Value creation
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The document discusses sources of value creation through mergers and acquisitions. It defines value and value creation, and outlines four models for creating value through M&A: Ansoff's product market matrix model, BCG matrix model, grand matrix model, and industry/product life cycle. The models identify strategies like market penetration, product development, backward integration, and diversification that can be applied at different stages to generate synergies, economies of scale, access to new markets and technology, and limit competition. A case study is presented of two companies merging to access new regions, bundle products, and realize cost savings through shared distribution and production.
Value creation
- 1. SOURCES OF VALUE CREATION IN MERGER & ACQUISITION
- 2. Members of group -A 1-SOUMYALIN SANTY 2-HINA SULTANA 3-SUMIT PARIDA 4-SRADHANJALI BEHERA
- 3. INTRODUCTION WHAT IS VALUE? Value: Originated from a French word: “valoir” which means ‘be worth’. WHAT IS VALUE CREATION? Value creation means performing activities that Increases the value to customers and also to the Shareholders.
- 4. Value Creation through M&A – What it means? • Synergies & Economies of Scale • Gain access to new markets, customers, products • Diversification of Risks • Access to New Technology and Knowledge • Ability to limit competition / gain market share
- 5. Value Creation Through M&A – Case Study Company B Company A Primarily North India Focussed Strong in Western India
- 6. What benefits will potentially accrue if Company A and B were to merge? Ability to sell bundled product (inverters & batteries) Organic Expansion – Access to newer markets for Battery Manufacturing in different products (North & North India West) Product Use of common diversification / distribution network Season neutral Value Creation Through Mergers & PwC 2011 6 April Slide 6 Acquisitions
- 7. “Value Creation” through this transaction..... Company A+B = Enhanced revenue & customer base + product diversification + cost savings + production efficiencies + new markets ultimately leading to… ‘Improved shareholders wealth’ Value Creation Through Mergers & PwC Slide 7 Acquisitions
- 8. SOURCES OF VALUE CREATION IN M&A There are four sources or models which create values- 1- ANSOFF’S PRODUCT MARKET MATRIX MODEL 2- BCG MATRIX MODEL 3- GRAND MATRIX MODEL 4- INDUSTRY/PRODUCT LIFE CYCLE Value Creation Through Mergers & PwC 2011 6 April Slide 8 Acquisitions
- 9. ANSOFF’S PRODUCT MATRIX Value Creation Through Mergers & PwC 2011 6 April Slide 9 Acquisitions
- 10. Market Guru Phillip Kotler divided this into 3 stages: • 1st stage is Intensive Growth Strategy: A. MARKET PENETRATION B. MARKET DEVELOPMENT C. PRODUCT DEVELOPMENT • 2nd stage is Integrative Growth Strategy: A. BACKWARD INTEGRATION B. FORWARD INTEGRATION C. HORIZONTAL INTEGRATION • 3rd stage is diversification growth strategy: A. CONCENTRIC DIVERSIFICATION B. HORIZONTAL DIVERSIFICATION C. CONGLOMETRIC DIVERSIFICATION Value Creation Through Mergers & PwC 2011 6 April Slide 10 Acquisitions
- 11. Value Creation Through Mergers & 6 April 2011 Slide 11 Acquisitions
- 12. 1.STAR- STRATEGIES APPLIED ARE INTENSIVE STRATEGY, INTEGRATIVE STRATEGY AND CONCENTRIC. 2.QUESTION MARK-STRATEGIES APPLIED ARE INTENSIVE GROWTH STRATEGY 3.DOG- STRATEGIES APPLIED ARE DIVESTURE AND LIQUIDATION. 4.CASH COW- CONCENTRIC CONGLOMETRIC & HORIZONTAL DIVERSIFICATION.
- 13. GRAND MATRIX • THERE ARE 4 STAGES OF GRAND MATRIX 1. STAGE 1-STAR IN BCG MATRIX 2. STAGE 2-QUESTION MARK 3. STAGE 3-DOG 4. STAGE 4-CASH COW Value Creation Through Mergers & PwC 2011 6 April Slide 13 Acquisitions
- 14. Value Creation Through Mergers & 6 April 2011 Slide 14 Acquisitions
- 15. STRATEGIES APPLIED • INTRODUCTION STAGE: MARKET PENETRATION,MARKET DEVELOPMENT,CONGLOMETRIC DIVERSIFICATION & HORIZONTAL INTEGRATION • GROWTH STAGE:HORIZONTAL MERGER, DIVESTURE, CONGLOMERATE DIVERSIFICATION • MATURITY STAGE: HORIZONTAL MERGER, DIVESTURE . • DECLINE STAGE:DIVESTURE CONGLOMERATE DIVERSIFICATION.
- 16. CONCLUSION From the above discussion we come to a conclusion that for creating values for the Acquirer’s they remain an important part of any company’s long term value creation Strategy. The benefits of a well thought out M&A strategy can be a source of competitive advantage. Value Creation Through Mergers & PwC 2011 6 April Slide 16 Acquisitions
- 17. THANK YOU ANY QUESTIONS………….? Value Creation Through Mergers & PwC 2011 6 April Slide 17 Acquisitions