A Report On Merger & Acquisition and Its Impact On Business

A Report on
Merger & Acquisition and its impact on Business
Course Title : Research Methodology

Course Code : AIS – 4205
Submitted To:
Sujan Chandra Paul,
Assistant Professor
Department of Accounting & InformationSystems
University of Barishal
Submitted By:
Hasib Sheikh
ID: 16 AIS 024
Department Of AIS, 4th Batch
University of Barishal
19th January, 2021.

Introduction
Merger and acquisition (M&A) represent a popular strategy used by firms for corporate strategy.
M&A plays a significant role in the industrial sector of any economy. It is to build powerful
partnership among business organizations.
Firms choose to understand M&A for different purposes. M&A may permit obtaining synergies that
would not be acquired otherwise (Bradley, Desai & Kim, 1988), exploiting economies of scale (Homburg
& Bucerius, 2006) or overcoming the shortcomings of the financial markets (Brouthers
& Brouthers, 2000). Managers’ self-interest or merely the inadequate evaluation of the potential
synergies may also lead to M&As (Seth, Song & Pettit, 2000). The outcome of M&As is contingent on
the post- acquisition integration of the acquired firm. The failure of M&A deals is often due to cultural
differences (Child, et al., 2001; Haspeslagh & Jemison, 1991; Morosini, et al., 1998).
The first ever merger in Bangladesh’s telecommunication sector is the merger of Robi and Airtel.
Following the amalgamation of Robi and Airtel, the merger will be known as Robi Axiata Limited.
Earlier on October 18, BTRC gave the go-ahead to the long-awaited merger of Robi Axiata Ltd and
Airtel Bangladesh Ltd.
On August 31, the High Court approved the merger of two mobile phone giants in the country. As
the country’s largest merger, Axiata now holds 68.7% controlling stake in the combined entity while
Airtel, parent company of Airtel, holds 25%. The remaining 6.3% will be held by the existing
shareholder, NTT DOCOMO of Japan.
The combined entity will operate under the brand name of Robi Axiata Limited and will serve
approximately 32.2 million subscribers. The joint strength of Robi and Airtel sets the stage for
creating a number one cellular network with widest coverage across Bangladesh, enhancing its
stronghold in the mobile internet segment as well as consolidating its position as the second largest
operator in the country.
The study is solely based on the merger of Robi and Airtel, its process, approvals, costs, synergies
and contribution to government goals of making digital Bangladesh.
Literature Review
It seems M&A is similar but mergers and acquisitions are actually theoretically & conceptually
different. A merger is the combination of two firms, in which only one firm survives and assumes all
the assets and obligations of the merged firm, which ceases to exist legally (Gaughan, 1999). Thus,
mergers involve a consolidation process and the creation of a new firm with the dissolution of the
original firms (Ross, Westerfield & Jaffe, 1998; Gaughan, 1999). In contrast, an acquisition relates to
the transfer of ownership between two firms, where one firm (the acquirer) buys a part or the totality
of another firm (the acquired) and establishes itself as the new owner (Ross et al., 1998).
Moreover, it is worth clarifying that there are different types of M&As, namely as to the scope
involved. Gaughan (1999) classifies M&As as horizontal, vertical and conglomerate. Horizontal
M&As are undertaken by firms operating in the same market performing the same activity and
producing the same products, such in the case of an M&A with a direct competitor. Vertical M&As
occur between firms that operate in different stages of the value chain. Conglomerate M&As join
firms operating in unrelated markets.
M&As provide a faster path towards the objective of corporate growth that, according to Marks and
Mirvis (1998), evolves in a continuum ranging from a simple licensing agreement, through alliance,
joint venture to M&A and greenfield start-up investments (Figure 1). The corporate growth through
M&As has several advantages compared to other modes of growth, namely because it allows for
accelerated growth and faster response to the market as well as a reduction in the number of
competitors operating in the industry.
Source: Adapted from Marks, M. & Mirvis, P. (1998). Joining forces: Making one plus one equal
three in merger, acquisition, and alliances. San Francisco: Jossey-Bass.
Methodology
The study is solely based on the first ever telecommunication merger in Bangladesh. Robi and Airtel
recently merged together in one company. The study is based on the published data. Data are
collected from different journals, articles, newspapers, press releases, BTRC, website of Robi and
Airtel.
Major objective of the study includes -

1. Properly understand the M&A and its process
2. Identify the synergy and objective behind the M&A.
3. Pre and post-merger business condition
4. Change in business dimension and industry
5. Shareholder and other stakeholders position
Limitations of the study includes –

