INTRODUCTION

Merger
The phrase mergers and acquisitions (abbreviated M&A) 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 without
having to create another business entity.

Acquisition
An acquisition, also known as a takeover or a buyout, is the buying of one
company (the ‘target’) by another. Merger is when two companies combine
together to form a new company all together. An acquisition may be private
or public, depending on whether the acquiree or merging company is or isn't
listed in public markets. An acquisition may be friendly or hostile. Whether a
purchase is perceived as a friendly or hostile depends on how it is
communicated to and received by the target company's board of directors,
employees and shareholders. It is quite normal though for M&A deal
communications to take place in a so called 'confidentiality bubble' whereby
information flows are restricted due to confidentiality agreements (Harwood,
2005).
In the case of a friendly transaction, the companies cooperate in
negotiations; in the case of a hostile deal, the takeover target is unwilling to
be bought or the target's board has no prior knowledge of the offer. Hostile
acquisitions can, and often do, turn friendly at the end, as the acquiror
secures the endorsement of the transaction from the board of the acquiree
company. This usually requires an improvement in the terms of the offer.
Acquisition usually refers to a purchase of a smaller firm by a larger one.
Sometimes, however, a smaller firm will acquire management control of a
larger or longer established company and keep its name for the combined
entity. This is known as a reverse takeover. Another type of acquisition is
reverse merger a deal that enables a private company to get publicly listed
in a short time period.
A reverse merger occurs when a private company that has strong
prospects and is eager to raise financing buys a publicly listed shell
company, usually one with no business and limited assets. Achieving
acquisition success has proven to be very difficult, while various studies have
shown that 50% of acquisitions were unsuccessful. The acquisition process is
very complex, with many dimensions influencing its outcome. There is also a
variety of structures used in securing control over the assets of a company,
which have different tax and regulatory implications:

 The buyer buys the shares, and therefore control, of the target
company being purchased. Ownership control of the company in turn
conveys effective control over the assets of the company, but since the
company is acquired intact as a going concern, this form of transaction
carries with it all of the liabilities accrued by that business over its past
and all of the risks that company faces in its commercial environment.
 The buyer buys the assets of the target company. The cash the target
receives from the sell-off is paid back to its shareholders by dividend or
through liquidation. This type of transaction leaves the target company as
an empty shell, if the buyer buys out the entire assets. A buyer often
structures the transaction as an asset purchase to "cherry-pick" the
assets that it wants and leave out the assets and liabilities that it does
not. This can be particularly important where foreseeable liabilities may
include future, unquantified damage awards such as those that could
arise from litigation over defective products, employee benefits or
terminations, or environmental damage. A disadvantage of this structure
is the tax that many jurisdictions, particularly outside the United States,
impose on transfers of the individual assets, whereas stock transactions
can frequently be structured as like-kind exchanges or other
arrangements that are tax-free or tax-neutral, both to the buyer and to
the seller's shareholders.

The terms "demerger", "spin-off" and "spin-out" are sometimes used to

indicate a situation where one company splits into two, generating a second
company separately listed on a stock exchange.
Distinction between mergers and acquisitions
Although often used synonymously, the
terms merger and acquisition mean slightly different things.

When one company takes over another and clearly establishes itself as the
new owner, the purchase is called an acquisition. From a legal point of view,
the target company ceases to exist, the buyer "swallows" the business and
the buyer's stock continues to be traded.

In the pure sense of the term, a merger happens when two firms agree to go
forward as a single new company rather than remain separately owned and
operated. This kind of action is more precisely referred to as a "merger of
equals". The firms are often of about the same size. Both companies' stocks
are surrendered and new company stock is issued in its place. For example,
in the 1999 merger of Glaxo Wellcome and SmithKline Beecham, both firms
ceased to exist when they merged, and a new company, GlaxoSmithKline,
was created.

In practice, however, actual mergers of equals don't happen very often.

