets. Microsoft
likewise gives consulting and product and solution bolster administration, and
trains and affirms PC system integrators and engineers.

• Extensive distribution system: Company maintains a strong distribution and
marketing system which use operational execution. Microsoft showcases and
appropriates its products through three noteworthy channels in particular OEMs
(Original Equipment Manufacturers); wholesalers and affiliates; and online
(through claim virtual store and E-business destinations).

• World leading OS – One of the significant preferences of Microsoft is its
Operating system. In spite of the fact that it is checked in the Product portfolio,
and despite the fact that individuals love to point out the glitches in Microsoft
OS, it is as yet one of the best Computer operating systems since the most recent
a very long while.

12.5.2. Strengths of NOKIA:

• The biggest strength of the company is their brand name.
• Many consumers often opt for Nokia more than any other brand because of the

reliability, durability, and creativity their phones provide.
• Most of Nokia’s highly qualified personnel have teamed up with Microsoft’s

experts as a part of the acquisition deal.
• The phones provided by Nokia have a much higher resale value compared to

other mobile phone brands.
• Many of Nokia’s products are easy to use and are usually coupled with a

variety of handy accessories.
• Products offered by the company are available in all price ranges.

12.5.3 End Result:
When Microsoft was getting stifled by Apple and Android devices, it decided to the
merger with Nokia as a last ditch attempt in 2013. Joining hands with an already existing
device manufacturer seemed to be more convenient than creating the business
organically.
However, the deal proved to be a sour one. Microsoft has shifted much of its $7.5 billion
acquisition into other divisions of the company, announced mass layoff for Nokia
employees, cut down its output of smartphones per year, and eventually wrote off the
entire acquisition price in a $7.6 billion impairment charge.
Meanwhile, Nokia’s market share declined from a peak of 41% to its current level of 3%
despite Microsoft support.

12.5.4 WHAT ACTUALLY LED TO THE FAILURE OF MICROSOFT NOKIA
MERGER?

• Desperation doesn’t lead anywhere
Rather than growing through a shared vision or common passion, both Nokia and
Microsoft were shoved into a corner and considered the other as their Knight in
shining armour.

• Failure to understand market trends and dynamics

Even after two years of Windows Phone-powered Nokia handsets, Microsoft’s
operating system captured a mere 3.5% of the smart phone market. This was a strong
indication that developers are unwilling to invest resources into creating applications
for the Windows-based phone. The mobile phone industry is not just about hardware
and software. Applications, e-commerce, advertising, social media applications,
location-based services, and many other things matter today. The software on the
phone wasn’t compatible or appealing enough for the entire ecosystem7.

12.6. VODAFONE IDEA MERGER

12.6.1 Strengths of VODAFONE

• Massive market coverage – Vodafone is ranked 395th amongst the world’s top 2000
brands by Forbes. It is known for its wide distribution and network cover. It has the
second largest subscriber base in India. It is the second highest ranked telecom
operator and is behind only China Mobile. Vodafone operates in more than 25
countries across the globe.

• Revenues generated – Vodafone generates billions of dollar of grand every year. The
latest figure of 2016 is it has generated a revenue of a whopping 87.3 billion dollars.
Naturally, this results in boosting the rankings and expectations from Vodafone even
further. It is ranked 104 in its sales figures across the global 2000 list and number 84
in market value.

• Marketing – Marketing by Vodafone is legendary. The Vodafone pug is known
across the globe to follow Vodafone users everywhere. Similarly, the Vodafone zoo
zoo's was a brilliant and endearing campaign which converted many users to die-hard
fans of Vodafone. Time and time again, Vodafone comes out with brilliant campaigns
at the right time.

• Premium cost – While other telecom operators are penetrating the market, Vodafone
is differentiating its services regularly. Due to its marketing and communications,
users already think that Vodafone is a notch above the rest and they are proud to be a
user of Vodafone. As a result, Vodafone is still able to get some premium out of their

7MICROSOFT-NOKIA MERGER CASE STUDYhttps://www.wallstreetmojo.com/successful-mergers-and-
acquisitions/

customers and float in margins whereas other telecom operators are struggling to
maintain positive margins.
• Subscriber base – Vodafone has a massive subscriber base which they retain
efficiently. As of 2016, the total subscribers of Vodafone across the world was close
to 350 million people.
• Brand recall and brand valuation – The brand valuation of Vodafone is 28 billion
dollars as of 2016. Besides the brand valuation, the brand equity and the brand recall
of the brand are very high too. It is impossible that anyone will not refer to Vodafone
when talking about the top telecom players.

12.6.2. Strengths of IDEA:

• Robust Services: Idea Cellular offers a wide variety of services over and
above just telecom such as digital communication, online entertainment,
digital payments, Games, Movies, music, and cloud-based services.

• Wide network: Idea has a network that spans across India and is there in
40,000 towns across the country. The idea is also credited with the fastest 4 G
network in India close to 230,000 sites and a fiber optic cable covering close
to 1.28 lakh km. It is proposed to expand the Idea 4G services to 20 circles
which will cover more than 94 % of the total market.

• Prompt Service: Idea Cellular is credited with the provision of great after
sales services through its outlets which number to 8780, call centers with
round the clock help desk number, service app, and social media presence.
The brand is at number 1 in a survey taken on customer satisfaction.

• Numerous Awards: The Idea Cellular Services has been given numerous
prestigious awards such as Voice & Data Telecom Leadership Awards 2016,
the Best CEO of the year 2015 by Business Today and the best marketing
campaign in 2016 at The Economic Times Telecom Awards. The company is
also listed among the top 25 companies to work for.

• Various domains of service: The company is also a registered presence in
other technology areas such as Enterprise Services, Customer Service,
Marketing, Internet & Broadband, Infrastructure Innovation, and VAS.

12.6.3. Key Highlights of Vodafone-Idea Merger

The merger will give a higher stake to the promoters of Idea as compared to Vodafone
India so that in the long run both the companies are able to gain access to equal hold
The first step for AB group would be the acquisition of 4.9 percent of shares from
Vodafone. This would amount to a total of Rs.3874 crores wherein each share is
worth Rs.108. This would be helpful in increasing the shareholding capacity of Idea
to 26 percent.
While Vodafone holds 45.1 percent of the shares in the merger, Idea would be
allowed to buy another 9.6 percent but at a cost of Rs.130 per share in the period
spread over next four years. However, if Idea is unable to come up equal to the
shareholding percentage of Vodafone, it can go forward and buy the number of shares
required further but at the price prevailing in the market
The chairman of the new combined entity would be Kumar Mangalam Birla while
Vodafone would appoint the chief financial officer. The CEO of the new entity would
be named jointly by both the companies under a joint agreement
The merger also gives the promoters of both the entities with a right to nominate 3
members each for the board. There would be a total of 12 members on the board of
which 6 would be independent8.

8 Nidhi Gupta, Idea and Vodafone Merger: A saga of becoming India’s Largest Telecom Company (Mar 27,

2017) https://www.jagranjosh.com/articles/idea-and-vodafone-merger-a-saga-of-becoming-indias-largest-

telecom-company-1490598696-1