Seminar on recent mergers & acquisition Presented by, Sweta Nagarkatti Sujana P Sahana Shilpa B Tejaswini G Shruti K

Introduction

Mergers and acquisitions (abbreviated M&A) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other child entity or using a joint venture. The distinction between a "merger" and an "acquisition" has become increasingly blurred in various respects (particularly in terms of the ultimate economic outcome),

Merger and Acquisition Strategies are extremely important in order to derive the maximum benefit out of a merger or acquisition deal. It is quite difficult to decide on the strategies of merger and acquisition , specially for those companies who are going to make a merger or acquisition deal for the first time. In this case, they take lessons from the past mergers and acquisitions that took place in the market between other companies and proved to be successful.

Through market survey and market analysis of different mergers and acquisitions, it has been found out that there are some golden rules which can be treated as the Strategies for Successful Merger or Acquisition Deal.

Before entering in to any merger or acquisition deal, the target company's market performance and market position is required to be examined thoroughly so that the optimal target company can be chosen and the deal can be finalized at a right price. Identification of future market opportunities, recent market trends and customer's reaction to the company's products are also very important in order to assess the growth potential of the company.

After finalizing the merger or acquisition deal, the integration process of the companies should be started in time. Before the closing of the deal, when the negotiation process is on, from that time, the management of both the companies require to work on a proper integration strategy. This is to ensure that no potential problem crop up after the closing of the deal. If the company which intends to acquire the target firm plans restructuring of the target company, then this plan should be declared and implemented within the period of acquisition to avoid uncertainties. It is also very important to consider the working environment and culture of the workforce of the target company, at the time of drawing up Merger and Acquisition Strategies, so that the laborers of the target company do not feel left out and become demoralized although it has not completely disappeared in all situations.

Recent mergers & acquisition

In 2010, corporate merger and acquisition (M&A) activity made a huge comeback. Most of the M&A activity involved North American companies, but activity has also increased around the world, and in various market sectors / industries. Companies have stashed away a record amount of cash, which they have hoarded since the height of the financial crisis (2008-2009) when cash was considered king. Acquiring companies have been spurred on by record low interest & lending rates, as well as a North American economy which has been considered as stabilized. Risk in general, has been perceived to be lower than during financial crisis, and there has been an increase in corporate and investor confidence. Even though stock prices were a lot higher in 2010 than in 2008 or 2009, the market value of companies have still remained relatively low due to a weak global economy.

M&A activity significantly increased during the second half of 2010 especially for large sized (multi-billion dollar) takeovers. Late July, the month of August, and September, were notable for heavy merger & acquisition activity. Those months were highlighted by the announcements of : 7/22/2010 General Motors [GM] AmeriCredit Corp ($3.5 billion). 7/29/2010 Sanofi-Aventis [SNY] Genzyme [GENZ] ($18.5 billion). 8/14/2010 -BHP Billiton [BHP] Potash Corp ($40 billion). 8/19/2010 Intel [INTC] McAfee [MFE] ($7.7 billion). 9/2/2010 Goldcorp [GG/G] Andean Resources Ltd [tse:AND] ($3.4 billion). 9/17/2010 Johnson & Johson [JNJ] Crucell [CRXL] ($2.3 billion). 9/27/2010 Unilever Plc [UL] Alberto Culver [ACV] ($3.7 billion). Takeovers have continued and also increased after September to the end of the year with no let down in activity. We expect

2011 Financial, Insurance, and Investment Sector M&A Outlook The M&A activity in the US financial, insurance, and investment sectors can be expected to slow or remain at same pace in 2011. The massive mergers have already occurred in 2008-2009 during the height of crisis. In 2010, there were a significant number of smaller deals made by the stronger US financial companies/banks. In particular, Wells Fargo [WFC], Umpqua [UMPQ], and US Bancorp [USB], had all completed several smaller deals (both financial institutions and insurance businesses) that went relatively unnoticed during 2009-2010. One of the larger exceptions last year was the Berkshire Hathaway [BRK.A/BRK.B] and Sun Life Financial [SLF] reinsurance deal ($109 billion). The reason there may have been less deals, may have been due to the operations of small financial companies being acquired via the Federal Deposit and Insurance Corporation (FDIC) facilitated transactions, and therefore they were not really considered traditional/conventional M&A deals by many.

