EXECUTIVE SUMMARY

This report examines the pre-acquisition analysis derived by the TATA Company and
the rationale behind the acquisition in order to understand the context of the
problems faced by TATA during the acquisition. These findings will further serve the
purpose to analyze the strategic decisions taken by TATA to overcome the problems
faced during the acquisition. This report draws attention to the fact that the impetus
to the deal started when Ford reported heavy losses of around 12.6 billion USD in
the year 2006 as a result of the bad performance of Jaguar. Starting on this note the
report delves into the past of Jaguar and Land Rover. Since mergers and acquisitions
are strategic decisions made by a company, so in order to learn why Tata went
ahead with the deal, a review on the rationale for the acquisition offered a great
deal of insights. But as evident, not all acquisitions is devoid of problems. Tata went
through a rough phase after the acquisition. There was pressure from the investors
and a burgeoning debt and a common problem that plagues every auto company in
the luxury car segment: competition. This was Tatas first venture into the luxury
brand and the market conditions prevalent around that time proved to be turbulent
for Tata as it suffered from operational losses.
PROJECT OBJECTIVES
The aim of the project is to study the problems faced by Tata after the acquisition of
Jaguar and Land Rover and to find the strategic solutions. With this aim in view we
have set a few objectives which will aid us to understand the acquisition in depth.
The objectives are as follows:
1)
2)
3)
4)
5)

History of Jaguar and Land Rover under Ford.

Study the rationale behind the acquisition.
Problems faced by Tata after acquisition
Strategies applied by Tata
Strategies or recommendations to overcome these problems.

To start off with the project we study a brief history about Jaguar and Land Rover
when Ford was the owner so as to understand what led to the acquisition from
Fords perspective. Then we move on to understand the reasons why Tata went for
the acquisition. With reference to this objective we use some strategic tools like
SWOT, Porters five analysis and Porters Three Generic strategies to analyze the
deal. Having done the analyses we examine the problems that Tata faced post
acquisition. Then we move on to study what strategies Tata applied to overcome
these problems. Finally, we provide our recommendations on the acquisition and
provide our strategic analysis on the topic.

FINDINGS

In this report we cover the first three objectives as listed above. These findings are
based on the literature review.
History of Jaguar and Land Rover under Ford.
Ford acquired Jaguar in November, 1989. In 1999 it became part of Ford's
new Premier Automotive Group along with Aston Martin, Volvo Cars and, from 2000,
Land Rover. Under Fords ownership Jaguar launched S-type in 1999 and X-type in
2001 thereby expanding its range of products. Since Land Rover's May 2000
purchase by Ford, it has been closely associated with Jaguar. The two companies
were integrated under a common management structure within Fords Premier
Automotive Group. By reports Jaguar and Land Rover added up to be Fords costliest
acquisitions in its long history. Ford originally paid $2.5 billion for Jaguar, in 1989,
and $3.3 billion for Land Rover, in 1999. However, according to the companys
financial records 35 to 50 billion USD was spent on the two brands. Ford has been
pumping an average $1 billion to $1.5 billion annually into Jaguar, over the last 18
years. Reports say that losses at jaguar stand at USD 715 billion in 2006. Jaguar was
not able to generate any profit for Ford primarily because of high manufacturing
costs in the UK. Land Rovers profit on the other hand was driven by the record sale
of 2.26 lakh vehicles, an 18% year-on-year growth in 2007. On 11 June 2007, Ford
announced that it planned to sell Jaguar, along with Land Rover. On 1 January 2008,
Ford formally declared that Tata was the preferred bidder at a bid of 2.3 billion USD.
The sale was central to Fords CEO Alan Mullalys strategy to focus on its core
brands like Lincoln and Mercury.
The rationale behind the acquisition

Problems faced by Tata during acquisition

FINANCING THE DEAL
Just before acquiring JLR, Tata had acquired Corus and in addition to that Tata
motors had made huge capital expenditure to bring Nano into the market and hence
financing the acquisition was a major concern for Tata motors.
INVESTOR DISAGREEMENT
Investors were not in favor of the decision of acquiring JLR at that time as both
jaguar and Land Rover were making loss and the automobile industry was under
pressure of downturn. As a matter of fact, Tata motors itself had gone in for
rationalization and retrenchment strategies. Investors believed that the balance
sheet of Tata motors was not strong enough to absorb more loans.
UNFAVOURABLE ECONOMIC CONDITIONS IN THE TARGET MARKET
During the acquisition the worldwide car sales were down by 5%, the automobile
industries over the world were rationalizing to conserve funds. Moreover difficult
economic conditions prevailed in the key markets comprising USA and Europe,
which were the major factors influencing the volatility of the market.

DEBT BURDEN
To finance the acquisition Tata motors raised a bridge loan of 3 billion USD through a
number of banks by the end of 2009. Tata motors had yet to pay 2 billion towards
the bridge loan, moreover it required additional funds and that too quickly to keep
the operations running.
FALL IN SHARE PRICE
Tata motors share prices dropped in the market after acquisition of JLR because of
the investor perception that it was not the right time to invest in that acquisition
and that too at the time when Tata had recently undergone huge capital
expenditure for the Nano project, especially in Singur and moreover the investors
had the opinion that it was the time to be conservative and stabilize reserves rather
than insourcing more debt burden.
INEXPERIENCE IN HANDLING LUXURY BRANDS:
Tata motors had never ventured into luxury car segment before acquiring JLR, hence
the inefficiency in handling such segment hampered Tata motors operational
efficiency for some time.
STRONG COMPETITION
Tata motors strategy to penetrate global market through acquisition of JLR faced
hurdles as there was strong competition from global automobile giants like
Mercedes, BMW, Lexus and Infinity.
IMPACT ON THE LUXURY CAR SEGMENT DUE TO THE GLOBAL FINANCIAL CRISIS.
GDP growth slowed down substantially from 9 % in year 2008 to 6.7% in year 2009.
There was a huge dip in demand due to high inflation, high material costs and
unavailability of finance. These factors have tremendously pressured both Tata
Motors commercial and passenger vehicle industry. Jaguar and Land Rover faced
severe demand contraction due to the negative wealth effect. So, the problem
occurs as the JLR could not generate working capital to Tata Motors.
POST-MIDTERM FRAMEWORK
Having completed the first three objectives in this report we shall proceed to cover
the remaining objectives. We will also provide an external as well as an internal
environment analysis on the topic and henceforth come out with our
recommendations.
References
http://www.thecarconnection.com/news/1015368_just-how-much-did-ford-lose-on-jaguar-andland-rover.
http://abcnews.go.com/Business/story?id=4525035
http://en.wikipedia.org/wiki/Jaguar_Cars#Ford_Motor_Company_era