Usually, one company will buy another and, as part of the deal's terms,
simply allow the acquired firm to proclaim that the action is a merger of
equals, even if it is technically an acquisition. Being bought out often carries
negative connotations, therefore, by describing the deal euphemistically as a
merger, deal makers and top managers try to make the takeover more
palatable. An example of this would be the takeover of Chrysler by Daimler-
Benz in 1999 which was widely referred to in the time.

A purchase deal will also be called a merger when both CEOs agree that
joining together is in the best interest of both of their companies. But when
the deal is unfriendly - that is, when the target company does not want to be
purchased - it is always regarded as an acquisition.
MERGERS AND ACQUISITIONS IN INDIA:

The process of mergers and acquisitions has gained substantial importance

in today's corporate world. This process is extensively used for restructuring
the business organizations.

In India, the concept of mergers and acquisitions was initiated by the

government bodies. Some well known financial organizations also took the
necessary initiatives to restructure the corporate sector of India by adopting
the mergers and acquisitions policies. The Indian economic reform since
1991 has opened up a whole lot of challenges both in the domestic and
international spheres.

The increased competition in the global market has prompted the Indian
companies to go for mergers and acquisitions as an important strategic
choice. The trends of mergers and acquisitions in India have changed over
the years. The immediate effects of the mergers and acquisitions have also
been diverse across the various sectors of the Indian economy. India is now
one of the leading nations in the world in terms of mergers and acquisitions.
COMPANY PROFILE
Mahindra Satyam (NYSE: SAY), is a leading information, communications and
technology (ICT) company providing top-class business consulting,
information technology and communication services. Leveraging deep
industry and functional expertise, leading technology practices and a global
delivery model, they enable companies achieve their business goals and
transformation objectives.

They are powered by a pool of talented IT and consulting professionals

across enterprise solutions, client relationship management, business
intelligence, business process quality, operations management, engineering
solutions, digital convergence, product lifecycle management, and
infrastructure management services, among other capabilities. Their
development and delivery centers in the US, Canada, Brazil, the UK,
Hungary, Egypt, UAE, India, China, Malaysia, Singapore and Australia serve
numerous clients, including several Fortune 500 companies.

They are part of the $7.1 billion Mahindra Group, a global industrial
conglomerate and one of the top 10 industrial firms based in India. The
Group’s interests span financial services, automotive products, trade, retail
and logistics, information technology and infrastructure development.

Subsidiaries:

• Satyam BPO Limited

• Satyam Computer Services (Shanghai) Company Limited
• Satyam Computer Services (Nanjing) Company Limited
• Satyam Technologies, Inc.
• Knowledge Dynamics Pte. Ltd.
• Knowledge Dynamics Private Limited
• Citisoft Plc.
• Citisoft Inc.
• Satyam Computer Services (Egypt) S. A. E.
• Nitor Global Solutions Limited
• Satyam Servicos De Informatica LTDA
• Bridge Strategy Group LLC
• Satyam Computer Services De Mexico S.DE R.L.DE C.V
• Satyam Computer Services Belgium BVBA
• C&S System Technologies Private Limited
• S&V Management Consultants NV
About Mahindra Group

Genesis

 Incorporated in 1945, M&M started production of vehicles in 1949

 Mahindra Group’s revenues increased fourfold over the past six years
to
USD 7.1 billion (FY2010)

Businesses
 Automotive: India’s fourth largest Automobile company

 Farm equipment: One of the 3 largest global manufacturers

 Financial services: Leader in rural financing

 IT: Leader in Telecom Software (Tech Mahindra), diversified service

offerings through Satyam acquisition

 Forging: One of the 5 largest global manufacturers

 Infrastructure development: Promoter of two largest IT SEZs in

India

 Others: Limited presence in – Retail, Logistics, Defense, Engineering &

Chemical Products

Employees

 Around 100,000+ professionals across the globe

Awards and recognition

 Ranked amongst India’s 6 most respected companies by Forbes.

 ICSI National Award for Excellence in Corporate Governance – 2008.