In 2011 we can expect that most M&As will still be the smaller sized financial deals, such as the FDIC facilitated acquisitions. We expect small and regional financial firms to continue being seized by the FDIC. Conditions likely to affect/limit the ability of the larger financial firms to complete large mergers and takeovers are the Vockler and Basel III rules, as they are more strict. Firms wont be willing to make bold takeovers without being more cautious, or unless they are confident enough in their financial strength. We can also expect small and mid sized insurance and investment management deals to continue roughly at same pace as in 2010 . Furthermore, it is important to note that entire take overs may be less likely in these two sectors, giving way to takeovers of certain units or divisions. The US economy is still very weak with an extremely high unemployment level, that hasnt really declined since the height of the crisis. Sustained job creation over many months has yet to be seen, and US consumers still have trouble repaying debts. These will be the major conditions affecting the financial, insurance, and investment sectors. The negative conditions foster uncertainty, weakened market values, and lasting risk concerns, which give way to takeovers by stronger companies (either through conventional means or FDIC facilitated acquisitions).

The financial sector M&A activity by Canadian companies is expected to continue in 2011. However, it will be in lower numbers compared to those made by US corporations (due to far fewer Canadian companies relative to the US). The Canadian financial sector has been stronger than most developed nations, and financial institutions in Canada also have much more cash. In recent months The Bank of Nova Scotia [BNS], TorontoDominion Bank [TD], and Bank of Montreal [BMO] announced acquisition deals: 11/22/2010 The Bank of Nova Scotia [BNS] agreed to acquire all shares of Dundee Wealth Inc [DW] ($3.2 billion). 12/7/2010 Toronto-Dominion Bank [TD] agreed to acquire Chrysler Financial, the auto lender owned by Cerberus Capital Management ($6.3 billion). 12/17/2010 Bank of Montreal [BMO] announced it was

In 2011, other Canadian financial institutions may feel need to make a deal to increase its global market share. In addition, a strong Canadian dollar will help in deal making. On December 31st 2010, the Canadian dollar had a value of 1.0042 USD. Factors that would influence or limit acquisitions by Canadian financial companies would include a widening trade gap (widen to significant levels), year end household debt levels that rose to 144% of disposable income, and interest rates that are expected to rise in 2011 (which will put pressure on the Canadian economy and households).

2011 Biotechnology, Pharmaceutical, and Health Care Sector M&A Outlook There has been more M&A activity in the biotechnology, pharmaceuticals, and health care sectors during 2008-2009, but slightly less in 2010. However, the big M&A deal to watch in 2011 will be the outcome of Sanofi-Aventis [SNY] and Genzyme [GENZ]. Most large companies in the industry have already completed many multi-million and multi-billion dollar deals within the last 2 years alone. This includes names such as Merck, Wyeth, Schering-Plough, Sanofi-Aventis, AstraZeneca, Johnson&Johnson, Bristol-Myers Squibb, GlaxoSmithKline, etc. These acquisitions ranged from small, mid, to large sized companies in a wide range of industries including consumer, health, generics, animal health, vaccines, diabetes, cancer, etc. Many joint ventures have also been completed as well. Despite the busy M&A activity in recent years, it can be expected that further consolidation and joint ventures continue at a fairly moderate pace in 2011 and beyond.

Many large companies have hoards of cash, and will likely spend it on small to mid-size deals/companies. The Sanofi-Aventis and Genzyme deal may be the largest deal of the year in the industry. Potential takeover targets include smaller highly specialized niche players, with good research pipelines, but also lack financial muscle or production expertise. Specialized niche areas include vaccines (highly sought after in recent years), cancer, diabetes, gene therapy, rare/infectious diseases, etc. We can also expect smaller generic manufacturers to be takeover targets as the larger companies try to diversify, seek downside protection from expiring drug patents, and limit the negative financial impact of other larger generics. .

conclusion

From the above examples we can conclude that M&A is the most important strategy adopted by many companies in order to expand their area, decrease their cost, explore in market and so on.

Thank you