Course: Merger & Acquisitions

Prof. Manish Popli

Group 05 Section B

Submitted by: Siddharth Kumar, Sourabh Mandley, Vipin Yadav, Tanushree Halder, Swapnil Nillawad, Pooja Dagar
 Tata Motors Limited, formerly TELCO, is an Indian multinational
automotive manufacturing company headquartered
in Mumbai, and a subsidiary of the Tata Group
Tata entered the commercial vehicle sector in 1954 after forming a
joint venture with Daimler-Benz of Germany
World's 5th-largest motor vehicle manufacturing company, fourth-
largest truck manufacturer, and second-largest bus manufacturer
by volume
Category- Passenger cars, trucks, vans, coaches, buses,
construction equipment and military vehicles
Sector Automobile
 Strength Weakness Opportunity Threat
Wide & extensive Limited international Increasing per capita Increasing fuel costs
distribution and service presence income and purchasing Competition from other
network Sometimes faces alleged capability of potential big automobile giants
Good market penetration quality and durability customer base Competitive products
in the taxi & rental issues Leveraging customer offering same level
segment Not much customer engagement experience features at a lesser price
Highly diversified engagement programs to acquire new Product innovations and
product portfolio and activities customers frugal engineering by
More than 60,000 Weak technical Leveraging mergers and competitors
employees competencies when acquisitions to acquire
Expert service compared to companies newer technology
professionals available like Ford, Benz Augmenting the
Excellent brand equity Focus is more on cost distribution and service
and strengths in Indian thus their car models network in various
Market lack advanced features countries
 Jaguar Land Rover Limited is a British multinational automotive
company with its headquarters in Whitley, Coventry, United
Kingdom
Ford had acquired Jaguar Cars in 1989 and Land Rover from BMW
in 2000
The Jaguar Cars and Land Rover businesses were first united
under a single entity by Ford Motor Company in 2002
Category- SUVs, Luxury cars
Sector Automobile
 Strength Weakness Opportunity Threat
Carbon dioxide off- Intense competition from Emerging economies Increasing fuel costs
setting and environment other global SUV brands like India, China, Russia Foreign partnership may
friendly Very difficult to find apart from USA and weaken brand image;
Luxurious interior design spare parts and get Europe deter UK customers
Durable service Hybrid models of luxury Competition from other
Extensive advertising Lack a variety product cars is an untapped big automobile giants
and branding through range as compared to market offering same level
TVCs online and print competitors Augmenting the features
media Despite having high distribution and service Dependence on
4WD technology with performance cars, car network in various government policies
unrivalled all terrain exterior design is countries Financial instability
performance criticized Increasing per capita causes steep downfall in
Upgraded distribution income and purchasing premium car segment
channels and R &D capability of potential
facilities customer base
 First car was introduced in India
in 1898
10th position in the entire world

The second fastest growing

automobile market in the world
Largest manufacturer of Two
Wheelers
Ranks 4th in commercial vehicles
production
As of 2008, about 40 million
passenger vehicles and more than
1.5 million cars were sold in India
Tata, Mahindra, Suzuki, Honda,
Ashok Leyland, Bajaj etc are the
key players in the industry
 Barriers to
Entry

High

Bargaining Bargaining
Degree of
Power of power of
Rivalry
Suppliers Buyers

HIGH
Low Low

Threat of
Substitute

Fairly Mild
 foreign equity investment up to 100% in the automotive sector
international hub for manufacturing small, affordable passenger cars as well as
Political tractor and two wheelers
Promoting multi-model transportation and the implementation of mass rapid transport
system

The level of inflation Employment level per capita is right

The Indian economy has grown at 8.5% per annum
Economic Establishment of India as a manufacturing hub, for mini, compact cars, OEMs and for
auto components.

Since changed lifestyle of people, leads to increased purchase of automobiles, so automobile

sector has a large customer base to serve.
Social Growth in urbanization. Indian customers are highly discerning, educated
Upward migration of household income levels, price sensitive and put a lot of emphasis on value
for money.
 Advanced technologies used both in product and production process
Hybrid cars have made entry into the market
Technological More emphasis is being laid on R & D activities

Physical conditions like environmental situation affect the use of

automobiles
Environmental Evolution of alternate fuel
Fuel efficient cars

Provisions relating to safety measures and environmental conservation

Ensure a balanced transition to open trade at minimal risk to the Indian economy
Legal and local industry
Indian government auto policy aimed at promoting an integrated, phased and
conductive growth of the Indian automobile industry
 First car was introduced in Britain in
1885 by Daimler
The British automobile industry is
dominated by cars manufacturing
In 2008, it was the 12th-largest
producer of cars measured by volume
The automotive industry in the United
Kingdom is now best known for
premium and sports car marques
As of 2008, 1.2 million cars were
produced in the UK in 2008 and is
expected to rise up to 2 million cars
per year
The UK has a strong design and
technical base, with several foreign
companies basing some of their
research and development resource in
the UK
Ford, Nissan, Jaguar, Land Rover, Aston
Martin, Rolls Royce etc. are the key
players in the industry
 Barriers to
Entry

High

Bargaining Bargaining
Degree of
Power of power of
Rivalry
Suppliers Buyers

HIGH
Low Medium

Threat of
Substitute

High
 manufacturers are supposed to be privy to environmental issues while manufacturing
cars
Political Government subsidies
Promoting multi-model transportation and the implementation of mass rapid transport
system

Decrease in euro exchange rate has also hampered car makers in Europe in a major
way
Economic Surplus buying power and capital in developing economies such as China and India
have made Europe a global market place.

