WHAT IS ACQUISITION

• The act of contracting or assuming or acquiring possession of something;

"the acquisition of wealth"; "the acquisition of one company by another"
• something acquired; "a recent acquisition by the museum"
• learning: the cognitive process of acquiring skill or knowledge; "the
child's acquisition of language"
• skill: an ability that has been acquired by training
• Most acquisitions are done by one company buying another company
with cash, with stock, or with a combination of the two. Smaller
acquisition transactions usually involve one company buying another
company’s assets while the company that has sold its assets is forced to
liquidate or enter into another type of business.
• The shell of a company that is left behind after the selling of its assets can
be used by smaller, privately owned companies who are quickly
emerging and seeking to become publicly listed on the stock market. This
type of acquisition is called a reverse merger. I
• A reverse merger the shell company’s stock market listing becomes its
most valuable drawing card, allowing the private company to merge with
it in order to become a new public corporation.

In general, acquisitions can be horizontal, vertical, or conglomerate. A horizontal

acquisition takes place between two firms in the same line of business. For example,
one tool and die company might purchase another. In contrast, a vertical merger
entails expanding forward or backward in the chain of distribution, toward the
source of raw materials or toward the ultimate consumer. For example, an auto parts
manufacturer might purchase a retail auto parts chain. A conglomerate is formed
through the combination of unrelated businesses.

Example:-
Vodafone's Hutch stake acquisition fourth largest in global
M&A: Dealogicnews

17 February 2007

New Delhi: According to market researcher Dealogic, Vodafone's acquisition

of Hutch-Essar is the fourth largest deal in terms of value at $13.3 billion
dollar in 2007 year-to-date.

The Hutch-Essar deal is at the fourth place followed by $9.9 bilion acquisition
deal of 27.39 per cent of Russia's Norilsk Nickel by Interros Holding, says
Dealogic.

India-targeted M&A activity is the highest on record at $21.3 billion in 2007

year-to-date via 101 deals - five times more than last year's $4.4 billion
through as many as 108 deals.

Inbound deals to the country account for $20.7 billion dollars by way of 38
acquisitions so far this year, which includes the latest Vodafone's acquisition
of Hutchisson-Essar, the largest inbound deal this year

WHAT IS FRANCHISE
A form of business organization in which a firm which already has a
successful product or service (the franchisor) enters into a continuing
contractual relationship with other businesses (franchisees) operating under the
franchisor's trade name and usually with the franchisor's guidance, in exchange
for a fee.

Franchising is the practice of using another firm's successful business model.

The word 'franchise' is of anglo-French derivation - from franc- meaning free,
and is used both as a noun and as a (transitive) verb. For the franchisor, the
franchise is an alternative to building 'chain stores' to distribute goods and
avoid investment and liability over a chain. The franchisor's success is the
success of the franchisees. The franchisee is said to have a greater incentive
than a direct employee because he or she has a direct stake in the business.

Advantages of Franchise:-

1. Branding

The first thing Franchises offer franchisees is a strategic identity that is not
only effective, it has cumulative market impact. Corporate Brand Identities are
proven. Mega-brands like McDonald’s and Dunkin’ Donuts have literally
spent millions on their brandings and logos and the franchisee gets to take full
advantage. Most Franchisors have already survived decades in their respective
industries and are easily identifiable to the public. A successful brand is one
that is remembered, and Franchises have some of the most successful brand
identities in the world.

Advertising
Advertising can be one of the biggest expenses for any new business and for
good reason. You can’t survive without effective advertising and effective
advertising is expensive. These days, even if you have a prime location, if
customers are unfamiliar with what you have to offer they won’t come in.
Franchises offer national advertising campaigns that are included in your
franchise fee. This is a huge benefit when considering a franchise.

3. Name Recognition
People today want guarantees like never before and name/menu/brand
recognition gives them that assurance. Everyone knows what to expect when
they stop at your franchise because the majority of them are repeat customers
even if it’s the first time in your store. You get to take advantage of the fact
that a family from out-of-state, for instance, who has previously enjoyed your
franchise’s products and services, will think nothing of visiting your facility
because of their past positive experiences.

