Inorganic Growth

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Information about Inorganic Growth

Published on February 25, 2014

Author: nupsb


Inorganic Growth : Is It The Right Strategic Move For Indian Businesses: Presented by: Nupur Bhardwaj Inorganic Growth : Is I t T he R ight Strategic M ove For Indian Businesses Introduction: Introduction Today, the business environment is rapidly changing with respect to: Competition Products People P rocess of manufacture Markets Customers T echnology. Companies are expected to beat competitors and innovate in order to continuously maximize shareholder value. PowerPoint Presentation: Since 1991 Indian industries have been increasingly exposed to both domestic and international competition. Indian corporate sector has been forced to restructure, reengineer to be competitive and deliver value to stakeholders. Indian companies have adopted organic and inorganic strategies to enhance value for their shareholders . Inorganic Growth: Inorganic Growth A growth in the operations of a business that arises from mergers or takeovers, rather than an increase in the company’s own business activity. Helps companies to enter: New markets E xpand customer base C ut competition C onsolidate and grow in size quickly E mploy new technology with respect to products people and processes. Difference: Difference Organic Growth Inorganic Growth When a company with help of its efficient management enhances its growth rate it is referred as organic growth. Through increase in sales revenues This is an internal growth. Inorganic growth refers to a company growing through acquiring or it’s merger with other companies Through t akeover or acquiring another similar company in current industry This is referred to as external growth. Inorganic Growth Strategy: Inorganic Growth Strategy The strategy of inorganic growth takes place by: Takeover Merger and Acquisitions Spinoffs Joint Venture Integration . Takeover: Takeover A takeover is the purchase of one company by the another company. The term refers to the acquisition of a public company whose shares are listed on a stock exchange. Types of Takeover: Friendly Takeover Hostile Takeover Reverse Takeover Merger and Acquisition: Merger and Acquisition Mergers and acquisitions is an aspect of corporate strategy that is dealing with the buying, selling, dividing and combining of different companies and similar entities without creating a subsidiary Types of Mergers and Acquisition: Horizontal Vertical Co-generic Conglomerate Spin-Off: Spin-Off It is a corporate action where a company “splits off” sections of itself as a separate business. The new company takes assets, intellectual property, technology, and/or existing products from the parent organization. Integration: Integration Integration generally means combining parts of a company so that they work together or form a whole. Joint Venture: Joint Venture A joint venture takes place when two parties come together to take on one project. In this type of project, both parties are equally invested in the project in terms of money, time, and effort to build on the original concept . Advantages of Inorganic Growth: Advantages of Inorganic Growth Can occur more quickly than organic growth Firms can benefit from a greater pool of skills and experience Customers, sales, assets and market position are acquired immediately Reduces competition Disadvantages of Inorganic Growth: Disadvantages of Inorganic Growth More expensive than organic growth Difficult to combine different organisational cultures and management styles Possibility of diseconomies of scale Greater risk Difficult to control Wipro: Wipro In 2005, Wipro acquired the consumer products and lighting business of Yardley and Unza Holdings. In 2006, Wipro acquired cMango Inc., a US based Technology Infrastructure Consulting firm. Wipro struck a deal with Saraware Oy , a leading provider of design and engineering services to telecoms companies, for Euro 25 In 2007, Wipro entered into a agreement to acquire Oki Techno Centre Singapore Pte Ltd (OTCS). Tata Group: Tata Group February 2000 - Tetley Tea Company, $407 million March 2004 - Daewoo Commercial Vehicles, $102 million August 200 4 - NatSteel's Steel business, $292 million July 2005 - Teleglobe International Holdings, $239 million November 2006 - Ritz Carlton Boston, $170 million January 2007 - Corus Group, $12 billion April 2007 - Campton Place Hotel, San Francisco, $60 million March 2008 - Jaguar Cars and Land Rover, $2.3 billion ICICI Bank: ICICI Bank 1998 - Anagram Finance 2001 - Bank of Madura 2002 - The Darjeeling and  Simla  branches of  Grindlays Bank 2005 - Investitsionno-Kreditny Bank (IKB), a Russian bank 2007 - Sangli Bank 2010 - Bank of Rajasthan Reliance - BP Deal: Reliance - BP Deal The much talked about Reliance – BP deal finally came through in July 2011 after a 5 month wait. Reliance Industries signed a 7.2 billion dollar deal with UK energy giant BP, with 30 percent stake in 21 oil and gas blocks operated in India. Although the Indian government’s approval on two oil blocks still remains pending, this still makes it one of the biggest FDI deals to come through in India Inc in 2011-12-31. Fortis Healthcare Merger: Fortis Healthcare Merger In September 2011, Fortis Healthcare (India) Ltd, merged with Fortis Healthcare International Pte Ltd. This made Fortis Asia’s top healthcare provider with the approximate total revenue pegged at Rs. 4,800 crore . Fortis India also bought the entire stake of the Singapore based Fortis International. Essar-Vodafone: Essar -Vodafone In March 2011, the Vodafone Group announced that it would buy 33 percent stake in its Indian joint venture This was for about 5 billion dollars after the Essar Group sold its holding and exited Vodafone. Healthcare giant Piramal Group too, bought about 5.5 percent in the Indian arm of Vodafone for about 640 million dollars. iGate – Patni Computers: iGate – Patni Computers In May 2011, IT firm iGate  completed its acquisition of its midsized rival Patni Computers for an estimated 1.2 billion dollars. For iGate , the main aim of this acquisition was to increase its revenue, vertical capability and customer base. iGate now holds an approximate stake of 82.5 percent in Patni computers, now called iGate Patni . Aditya Birla Group: Aditya Birla Group In June 2011, the Aditya Birla Group announced its completion of acquiring US based Columbian Chemicals. Columbian Chemicals is a 100 year old carbon black maker company for an estimated 875 million dollars. This will make the Aditya Birla Group one of the largest carbon black maker companies in the world, doubling its production capacity instantly. Mahindra & Mahindra: Mahindra & Mahindra In March 2011, Mahindra acquired a 70 percent stake in ailing South Korean auto maker Ssangyong Motor Company Limited (SYMC) This deal was for a total of 463 million dollars. This acquisition will see the Korean company’s flagship SUV models, the Rexton II and the Korando C foray into the Indian market. Is it the right strategic move for Indian businesses?: Is it the right strategic move for Indian businesses ? Yes, inorganic growth is the right strategic move for Indian businesses. Inorganic growth strategies are regarded as important engines that help companies to enter new markets, expand customer base, cut competition, consolidate and grow in size quickly, employ new technology with respect to products, people and processes. Thus the inorganic strategies are regarded by companies as fast track strategies for growth and unlocking of value to shareholders. Thank You: Thank You

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