Kollam, , India
Financial Management
0 टिप्पणी करें | 37 लोगो ने देखा है | 21 जनवरी 14  | Sidhartha Sankar Pillai
Merger - Pros and Cons
Merger Green and Blues HDFC Bank to buy Centurian BoP. Tata buys Corus. HCL Technologies buys Cape Stream. Tata Communications buys Tyco Global Network. British Petroleum Co. Plc buys Amoco Group... Sounds familiar Yes, these mega events in bold ink often hit every second pink paper the folks subscribe to. It adds value- but only to the venturer s dream run up to a situation fondly named and cherished - a business s second haven. Perspective Differentiation The same cake has different motives- according to management guru Arindam Chaudhuri. To corroborate and illustrate the point, the young professor takes us through the birthday party when a cake is the central poin of discussion. A two year old has his eyes fixed on it and about to jump and smudje it all over his face. An eight year old takes a big piece and goes slyly to one corner and eats it up. A fifteen year old, on the other hand, carefully cuts out a big piece and goes towards his sister s best friend who, no doubt, is a girl Corporate mergers, too, are not too far behind from the example of the cake given to its analysts who predict itd different results for the same deal. Case Study Merge us, we can grow the idea is the beginning of the journey and it pays up well with the belief- unity of operations will push us up. The journey towards the operations take a new turn afterwards. It produces commitments to work together and to suceed in the Indian business environment and yet gets boggled down by the tiresome procedures on the way to expend huge oney and resources so as to make it a costly affair-at times , even a costly error. It is the appetite for foreign acquisitions which realizes its place as the world s most representative enterprise which changes the dynamics of international business. It provides a new dimension to the theory of investment strategy thereby laying the platform for huge diversified investment. The urge to integrate lead the emergence of historic buy-outs and acquisitions, significantly the merger of Tata Communications and US based Tyco Global NetworkTNG in 2005 and Canada s Teleglobe in 2006 gives ample food for thought. It is one of the most successful corporate marriage the business world has ever witnessed. It produced the desired results and reiterated the positive outcome of the kind-of deals. The deal went on to become a roaring success with Tata Communications finally getting to the top three slot as international call-career. What a stupendous accomplishment for the deal The arrangement proved wrong for a conglomerate of the stature of Novell Inc which incurred heavy sums to the tune of 855 million in acquring Word Perfect Corp, the motive being to challenge the market place of none other than the giant Microsoft. The deal bounced back, the clash of the respective work cultures being the very reason for the fallout. Moreover, the giant s effort to seamlessly put together the entire segment into the plaster of the deal questioned its existence. The key product sale was gravely affected and the deal lasted for mere two years period at the end of which the Word Perfect Corp was up for sale Here, the Two to Tango slogan received a serious jolt. The feel in the industry is that the proposed merger of HDFC Bank and Centurion Bank of Punjab is going to be the largest ever witnessed by the Banking sector with the investment well over Rr 10000 crores. Centurian has in its fold three take overs-Bank Muscat, Bank of Punjab and Lord Krishna Bank- all of which were concluded in a brief span of 4 years. The confidence reposed on the hopes chasing the merger is set high which shall mitigate the problem faced by delays involved in foreign acquisition of Indian banks. The foreign banks underthe umbrella of CBoP can now get a slice of a bigger Indian bank. Three Dimensional Three cases illustrated in the cases of theree different degrees of integration addresses many a questions on the success or failure of multi-million dollar deals. The investment strategy on the mergers often are guided by the three dimensional criteria which also forms the purpose with which the merger is undertaken- 1 to expand the scope of operations by including within its ambit the various segments pursued by either of the groups. 2 to enhance the scale of operations by sharing the production of similar products or customers and finally 3 to create a separate platform for marginal investment and bringing in more talent in each sector of operation. The prudent coordination of the method of integration after identifying the real purpose saves the merger from the possible danger of back firing the deal. The acquisition , at times, is oriented towards the technological acqusitions which obviously boosts the industry s capabilities in new technologies. what is clearly evident in various spaces of the industry , big concerns benefit out of deals by expanding the operations and smaller concerns merge to strengthen their stronghold and to secure them against liquidity crunch and fragmentation. With the mergers, the reporting results have improved steadily and given positive outlook by modifying end enlarging the figures of revenue and profits, thus giving an impression of 300 to 500 per cent growth in the previous figures for many companies. In fact the contrary results also did hit the fortunes of many and huge losses out of the merger vitiated the good oicture that they held earlier. The Air India International and the Indian Airlines national merger did not quite produce desired results as evident from the fact thatthe combine reported a loss of Rs. 700 crore in the last fiscal. Here, the view that a merger always synergises the growth has received another sever jolt. Tje rising costs and falling revenues affected the success spree of the integration process. Path To Integration The road map for integration needs to be well laid out. Instead of integrating as a whole, a segmentwise integration can easily bring about encouragement to work under similar conditions and aoid the trap of integrating everything. A capable team of talented managers need to analyse and hit the riht spot favourable to the deal. The point which always to be kept in mind is even a successful integration can make or break a deal. The experience shows from the failure of deals that in fast moving, intensively competitive markets companies that don t get their integration right can pay heavy price. A merger often involves coming together of a huge work force and resources the management of which is a critical issue to be addressed properly. The skill set should be built up in the management, widening it amply to pay attention to the problems of a large size achieved after the amalgamation. The biggest benefit is ensured from network integration, rationalisation of process and reduced cost of operations.

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