4. Reputation
Next to Advertising and Branding, a Franchisee enjoys the protected
reputation of the Franchisor. I say protected because there are designated legal
departments that take care of the inevitable issues like lawsuits, accidents, and
difficulties with employees. The reputation of the franchise is important
enough, it is what breeds positive expectations that keep patrons loyal, but this
benefit coupled with a built-in umbrella of legal protection is an incredible
bonus and one you cannot get as an independent.

5. Support
Unless you were raised in the specific business you are trying to start, you will
need special training. Franchise Head Quarters will train you in everything
from the technology involved, to the accounting, to standing behind the
counter and taking money. Ongoing and online support is always available as
well as special alerts and continuing education. Franchisors want you to be
successful and they make themselves available every step of the way. After
all, they want to keep selling franchises and high success ratios keep potential
franchisees coming.

EXAMPLE

Monginis seeks franchisees

Last updated : February 05, 2010 18:19 IST

Monginis, a Mumbai based leading bakery chain, is all set to open 50 new
outlets via the franchise route by the end of 2010. The company also plans to
double its retail distribution from the current retail network of 15,000 stores
across the country

Monginis is in the process of finding suitable manufacturing franchisees for

their expansion in states like Kanpur, Lucknow, Raipur, Chennai and
Bangalore. The retail franchisees can be appointed only after the
manufacturing is commissioned. Regarding the issues of investment Ghole
informed, “The franchisee has to pay a refundable deposit of Rs one lakh and
a franchisee fee of Rs 50,000. Besides this the franchisee has to invest in
doing up the interiors and also in counters, equipments, as per the
specifications laid down by the company. Therefore the approximate
investment comes to around Rs six to eight lakh.”

Apart from opening these outlets, Monginis also plans to add a segment of
health foods like ‘0% Sugar Cookies’ in different flavours like coconut, jeera,
chocolate chips and shrewsbury. The company has also started a concept
called ‘Gift-A-Cake Online’. Ghole said, “We are trying to reach out to NRIs,
who want to send cakes to their near and dear ones in India.”

What is Outsourcing?

Outsourcing is contracting with another company or

person to do a particular function. Almost every
organization outsources in some way. Typically, the function being outsourced
is considered non-core to the business. An insurance company, for example,
might outsource its janitorial and landscaping operations to firms that
specialize in those types of work since they are not related to insurance or
strategic to the business. The outside firms that are providing the outsourcing
services are third-party providers, or as they are more commonly called,
service providers.

Although outsourcing has been around as long as work specialization has

existed, in recent history, companies began employing the outsourcing model
to carry out narrow functions, such as payroll, billing and data entry. Those
processes could be done more efficiently, and therefore more cost-effectively,
by other companies with specialized tools and facilities and specially trained
personnel.

Currently, outsourcing takes many forms. Organizations still hire service

providers to handle distinct business processes, such as benefits management.
But some organizations outsource whole operations. The most common forms
are information technology outsourcing (ITO) and business process
outsourcing (BPO).

Business process outsourcing encompasses call center outsourcing, human

resources outsourcing (HRO), finance and accounting outsourcing, and claims
processing outsourcing. These outsourcing deals involve multi-year contracts
that can run into hundreds of millions of dollars. Frequently, the people
performing the work internally for the client firm are transferred and become
employees for the service provider.

Dominant outsourcing service providers in the information technology

outsourcing and business process outsourcing fields include IBM, EDS, CSC,
HP, ACS, Accenture and Capgemini.

The process of outsourcing generally encompasses four stages: 1) strategic

thinking, to develop the organization's philosophy about the role of
outsourcing in its activities; 2) evaluation and selection, to decide on the
appropriate outsourcing projects and potential locations for the work to be
done and service providers to do it; 3) contract development, to work out the
legal, pricing and service level agreement (SLA) terms; and 4) outsourcing
management or governance, to refine the ongoing working relationship
between the client and outsourcing service providers.