1. Data are collected from secondary sources
2. Updated data might change the outcomes of the study
3. Limited time and data sources
Merger & Acquisition
Merger and acquisition refers to the combination of two or more firms to create a new firm. The
existing firm will seize to exist if they are merged together or a firm acquires the assets of other
firms.
Forms of Merger & Acquisition
There are three legal forms of merger and acquisitions. This are stated followings:
1. Merger and Consolidation: Merger refers to the absorption of one firm by another where in
the acquiring firm retained its identity and the acquired firm seizes to exist. The firm which
acquires the assets of other firm is called bidder firm. The firm whose assets are acquired is
known as target firm.
On the other hand, consolidation refers to the combination of two firms which creates a new
firm and both the firm seizes to exist.
2. Acquisition of stocks: Acquisition of stocks refers that the bidder firm purchases the total assets
of the target firm offering the owners of target firm certain number of shares through tender offer.
Which is a public offer by one firm to purchase the share of other firm.
3. Acquisition of assets: Acquisition of assets refers that the bidder firm purchases the assets of
the target firm. There are three categories of acquisition, this are-
i) Horizontal acquisition: In case of horizontal acquisition different firms of same line
of business merge together to create a new firm like- a commercial bank merges with
another commercial bank doing the same line of business or producing the same line
of products.
ii) Vertical acquisition: Vertical acquisition refers to the merger of two firms doing the
business of different steps of a line of product. For example- A travel agency may
merge with an aviation or airline company. Another example is that a spinning mills
may merge with a textile mills, a textile mill may merge with a garments company.
iii) Conglomerate acquisition: Conglomerate acquisition refers to the combinations of
different line of business of different industry. Suppose, a group of industries or
companies like- S. Alam group purchase a dying company.
Objective and Criteria for M&A:

Merger is in line with Axiata’s long term strategy. The primary objectives of the M&A and the
M&A criteria are as follows:
Objectives:
1. Long term commitment to core markets
2. Unlocking profitability and synergy opportunities of the market and long term growth
3. Ensuring better services to customers and the public
4. More mature telecommunication business and investment environment in Bangladesh
M&A criteria:
1. Management control retained
2. Growth market in Bangladesh, especially mobile internet.
Changes in Shareholding structure:

Robi with Aitel limited:
Before Merger After Merger
References
Web References:
1. https://en.wikipedia.org/wiki/Mergers_and_acquisitions
2. http://www.investopedia.com/terms/m/mergersandacquisitions.asp
3. http://futurestartup.com/2016/11/16/finally-robi-airtel-merger-comes-into-effect-merged-
company-starts-operation-today-here-is-everything-you-need-to-know/
4. http://whatis.techtarget.com/definition/mergers-and-acquisitions-MA
5. http://www.edupristine.com/blog/mergers-acquisitions
Article References:
1. http://epublications.marquette.edu/cgi/viewcontent.cgi?article=1042&context=mgmt_fac
2. https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=36&cad=rja&ua
ct=8&ved=0ahUKEwjgjZeB2f_RAhUGqI8KHayFAYUQFgipAjAj&url=http%3A%2F
%2Feujournal.org%2Findex.php%2Fesj%2Farticle%2Fdownload%2F1263%2F1272&us
g=AFQjCNGyaslKjDNUnYmRUhJUgY-rI3mDDQ&sig2=VWxCYbZkDbhFe38uQWnUkw
3. https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=35&cad=rja&ua
ct=8&ved=0ahUKEwjgjZeB2f_RAhUGqI8KHayFAYUQFgigAjAi&url=http%3A%2F
%2Fwww.iiste.org%2FJournals%2Findex.php%2FRJFA%2Farticle%2Fdownload%2F26
37%2F2652&usg=AFQjCNFdYI6t0j_xq7bAZRveOD8EMnGYVw&sig2=E5op3ybwzG
d2fn5xqm2KCg
4. http://scholarcommons.usf.edu/cgi/viewcontent.cgi?article=6106&context=etd
5. http://repository.usfca.edu/cgi/viewcontent.cgi?article=1175&context=diss
6. http://globadvantage.ipleiria.pt/files/2011/02/working_paper-70_globadvantage.pdf
7. http://innovativejournal.in/index.php/ijbm/article/viewFile/389/374
8. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.532.1175&rep=rep1&type=pdf

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A Report on

Merger & Acquisition and its impact on Business

Course Title : Research Methodology

19th January, 2021.

Major objective of the study includes -

Limitations of the study includes –

Objective and Criteria for M&A:

Changes in Shareholding structure:

Before Merger After Merger

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