Mahindra Satyam Merger with Tech Mahindra: Arriving at the Share Exchange Ratio

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Case Details:

Case Code : FINC078
Case Length : 19 pages
Period : 2009-2011
Pub. Date : 2012
Teaching Note : Available
Organization : Mahindra Satyam and Tech Mahindra
Industry : Information technology and telecommunications industry
Countries : India, Global

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"The math simply doesn't add up now. The company has just started making profits and we would want the company to stabilize before the merger. We don't want to be rushed into merging with Tech Mahindra.1"

-A shareholder2, Kamal Kishore, August, 2011.

"The awaited merger process will start in October this year [2011]. Both Satyam and Tech Mahindra shareholders are concerned about the swap ratios but going by the guiding principles of this group, the ratio will be fair and objective.3"

-Vineet Nayyar (Nayyar), Chief Executive Officer, Mahindra Satyam, August 2011.

On August 10, 2011, at the 24th annual general meeting (AGM) of Mahindra Satyam (Msat), minority shareholders opposed a proposal by Vineet Nayyar, Chief Executive Officer, Msat, and the management team to merge Msat with Tech Mahindra (TechM). Earlier, the minority shareholders of Msat had been worried about the timing of the merger as they felt that the valuations were not attractive and that the number of shares they would receive in exchange for one TechM would be less. Hard selling the merger to Msat's shareholders, Nayyar commented, "They would proceed with the merger only after obtaining consent from all investors.4" In an interview, Nayyar talked about the synergy from the merger, "If they [minority shareholders] don't merge they will miss a lot of cross-selling opportunities.

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When you merge there is a fair amount of savings and support. TechM is a leader in providing networking technology solution and business support services to the global telecommunication industry and Msat has expertise in enterprise, manufacturing, banking and finance, and healthcare.5" However, some analysts commented that the merger might not be able to generate the kind of synergies expected. Bhavtosh Vajpayee and Nimish Joshi, analysts at Credit Lyonnais SA (CLSA )6, wrote a note to clients about the consequence of the merger, "While a merger would help reduce overhead costs to some extent, we do not see either company being stronger post the merger.7"

Satyam to Mahindra Satyam - Next Page>>

1] "Satyam Computer Minority Shareholders Plans with Tech Mahindra,", August 11, 2011.
2] Kamal Kishore is a share holder of Mahindra Satyam, who was participated in 24th annual general meetings.
3] "Tech Mahindra-Satyam Wedding Preparations to Roll This Oct,", August 12,2011.
4] "Satyam Computer Minority Shareholders Plans with Tech Mahindra,", August 11, 2011.
5] Swati Bharadwaj-Chand, "Our Target does not Appear as Distant as it did 2 Yrs Ago," www., August 13, 2011.
6] Headquartered in Hong Kong and founded in 1986, CLSA is Asia's leading brokerage and investment group.
7] "Merger Next on Menu,", September 29, 2011.

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