In all cases, outsourcing success depends on three factors: executive-level

support in the client organization for the outsourcing mission; ample
communication to affected employees; and the client's ability to manage its
service providers. The outsourcing professionals in charge of the work on both
the client and provider sides need a combination of skills in such areas as
negotiation, communication, project management, the ability to understand the
terms and conditions of the contracts and service level agreements (SLAs),
and, above all, the willingness to be flexible as business needs change.

Advantages
1. Focus On Core Activities

In rapid growth periods, the back-office operations of a company will

expand also. This expansion may start to consume resources (human and
financial) at the expense of the core activities that have made your
company successful. Outsourcing those activities will allow refocusing on
those business activities that are important without sacrificing quality or
service in the back-office.

2. Cost And Efficiency Savings

Back-office functions that are complicated in nature, but the size of your
company is preventing you from performing it at a consistent and
 reasonable cost, is another advantage of outsourcing.

3. Reduced Overhead

Overhead costs of performing a particular back-office function are

extremely high. Consider outsourcing those functions which can be moved
easily.

4. Operational Control

Operations whose costs are running out of control must be considered for
outsourcing. Departments that may have evolved over time into
uncontrolled and poorly managed areas are prime motivators for
outsourcing. In addition, an outsourcing company can bring better
management skills to your company than what would otherwise be
available.

5. Staffing Flexibility

Outsourcing will allow operations that have seasonal or cyclical demands

to bring in additional resources when you need them and release them
when you’re done.

Example

NEW DELHI: In one of the most scathing attacks on outsourcing, Governor of

US state Ohio, Ted Strickland, has termed it not only a threat to jobs but an IT
security risk.

According to a news report in Computer World, the governor's criticism of

offshore outsourcing is part of a recent order to the state agencies prohibiting
them from hiring any company that sends work offshore.

The order to the state agencies said that the purchase of offshore services "has
unacceptable business consequences," and among them were "unacceptable
data security, and thus privacy and identity theft risks." The order further
added, "There are pervasive service delivery problems with offshore
providers, including dissatisfaction with the quality of their services and with
the fact that services are being provided offshore,"

Incidentally in November 2007, Strickland wooed Indian IT giant TCS to

open a centre in Ohio. The state reportedly offered about $19 million in tax
credits and other incentives to the company.

WHAT IS TAKEOVER
In business, a takeover is the purchase of one company (the target) by another
(the acquirer, or bidder). In the UK, the term refers to the acquisition of a
public company whose shares are listed on a stock exchange, in contrast to the
acquisition of a private company. A takeover, or acquisition, on the other
hand, is characterized by the purchase of a smaller company by a much larger
one. This combination of "unequals" can produce the same benefits as
a merger, but it does not necessarily have to be a mutual decision. A larger
company can initiate a hostile takeover of a smaller firm, which essentially
amounts to buying the company in the face of resistance from the smaller
company's management.
Example

June 12, 2008

Japanese take over drugmaker Ranbaxy

A Japanese pharmaceuticals group has astonished the Tokyo market by taking

over Ranbaxy Laboratories, India's largest maker of generic drugs, in a deal
worth up to $4.6 billion (£2.3 billion).

Daiichi Sankyo's move on Ranbaxy was described by Tokyo investors as

being bold and out of character and it may mark the start of a strategic shift
towards emerging markets by Japan's pharmaceutical industry.

The agreed offer for 50.1 per cent of Ranbaxy's shares is a response to a
worsening profit crisis in Japan's drugs industry. The remedy may lie in
emerging markets, analysts said.

The takeover is thought to be the largest of an Indian listed group by a foreign

buyer.

Daiichi has agreed to buy the 34.8per cent stake in Ranbaxy held by the
founding Singh family at 737 rupees a share, a 31 per cent premium to
Tuesday's closing price.

Under Indian takeover rules Daiichi must make a tender offer for a further 20
per cent.

Malvinder Mohan Singh, Ranbaxy's chief executive, said that the sale would
create “a new powerhouse ... spanning the entire pharmaceutical spectrum”.

