Issue No: 21
Moneta
the company. On an average
company’s earnings have been
increasing by 20%-25% because of
effective M&A strategies. Companies
many times adopt an M&A strategy
because they do not have resources
and data which they can get by
acquiring another company. The top
reason for such deals are 1)
Expanding 2) Get an edge over the
competitors 3) Advantages of
Economies of scale and Synergy 4)
Getting
access
to
advanced
technology 5) Getting tax benefits 6)
Increased speed to market 7)
Diversification 8) Increasing the
market share. Start-ups like Flipkart
constantly seek M&A opportunities to
keep themselves updated with new
technology and database.
July 2017
attract investors so as to get more
and more funding. And hence
strategic management now plays a
key role in sustaining the market. For
a moment you are at the top and the
next moment the competitor's
merger-acquisition will hit you hard.
Many companies also prefer buying
a financially weak company, the main
reason being, even though the
company is not performing well it has
a good business model. Thus a good
management can turn it into a good
future opportunity. Companies like
Third Capital Inc. are great example
of it.
It might seem like mergers &
acquisitions are key to success but
this not the case every time. The
opposite has an equally likely
probability of holding true. Many big
M&As have failed due to cultural
differences,
flawed
intention,
employee denial, incorrect valuation
and
wrong
management.
Big
companies like Reliance Industries,
Suzlon energy, Tata steel, Apollo
tyres, Rcom have failed after M&A. If
and only if companies have good
management
skills
and
great
financial support they can succeed.
So
correct
valuation,
proper
execution, time frame.
The trend of mergers & acquisitions
is playing a major role in the Indian
economy, especially after the
government started many initiatives
of merging government entities with
an aim to make the processes
simpler
and
effective.
Recent
examples of M&A deals are HPCL
and ONGC, IDFC Bank-Shriram
Capital, ABC bearings and Timken
India, Vodafone-idea Cellular, Axis
bank-Freecharge etc.
Some of India's biggest start-ups
including Paytm, Freshworks, Quickr,
OYO Rooms, Flipkart and others
have made several acquisitions in a
bid to expand their geographical
reach
and beat competitors by
having large market share. Also,
start-ups are considering acquisitions
and mergers to expand services and
Completion and focused long term
strategy and growth are the key
components to make it a success. So
2+2 can be 3 as well.
- Hitesh Jain
NMIMS , PGDM 2016-18
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