Lecture Notes: Mergers and Acquisitions & Private Equity

Introduction

• Focus: Reasons why companies merge or acquire one another
• Overview of private equity and money-raising purposes discussed later

Key Reasons for Mergers and Acquisitions

1. Drive Efficiency and Reduce Costs

   • Consolidation can lead to redundant departments (HR, Finance, etc.) being streamlined, thus reducing overall operational costs.

2. Increase Market Share

   • Companies may merge or acquire others to enhance their market presence.

Examples of Mergers and Acquisitions

• Telecom Industry Example:

  • Case Study: Vodafone and Idea
    • Merged to form India's largest telecom company in response to competitive pressure from Jio, which was offering lower prices and services.

• Automobile Industry Example:

  • Case Study: Volkswagen AG
    • Set up a subsidiary in India to manufacture and sell cars, tapping into the emerging market, while also potentially exporting products.

• Retail Industry Example:

  • Case Study: Walmart and Flipkart
    • Acquired Flipkart to increase market share in India amid competition from Amazon and Reliance.

Key Differences Between Mergers and Acquisitions

• Merger:

  • Results in the cessation of one company (becomes defunct) under company registrar.
  • The merged entity may carry names from both companies (e.g., Vodafone Idea Limited).

• Acquisition:

  • Both companies continue to exist as separate legal entities; one becomes a subsidiary of the other.

Conclusion

• Summary of major reasons for mergers and acquisitions.
• Next lecture: Discuss modes of mergers and acquisitions (M&A) types.