 One of the few Indian companies to receive an A+ GRI checked rating

for its first Sustainability Report for the year 2007-08.
About Tech Mahindra

Genesis

 Incorporated in 1986 as a joint venture of Mahindra Group & BT

 IPO in 2006, rechristened to “Tech Mahindra”

Business

 Comprehensive service offerings for TSPs, TEMs & ISVs

 Consulting, Application Development & Management, Network

Services, Solution Integration, Product Engineering, Managed Services,
Remote Infrastructure Management and BPO.

Leader in Telecom offshoring

 Ranks 5th among the Top 20 IT Software and Service exporters in
India (excluding BPO revenues)

 Stands 11th in the IT-BPO Employers category

Global presence

 Operations in more than 25 countries

 Global presence with 16 sales offices & 13 delivery centers

Customer profile

 Clients include 11 Fortune Global 500 companies (5 US)

 Customers include 12 of Top 20 wireless TSPs & Top 5 TEMs

Major clients
 BT, Cisco, Alcatel Lucent, Microsoft, Motorola, O2, Qwest, StarHub,
TNZ, Hutchison, Unisys, Vodafone, BSNL, Airtel, MTN, Etisalat, Zain, T-
Mobile, NSN, Cox, Telus, Huawei.
Employees
 Around 33,000+ professionals across the globe.
Milestones

1987
• Incorporated as private limited company
1991
• Offshore software project with John Deere & Co.— Satyam’s
first Fortune 500 customer—announced
• Recognized as a public limited company; debuts on the
Bombay Stock Exchange (BSE)

• IPO oversubscribed by 17 times

1993
• Satyam signs joint venture with Dun & Bradstreet for IT
Services
• Awarded ISO 9001 Certification

• Satyam Technology Center (STC) inaugurated

1999
• Assessed at SEI CMM® Level 5
• Satyam Infoway (Sify) becomes the first Indian Internet
company listed on NASDAQ
• Satyam forms joint venture with TRW Inc.

• Presence established in 30 countries

2000
• Associate count reaches 10,000

• Satyam receives National HRD Award from Indian government

2001
• Satyam becomes world’s first ISO 9001:2000 company to be
certified by BVQI
• Listed on the NYSE (SAY)

• APAC headquarters established in Singapore

2002
• Satyam BPO launched in Hyderabad
• First Customer Summit conducted

2005
• FLC framework launched across the entire organization
• Largest global development center outside India (in Melbourne) begins
operation

• Citisoft and Knowledge Dynamics acquired

2006
• Sets up the first “Global Innovation Hub” in Singapore

• Sets up operations in Guangzhou, China

2007
• Satyam becomes the Official IT Services Provider for the FIFA World Cups,
2010 (South Africa) and 2014 (Brazil)
• Announces acquisition of UK-based Nitor Global Solutions Limited
• Opens Global Development Center (GDC) in Malaysia
• Opens Development Center in Vizag, India

• Becomes the first Asian company to feature in the Training Magazine’s list
of Top 125 companies for learning
2008
• Adopts new tagline “Business Transformation. Together.”
• Enters agreement to acquire S&V Management Consultants, a Ghent,
Belgium-based supply chain management (SCM) consulting firm
• Becomes the first company to launch a secondary listing on Euronext
Amsterdam under NYSE Euronext’s new “Fast Path” process for cross listings
in New York and Europe
• Becomes the first company to be invited by the National Stock Exchange
(NSE) to ring the opening bell

• Enters into a definitive agreement to acquire Chicago-based Bridge Strategy

Group

2009
 • Unveils the new brand identity, “Mahindra Satyam”
• Tech Mahindra announces an open offer to buy an additional 20% in Satyam
from existing shareholders
• Tech Mahindra acquires a 31% stake (Preferential Shares) in Satyam
• Venturbay Consultants Private Limited, a Tech Mahindra subsidiary, emerges as
the highest bidder to acquire a controlling stake in Satyam.

2010 FIFA World CupTM

Mahindra Satyam is the first Indian company to join FIFA as the Official IT
Services Provider for the 2010 FIFA World Cup™, South Africa. Mahindra
Satyam was entrusted with the responsibility of developing the core IT event
management system for FIFA and the Local Organizing Committee of South Africa. As
part of this partnership, Mahindra Satyam developed the Event Management Solutions
system with various software modules focusing on specific areas such as
Accreditation, Transportation, Volunteer Management and Space & Material
Management.