Awareness of harmful emissions caused by automobiles and increase of

environmental issues.
Social Change in the buying pattern of consumers as a result of recent recession especially
in mature markets
 Increasing the efficiency of manufacturing plants
Boosting safety
Technological Ecommerce
Restriction or modification of technology that causes pollution

Increased awareness of global warming awareness, burnout and greenhouse effects

Strict application of EURO norms in curbing pollution in countries
Environmental

Strict pollution laws and restrictions set in the European markets

Legal
 Easy access to international markets
Land Rover & Jaguar had strong distribution network in North
America, Europe & UK.
Geographical Expansion 90% of sales were from Indian market, thus with acquisition of
JLR its dependence on Indian market will reduce

TATA would enter into premium Luxury and small cars segments
through this acquisition

Product Expansion The segment is very attractive because it will always have demand for
these products and they are loyal to the brand
Tata Motors will be selling cars from US$2,500 (Nano car) to
US$65,000(Jaguar)

Acquisition would increase its efficiency in terms of economies of

scales once the sales will increase as well as the profit.

Operational Synergies The economies of scope because the acquisition also means the
acquisition of technology and expertise so that TML can improve its low-
ends cars without extra expenses because it would be integrated
Synergy in areas of component sourcing, engineering, and design.
 JLR had three manufacturing sites spanning an area of more
than 800 acres; two advanced designed centers with over
Access to Production 16,000 workforces

facilities These advanced facilities included: design studio, vehicle

development, power train engineering, power train
development and power train integration

Tata aimed to improve its technology in order to ingress into the

international markets and JRL would support it by providing
technological know-how
Access to Technology It would be possible to expand the range of products which focused in
the very beginning on low end cars.
With new technology it can reduce the cost and hence get advantage
over its Indian competitors

Instant recognition and credibility in global market

Cost competitive advantage since Corus was main supplier
Strategic of automotive high grade steel.
12 June 2007: Ford announced plans to sell Land Rover & Jaguar

August 2007: Major bidders identified: Tata Motors, M&M, Ceribrus

Capital management, TPG Capital, Apollo Management. TM and M&M
arrived as top bidders

3 Jan 2008: Ford announced Tata as preferred bidder

26 March 2008: Ford agreed to sell JLR operations to TM( $2.3 bn)

2 June 2008: Acquisition completed

 Cash pile of over Rs 6000 Cr. And Free
Easy for TM to Cash Flow of over Rs 1000 Cr. In FY 07 :
finance the deal. These reserves could be used to raise
Following are more funds
TMs D/E ratio of 0.56: ample room to
the reasons: raise more funds
TM raised $3bn , 15 month bridge loan from a consortium of banks, Citigroup, SBI and
FI- JP Morgan.

$3bn = 2.7bn(deal amount)+ 0.3bn(for engine and component supply, contingencies

and working capital)
3 modern plants in UK

2 advance design and engineering centers

26 national sales companies

Intellectual Property: free license to share technology with Ford

Support from Ford Motor Credit for sale of Jaguar and Land Rover for next 12 months
 Expected
Cost
The cost competitive advantage as Corus was
the main supplier of automotive high grade
steel to JLR and other automobile industry in
US and Europe. This would have provided a
synergy for TATA Group on a whole.
Enhanced human capital and managerial talent
Synergies
EVA of the company increased by
11.42% showing high operating
efficiency
JLR had many new models lined up for
next 3 years
JLR is moving from being a premium
high margin car to high volume, low
Cost margin firm due to the cist synergies
Actual
Enter into high-end premier segment of the global market , Revenue
entire range of product line
Acquisition of advance design studios and technology as part
of the deal, three plants in UK
Improvement of their core products in India
Geographical diversification into European and American
market, less dependence on Indian market and market share
increase
Brand Identity of Iconic Land Rover and Jaguar leading to
improved corporations image and increased its public
reputation.
Net worth of the company increased
significantly(130.92%)
JLR Sales in North America went up by 15%(March 12)
Brand identity improved in European market
Net profit of Rs 469 cr for the year ended Mar 16 due to
JLR
Strong growth across products, strong M&HCV growth in
India
Revenue

The cost competitive advantage as Corus was
the main supplier of automotive high grade
steel to JLR and other automobile industry in
US and Europe. This would have provided a
synergy for TATA Group on a whole.
Enhanced human capital and managerial talent
EVA of the company increased by
11.42% showing high operating
efficiency
JLR had many new models lined up for
next 3 years
JLR is moving from being a premium
high margin car to high volume, low
margin firm due to the cist synergies
Enter into high-end premier segment of the global market ,
entire range of product line
Acquisition of advance design studios and technology as part
of the deal, three plants in UK
Improvement of their core products in India
Geographical diversification into European and American
market, less dependence on Indian market and market share
increase
Brand Identity of Iconic Land Rover and Jaguar leading to
improved corporations image and increased its public
reputation.
Net worth of the company increased
significantly(130.92%)
JLR Sales in North America went up by 15%(March 12)
Brand identity improved in European market
Net profit of Rs 469 cr for the year ended Mar 16 due to
JLR
Strong growth across products, strong M&HCV growth in
India
 Acquisition Strategy: Analysis of Tata Motors Jaguar Land Rover by Dr. Seema Lddham in IJMBS
Vol 06, Jan Mar 2016
An Understanding of TATA-JLR deal with the concepts of Downsizing, Corporate Culture and
Leveraged Buyout by Bhavika S Batra & Dharmendra B Khairajani
Financial and Strategic Analysis of Ford Motor Company and Tata Motors by Miel van
Blitterswijk & Rosen Karadzhov
en.wikipedia.org
Siddharth Kumar (2015PGP356)| Sourabh Mandley (2015PGP370)| Vipin Yadav (2012IPM119)|
Tanushree Halder (2015PGP402)| Swapnil Nillawad (2015PGP230)| Pooja Dagar (2015PGP259)