Making only generics, which typically sell at a 97 per cent discount to their
patented templates, was not a sustainable business model, Mr Singh said.

What Is Merger?
The mergers refers to the aspect of corporate strategy, corporate finance and
management dealing with the buying, selling and combining of different
companies that can aid, finance, or help a growing company in a given
industry grow rapidly

A merger in business or economics refers to the combination of two

companies into one larger company. Such actions are commonly voluntary
and often involve a stock swap. In many instances a merger resembles a
takeover but often results in a new company name (often combining the names
of the original companies) and in new branding.

A merger occurs when two companies combine to form a single company. A

merger is very similar to an acquisition or takeover, except that in the case of a
merger existing stockholders of both companies involved retain a shared
interest in the new corporation. By contrast, in an acquisition one company
purchases a bulk of a second company's stock, creating an uneven balance of
ownership in the new combined company.

The entire merger process is usually kept secret from the general public, and
often from the majority of the employees at the involved companies. Since the
majority of merger attempts do not succeed, and most are kept secret, it is
difficult to estimate how many potential mergers occur in a given year. It is
likely that the number is very high, however, given the amount of successful
mergers and the desirability of mergers for many companies.

Benefits of Merger
➢ Economies of scale:
This occurs when a larger firm with increased output can reduce
average costs. Different economies of scale include:

i) Technical economies if the firm has significant fixed costs then the
new larger firm would have lower average costs

ii) Bulk buying – discount for buying large quantities of raw materials

iii) Financial – better rate of interest for large company

iv) Organizational – one head office rather than two is more efficient
➢ International Competition:

Mergers can help firms deal with the threat of multinationals and
compete on an international scale. Mergers may allow greater
investment in R&D. This is because the new firm will have more profit.
This can lead to a better quality of goods for consumers.

➢ Greater Efficiency:
Redundancies can be merited if they can be employed more
efficiently.
➢ Evaluation:

The desirability of a merger will depend upon several factors

such as:

1. Is there scope for economies of scale

2. Will there be an increase in monopoly power and significant
reduction in competition
3. Is the market still contestable (freedom of entry and exit).

Because of this the Competition commission looks at each

individual case and assess its relative merits and demerits.

➢ Greater Value Generation:

Mergers often lead to an increased value generation for the

company. It is expected that the shareholder value of a firm after mergers
or acquisitions would be greater than the sum of the shareholder values of
the parent companies. Mergers generally succeed in generating cost
efficiency through the implementation of economies of scale.
 Merger of Reliance Power (RPL) with Reliance Natural
Resources (RNRL).

Reliance power the power sector company of reliance group and RNRL
reliance natural are merging this time

MUMBAI: Two Anil Ambani group companies, Reliance Power and Reliance
Natural Resources said their respective shareholders have approved merger
between the two entities, estimated to create a Rs 50,000-crore entity.
Shareholders of Reliance Power and Reliance Natural Resources (RNRL) at
their respective meetings held on September 4, have approved the composite
scheme of arrangement between the two companies, the ADAG companies
said in separate filings to the Bombay Stock Exchange (BSE)

Shares of both RNRL and Reliance Power rose following the announcement
of shareholder approvals. RNRL was trading at Rs 39.80, up 2.31 per cent on
the BSE, while R-Power was quoting at Rs 159.05, up 1.66 per cent from the
previous close.

As per the deal approved by the boards of the two companies on July 4, RNRL
would merge with Reliance Power in an all-share deal, under which RNRL
shareholders for their every four shares would get one share of

Name:- Bhagyashree Bamania

Roll no.:-44

Class:- TYBMS-A

ASSIGNMENT ON

Entrepreneurship & Management of

Small & Medium Enterprises.

SUBMITTED TO,

Prof. Mrs Purva Gaikwad

Name:- Ruturaj Gurav

Roll No:- 43

Class:- TYBMS-A

ASSIGNMENT ON

Entrepreneurship & Management of

Small & Medium Enterprises.

SUBMITTED TO,

Prof. Mrs Purva Gaikwad