Mergers and Acquisitions, The game of consolidation in the Indian steel sector

Steel is the most crucial material in industrial development and infrastructure construction, and is, therefore, of strategic importance for national transformation. Large economies around the world have achieved their economic development, prosperity, and growth strongly supported by a robust, sustainable and reliable domestic steel industry. In 2014, the Indian steel industry reeled due to scarcity of raw materials, supply-demand imbalance due to excessive capacity and moderate domestic demand, and surging imports from nations like China, South Korea, Japan, etc. in the absence of adequate tariff and non-tariff barriers against the dumping of steel and Free Trade Agreements (FTA’s) providing a very low duty protection.  

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Mergers & Acquisition, the game of consolidation The Flipkart-Walmart Saga

Introduction

Mergers and Acquisitions are transactions in which the ownership of a company is either consolidated with or transferred to other entities. In acquisitions, a new company is not formed. Instead, the assets of the company are transferred to the acquirer and the smaller company is absorbed in it. In mergers, two companies combine with each other on mutually agreed terms and become partners in the new joint venture. Mergers and Acquisitions are a crucial corporate strategy adopted by organizations for their growth and sustenance. Multiple reasons can be attributed to M&As being the pivot of the businesses. The whys and wherefores range from pre-emptive motives like expanding the market power, ensuring efficiency gains to corporate governance motives such as correction of the internal inefficiencies and rectifying capital market imperfections. Especially, M&As are projected to be the culmination point in the life-cycle of start-ups. The entrepreneurial ventures are presumed to start with the seed capital and end in M&As.

The following statistic shows the value of Mergers and Acquisitions (M&A) worldwide from 2003 to 2017 and a prediction for the year 2018. The value of global Mergers and Acquisitions deals in 2007 amounted to 3.66 trillion U.S. dollars and it was predicted to go up to 4.4 trillion U.S. dollars by the end of 2018.


Fig. 1 Value of Mergers and Acquisitions (M&A) worldwide from 2003 to 2018 (in billion USD)
(source: http://www.statista.com)

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