The Mahindra Satyam team developed solutions that enriched the experience of all
fans arriving in the stadia to watch the 64 matches and ensured seamless movement
of all the delegates, staff and volunteers. Additionally, these solutions were available
at the right place and the right time, leaving a lasting impression in the world of
sports and a legacy in South Africa.

This demonstrated Mahindra Satyam’s technology prowess to enhance the FIFA World
Cup™ experience from the end-user perspective. Mahindra Satyam developed
Extranets and the Intranet for FIFA. In addition, Mahindra Satyam supported
application users and deployed infrastructure and resources at the venue. The
company also provided helpdesk services for the event.

All these initiatives reiterate Mahindra Satyam’s commitment to bring technological

services to the sport. Mahindra Satyam leveraged its deep industry and functional
expertise, leading technology practices and an advanced, global delivery model to
help FIFA transform their solutions and provide a unique experience to football fans
across the globe.
Corporate Social Responsibility

Mahindra Satyam Foundation, the CSR arm of Mahindra Satyam, is a support

framework aiding the vulnerable and underprivileged sections of the society.
Its various initiatives are aimed at transforming the quality of life, deploying
technology and harnessing volunteerism. The Foundation believes in
engaging with the problem rather than cheque -book charity, and uses all
core competencies of Mahindra Satyam—Technology, Innovation and
Leadership—as change agents, enabling transformation for the deprived,
wherever required. Volunteering, creating enabling platforms, creating
alliances, partnerships are our other strengths to focus and create maximum
impact for Social Transformation.

Core Values and Guiding Principles

• Involving People: Volunteers, Community, Civilians, NGOs and

Government
• Applying Knowledge: Leveraging the core competencies of Satyam -
Technology, Process and Managerial competency
• Making Things Happen: All initiatives are outcome-oriented, scalability
driven and capable of execution

Awards and accolades such as the Business World-FICCI-SEDF 2006 award

for ‘Best Corporate Citizen’and the TERI Corporate Award 2006-2007, stand
testimony to our commitment to make a positive difference to the
society.

The Foundation has chapters in Hyderabad (Head Quarters), Bengaluru,

Bhubaneswar and Chennai. The Foundation focuses its activities in the core
areas of Education, Livelihoods, Health (Blood Donation Camps), Empowering
Persons with Disability, and Disaster Management.
Education

The Education program works with students of government schools, to

improve the quality of education, to bring about a decrease in school dropout
rates, increase pass percentage through various interventions such as
Notebook and Study Material Distribution, Motivational Tours, Kid Smart
Centers, Infrastructure Support, Summer Camps, Awareness Programs on
Health and Environment, regular mentoring by Mahindra Satyam volunteers
who teach English, Mathematics, Science, and basic Computer skills.

Livelihood

The Livelihood program of Mahindra Satyam Foundation believes in enabling

individual capacities. An individual or an organization is modeled around
specific skills and practical knowledge. Their policy recognizes the fact that
by providing skills to the underprivileged individual, they add value to the
individual as well as job markets. Their initiatives urge the need to maximize
the potential of under privileged people and instill confidence so they can
compete in emerging job markets. Livelihood Program Initiatives speak for
themselves. The initiatives focus on increasing individual skills. They believe
that in enabling an individual they can create confident and skilled workers.
Livelihood Program is deeply experienced in identifying the needs of
underprivileged people and transferring appropriate skills.

Empowering Persons with Disability

All initiatives under this program endeavor to integrate Persons with

Disabilities into the society, to live as dignified and responsible citizens.
Empowering Persons with Disability program has been striving to provide
livelihoods to Persons with Disability through employment and self
employment. This is achieved by identifying, training and providing livelihood
opportunities to Persons with Disabilities through employment and self
employment both in organized and unorganized sectors. The Program works
to sensitize both corporates and communities through workshops, observing
important days and fund raising events.

