MERGER & ACQUISITION IN AUTOMOBILE INDUSTRY

Evaluating the Acquisition of JLR by Tata Motors And Looking At The Future Of This Business Venture



ABSTRACT

Mergers and acquisitions has been regular phenomenon in an automobile industry and is considered as one of most important business strategies in today's corporate world and play a vital role across all business sectors in general and automotive sector in particular. The current landscape of automotive industry has evolved due to various merger and acquisition deals over the last century. While mergers lead to amalgamation of two or more enterprises which in turn leads to formation a big single entity, acquisitions refers to takeover or buyout of one company by another. Activities of mergers and acquisitions has evolved over time, they are no longer restricted to just domestic activity. Mergers and acquisitions have also spread across the national boundaries of all the major developed economies. ''The 1990's and last decade has seen the field of Merger & Acquisition becoming more focused and strategically driven''.(Coffey et al, 2002)

In 2008 Indian Auto maker Tata Motors acquired two iconic British car brands from its US based owner Ford Motor Company. This deal was much hyped in Indian and British media as its Tata motors first entry to premier / luxury car segment. In recent years we have seen many Indian and Chinese companies venturing in global business landscape through merger, acquisition or collaboration deals and great goes to their booming economy. JLR was managed and owned by American auto giant Ford Motor Company. Ford acquired Jaguar in 1989 and Land rover in 2002. Both brands were kept as part of Ford Motor's luxury car segment called Premier Automotive Group. Since acquiring Jaguar, Ford has invested huge sums in terms of technology and other resources in order to consolidate its position in European and American market but this venture has never been profitable. Also Land rover which ford acquired from BMW in 2002 failed to generate appreciable profits. Both brands were closely associated as they share common distribution and dealership network in many countries. Some models of both brands have got similar components and share one production unit in Halewood United Kingdom. Ford decided to sell both brands together due to their close association. There were various bidders up for this deal which included rival Indian vehicle maker Mahindra Group and private finance group One Equity but deal was finalised with Tata Motors for US $ 2.3 billion on a cash free debt free basis and was much hyped across the media (www.icmrindia.org). Tata Motors is one of the biggest automotive companies in Indian subcontinent, which deals in commercial, industrial and small car segment. The company enjoys a leadership position in commercial and industrial vehicle production in India with capturing overall share of 70 % of total market. Tata Motors ventured into small car manufacturing in mid 1990's by introducing Tata Indica, safari and sumo in local market, which was quite successful. The recent introduction of Tata Nano, world's cheapest car was widely acclaimed ...