Top 5 merger & acquisition deals in 2018 | India

Merger & acquisition (M&A) are strategic moves that companies consider to expand their footprint into the market. Merger means coming together two or more companies to club their business in every possible way whereas acquisition means one big company takes over the small company(s).

In both the cases, you may think businesses are combining either we do the merger or the acquisition but the motive behind this is abnormal. Merger is done in good faith, here both of the companies execute with their own consent. However, acquisition is not done in good faith, various strategies are considered by the acquirer company. 

We have scrubbed the data of top 5 M&As sector-wise which are to be proposed & held in 2018. Simplification is done by segregating the deals into background before/behind merger, financials & benefits after merger.

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:: :: Banking Sector 

Mega Merger of stressed PSU banks :- Bank of Baroda, Oriental bank of commerce, Central bank,  Allahabad bank, Punjab National Bank & IDBI bank.

• Background behind merger >> These banks are being proposed to be merged under pressure with combined losses of Rs. 21,646.38 crores (amount taken as at 31st March, 2018).There may be possibility regarding selling off the IDBI bank rather merging with any of the bank. Losses of these banks have accumulated due to Non performing asset (NPAs) held by these bank. Reserve bank of India (RBI) planned various strategies for banks that are sinking because of losses but unfortunately those plans were not executed properly.
• Financials after merger >> If the plan goes through, the merger entity will become the second largest bank in the country after State Bank of India (SBI) with combined assets of Rs. 16.58 trillion.
• Benefits after merger >> Merged entity can work more efficiently if all assets will be employed strategically. Those banks who were planning to expand geographically can bell their aim. 

Also read :-  What is NPA (in summary) ?

:: :: Energy & Renewable Sector

Merger of HPCL (Hindusthan Petroleum Corporation Ltd) & MRPL (Mangalore Refinery & petrochemicals Ltd)

• Background behind merger >> Both are the Oil & Natural Gas Corporation Ltd (ONGC) subsidiaries. ONGC have 51.1% in HPCL & 71.6% in MRPL share holding in these entities. HPCL, a big seller of petrol, diesel, LPG & turbine fuel controls 27 million tonnes of capacity. However, MRPL which operates petrochemicals, process crude oil & other refineries facilities are available, controls 15 million tonne capacity. The main aim behind merger is leading by HPCL who want to become powerful in petrochemicals space.
• Financials after merger >> In terms of capacity, merged entity will have 42 million tonne capacity which will help it in competing with the large companies in the market.
• Benefits after merger >> MRPL has virtually no marketing network, while HPCL sells more petroleum products than it produces. Clubbed entity can work with more efficiencies & synergy in procurement of crude oil.

Acquisition by ReNew Power Ventures of Ostro Energy Pvt ltd

• Background before acquisition >> ReNew is the largest renewable energy IPP ( Independent power producer ) with a capacity of more than 5,800 MW of wind & solar power assets across the country. New Delhi based Ostro energy operates & develops power projects in India. It has 2800 MW capacity.
• Financials after acquisition >> Though it's a biggest M&A deal in renewable sector creating 5600 MW capacity in single entity of which 65% of the capacity will be operational. It is now well ahead of Tata power renewable energy, which with Rs.9,247 crore acquisition of welspun's assets in June, 2016.
• Benefits after acquisition >>  Merger helps ReNew to further consolidate its position in fast growing Indian clear energy sector. Also, the main aim of Renew to reduce India's coal footprint can be achieved easily.

:: :: Telecom Sector

Vodafone-Idea Merger :-  As stated in our previous post Telecom up-gradation ahead, below merger will significantly affect the market, where Reliance Jio has explicitly mentioned their completion of 200 million users till now. It will be good watch in this competitive world.

• At the beginning of 2017, Vodafone announced the merger with Idea Cellular to make the largest telecom.
• Hindustan Times in its news stated that - 'Vodafone & Idea will have more spectrum than any other telecom operator, and can focus on its investments in offering cheaper high value products to its customers'.
• But approvals for merger from DoT (Department of telecom) is still pending.
• Benefits from this merger will be :-
• The merged entity will cover 400 million customers & 41% revenue market share as per ET.
• The customers will get unlimited voice & higher volume of high speed data as combined entity will hold around 1850 MHz of spectrum, highest in the industry which enable them to give 250 Mbps speed !!
• Expected merger of both of them will be held in 2018.

:: :: Infrastructure Sector  

Merger of KEF Infrastructure with Katerra :- KEF is a infrastructure manufacturing company whereas Katerra is pioneer in multi-family housing design, build & delivery.

• KEF, founded in 2014 utilities robotics & automation in its advanced manufacturing operations to deliver high quality building projects more quickly & efficiently. Currently, it holds 1400 employees. Katerra holds 2000 employees & it's major investors are Softbank & Canada pension plan investment fund.
• Partnership will jointly expand their geographical reach, manufacturing capacity & marketing expertise (statement issued by KEF). Both comapnies employ vertically integrated model, offering end-to-end building services enhanced by offsite manufacturing & enterprise technology.
• Major benefits to KEF will be the way to bring world-class concrete technologies to the US market, greatly expanding design & material for its American clients. Coming to Kateraa, who can offer robust supply chain & elevated manufacturing processes in existing KEF markets.
• This merger will  hopefully complete in 2018 only.

Last Lines ~ 

A merger & acquisition  is not for the faint-heart. Rather, it is a rigorous process with a required degree of detail that will make your head spin. A myriad of processes have to go right for this sort of business dealing to be successful.