Health (Blood Donation Drives)

Mahindra Satyam Foundation, in association with The Red Cross Society of

India, and other reputed Blood Banks regularly conducts blood donation
drives across all Mahindra Satyam locations.

Key Achievements:
 • The largest corporate blood donor recognized by Red Cross Society
(5,000 Units)
• More than 1,000 Thalassemic children supported with fresh blood
• H1N1 Swine flu awareness and hand-washing in schools and
orphanages
• 2009-2010 - Conducted 21 blood donation camps across chapters
• 1,929 units of blood donated to various blood banks

Business Continuity Management

 Business Continuity and recovery practice capitalizing our world class

global infrastructure backed by a resilient network, best-of-breed
practices; and our experience in servicing key Fortune 100 companies
in the USA and other locations
 Third company in India in the IT and ITES sector to be certified to BS
25999, the latest standard in Business Continuity Management from
the British Standards Institute

BCM operations at Mahindra Satyam is maintained and managed as follows

 BCM processes integrated into the Quality Management System,

ensuring consistency and compliance
 Multi-layered Crisis Management Teams to monitor and manage
business disruptive situations
 Integration of Customer and Location Business Continuity Plans
 Business Continuity Planning integrated with the Project Management
Life cycle.
The Merger (Tech Mahindra & Satyam)
Mahindra Group Company has approached Satyam Computer Services,
India’s fourth-largest IT services company, for a cashless merger, according
to reports.
The merger between Tech Mahindra and Satyam, formed the third-largest IT
company in the country.

Tech Mahindra Ltd. (TechM) formerly known as Mahindra British Telecom

(MBT) is a joint venture between Mahindra & Mahindra Limited (M&M) and
British Telecommunications plc (BT), UK with M&M holding 44% and BT
holding 39% of the equity. Tech Mahindra has its headquarters at Pune,
India. Tech Mahindra has grown rapidly to become the 6th largest software
exporter in India (Nasscom, 2007) and 2nd largest Telecom Software
Provider in India (Voice & Data, 2007). It has more than 24,000 employees.
The company had created a special purpose vehicle to acquire Satyam,
which some analysts had felt was done to ring-fence itself from any negative
fallout of the acquisition. For instance, J.R. Varma of the Indian Institute of
Management, Ahmedabad, had blogged around the time of the acquisition,
“If Satyam’s liabilities turn out to be larger than the cash and other assets,
Tech Mahindra can walk away and put Satyam into bankruptcy. If the
liabilities turn out to be small, then Tech Mahindra can merge Satyam into
itself and absorb the surplus assets.”

With the company already merged, one is tempted to think that the
management’s assessment of the “net worth” of the company has enhanced.
This view is supported by another statement by the company that client
attrition has practically stopped since the time of the acquisition. Besides,
the company’s open offer for 20% of Satyam’s capital is unlikely to get any
response.

As a result, Tech Mahindra has subscribed to a fresh issue of shares and

Satyam will end up with Rs.2,900 crore in cash (including the initial
investment for a 31% stake). Currently, there’s cash sitting in Satyam’s
books, which has effectively been funded by debt on Tech Mahindra’s books.
In the event of a merger, the cash can be used to pay back the debt. It must
be noted here that Tech Mahindra is making an attempt to reduce its
reliance on debt through a planned QIP (qualified institutional placement) of
about Rs.1,000 cr.

On April 13th 2009 Tech Mahindra took over major stakes of Satyam and
finally on June 21st 2009 a new brand Mahindra Satyam was launched.

CONCLUSION
The merger of Tech Mahindra & Satyam definitely proved to be a
beneficial deal for both the companies as they saved time and
money by just creating a new but reliable brand. Creating a totally
new entity would have been much more difficult because it is
much more difficult to establish a successful brand name.

As both the companies have a good image in the market it was a

better option to merge both the companies and create a new
brand. Due to the financial status of Satyam, Mahindra was able
to take over the majority stakes of Satyam and take over the
company.