Master of Management Studies (SEM-I)

ACQUISTION OF JAGUAR LAND ROVER BY TATA MOTORS

PRESENTED BYDeepa Jaisinghani-61 Jatin Jaisinghani-62 Ajay Joya -71 Pranav Kanetkar-77 Hitesh Kenny-83 Ameya Mukkadam-102 Rajikant Patel-111 Rachita Patnaik-113 Navjot Singh-115 Sumeet Pesricha-117

Tata Market Value --$83.5 billion (around Rs380,663 crore) in 2010-11 Companies 90 Operating Companies in Seven Business Sector. Operations In 80 Countries across 6 Continents Employees -425,000 people worldwide Recognition - Brand Finance, a UK-based consultancy firm, valued the Tata brand at $15.75 billion in 2011 ranked 41st in top 100 Valuable brands Business - Week magazine ranked Tata 17th among the '50 Most Innovative Companies

Tata Motors

India - leader in commercial vehicles and top three in passenger vehicles. World 4th largest Truck segment and 3rd largest in Bus segment. company Revenues - USD 7.2 billion in 2006-07 ( currently USD 27 billion). Employees 25,000 Vehicles 5.9 million vehicles plying since first roll out in 1954. India's first engineering sector to be listed in the New York Stock Exchange (September 2004)

Ford-Jaguar and Land Rover Ford Motors Company (Ford) Based in Detroit, Michigan is second largest automaker in the world & 5th in terms of car sales in 2010. Jaguar is a luxury car maker. Ford acquired Jaguar from British Leyland Limited in 1989 for US$ 2.5 billion. Land Rover is the second oldest four wheel drive brand in the world after Jeep. It has had many owners over the year from British Leyland, Rower Group to Bmw .Ford acquired Land Rover in US $ 2.7 billion in 2000 .

Why Acquire JLR Bought it for USD 2.3 Billion ( half of the cost at which Ford Purchased) Jaguar's brand appeal & Land Rover's technology to boost Tata Motors' truck and passenger car business back home Increased business diversity across markets and products. Land rover provides a natural fit for TMLs SUV segment. Benefits from component sourcing, design services and low cost engineering.

WHAT TATAS GOT

Cost synergies Material costs and not manpower key to better margins. Investors concerns on manpower costs misplaced Investors apprehensive that TAMO has agreed to continue with plants in UK Purchasing basket offers bigger opportunity for cost reduction It is more important to manage the material & sourcing costs to improve margins Material Cost is 4-6x the wage cost for high-end products such as Land Rover

Revenue synergies - A long-term possibility Revenue synergies limited in the medium term (2-3 years) In the long-run Tata Group and Tata Motors footprint in South-East Asia should help Jaguar/Land Rover diversify their geographic dependence from US (30% of volumes) and Western Europe (55% of volumes) Impact: The deal was transformational. It catapulted Tata Motors from a commercial vehicle and small-car manufacturer to a global player with marquee brands in its portfolio. The scale of the acquisition also was large relative to the size of Tata Motors.

Strategy to Fund JLR

Fund Raising 7200 Cr

Ordinary Equity Shares

A-Class Equity Shares

5 Yr. 0.5% Convertible Preference Shares

Full Voting Rights 2200 Cr

1 vote for every 10 A class Equity Shares 2000 Cr

Optionally convertible into A Equity shares after 3 yrs but before 5 yrs

This is the first time an Indian Co. issued shares with differential Rights

The Road ahead One of the major problems for Tata Motors could be the slowing down of the European and US automobile markets. It was expected that the company would address this issue by concentrating on countries like Russia, China, India, and the Middle East. Morgan Stanley reported that JLRs acquisition appeared negative for Tata Motors, as it had increased the earnings volatility, given the difficult economic conditions in the key markets of JLR including the US and Europe. The Road ahead Tata Motors had to incur huge expenditure as it planned to invest US $1 billion in addition to acquisition amount. Tata Motors had also incurred a huge expenditure on development of small car Nano and on JV with Fiat. All this coupled with Global Automobile Industry downturn, was expected to impact the profitability of the company in near future. The Road ahead Tata Motors formed an integration committee with Sr. Executives from the JLR and TAMO, to set milestones and long-term goals for the acquired entities. Problem was slowing down of European and US automobile Markets. It was expected that company would address this issue by concentrating on countries like Russia, China, India, and the Middle East.

Success or Failure Factors Affected: Timing of the deal TAMO infused $1 billion to fund operations & new product launches; Nano Project Investment; JV with Fiat to manufacture some vehicles in India & Thailand Huge Debt Burden Extremely high Manufacturing Cost in Britain Depressed State of Global Premium car market Within 10 months post-acquisition, sales volumes plunged 32% and the unit recorded a loss of $450 million. Factors Worked: Determination of the LEADER, Group's Management Skills, Financial resources and Credibility (Strengths of TAMO). TAMO focused on reducing costs, improving efficiencies and managing cash flow lessons from downturn in 2001. TAMO reported 49% growth in Germany, 68% in Russia & 61% in India in its 1st year Benefit from TATAs Local Knowledge & Credibility More sales in emerging market, reduced dependence on matured markets Strong R&D culture, component sourcing engineering and design benefit Post Acquisition Figures JLR turned profitable during the quarter ended Dec. 31, 2009 with a net profit $90.6 million. JLR boosted Global sales by 26% to 244,000 vehicles in yr to the end of March2011. JLR sees record profits of US $ 1.6 billion as sales soar in China and India - guardian.co.uk, Thursday 26 May 2011 TAMO - 80 % of its bumper $2.04 billion annual profits came from the JLR unit alone. TAMO turns JLR fortunes into Gold! - ARUN PRABHUDESAI on JUNE 1, 2011 TAMO is aiming to double its JLR sales in India till March 2012.

The verdict: Successful While the acquisition itself was not expensive (US S$ 2.3 billion Totally debt free) (Ford had acquired Jaguar and Land Rover separately for a total of $5.3 billion), the scale of the acquisition combined with bad timing could have easily derailed the deal. Strong and committed management can make even a difficult acquisition work. Recommendations/Learning Outcomes: Keep acquisition structurally separate Maintain its identity Share Operational Know-how Operational Autonomy Time factor

References: http://www.guardian.co.uk/business/2011/may/26/jaguar-land-rover-sees-sales-soar http://search.independent.co.uk/topic/jaguar-land-rover-tata-motors HBR on Mergers and acquisitions The importance of Leadership and Culture to M&A success Richard M Able http://www.jaguar.in/news.asp http://www.tata.com/company/profile.aspx?sectid=ZhDd6fXWtEY= Understanding the Human Side of Merger and Acquisition: An integrative Framework Myeong GuSeo, N Sharon Hill