Wednesday, September 24, 2008

Why Mergers Fail

It's no secret that plenty of mergers don't work. Research shows that 70-80% of mergers fail.Those who advocate mergers will argue that the merger will cut costs or boost revenues by more than enough to justify the price premium. It can sound so simple: just combine computer systems, merge a few departments, use sheer size to force down the price of supplies and the merged giant should be more profitable than its parts. In theory, 1+1 = 3 sounds great, but in practice, things can go awry.


 Historical trends show that roughly two thirds of big mergers will disappoint on their own terms, which means they will lose value on the stock market. The motivations that drive mergers can be flawed and efficiencies from economies of scale may prove elusive. In many cases, the problems associated with trying to make merged companies work are all too concrete. 

A merger may often have more to do with glory-seeking than business strategy. The executive ego, which is boosted by buying the competition, is a major force in M&A, especially when combined with the influences from the bankers, lawyers and other assorted advisers who can earn big fees from clients engaged in mergers. Most CEOs get to where they are because they want to be the biggest and the best, and many top executives get a big bonus for merger deals, no matter what happens to the share price later.


On the other side of the coin, mergers can be driven by generalized fear. Globalization, the arrival of new technological developments or a fast-changing economic landscape that makes the outlook uncertain are all factors that can create a strong incentive for defensive mergers. Sometimes the management team feels they have no choice and must acquire a rival before being acquired. The idea is that only big players will survive a more competitive world. 

courtersy: investopedia 

IPO- Is the Party over ?

The gloom that has descended on stock markets worldwide in the wake of a financial turmoil in the US.Is the IPO party over? For now, that appears to be the case. About 30 IPOs, aiming to raise some $9 billion, have been withdrawn from markets around the world in the last few months most of them in the US and Hong Kong. Unfortunately, things aren't likely to improve in the near-term as the pipeline of companies waiting to go public remain backed up. With the future direction of their IPO market held in the balance, we only hope that things may become better some day in near future

Thursday, September 18, 2008

US Financial Crises -Lessons

After the bailout of American International Group (AIG) on the heels of Fannie Mae, Freddie Mac and Bear Stearns, many Americans are no doubt wondering why the government appears to be coming to the aid of fat cats who mismanaged large corporations. Some economists ask a related question of whether it would be better to let these companies fail to send a message to future managers that they had better be prudent.

The current market jitters are centred on disturbances in the world's credit markets. Worries about the viability of sub-prime mortgage lending have spread around the financial system, and the central banks have been forced to pump in billions of dollars to oil the wheels of lending.

But what happened in previous financial crises, and what are the lessons for today?

There have been a growing number of financial crises in the world, according to the International Monetary Fund (IMF).

Among the key lessons of previous major financial crises are:

Globalisation has increased the frequency and spread of financial crises, but not necessarily their severity

Early intervention by central banks is more effective in limiting their spread than later moves

It is difficult to tell at the time whether a financial crisis will have broader economic consequences

Regulators often cannot keep up with the pace of financial innovation that may trigger a crisis.

Sunday, September 14, 2008


The basket of crude oil that Indian refiners buy fell below $100 per barrel , the latest day for which data are available, nearly five months after it first breached the three-digit mark.This will allow the country’s oil marketing companies to make profits on a third of their petrol sales, for the first time in 13 months.More importantly, the oil ministry is considering a proposal to reduce diesel prices if the crude oil prices fall below $85 per barrel to control the 13-year high inflation with an eye on elections, said two senior officials in the petroleum ministry.Diesel is used largely by the transport sector and high diesel prices have a cascading effect on general price levels as 78 per cent of goods are transported by road.

courtesy:Business Standard

Wednesday, September 10, 2008

Doing Business Index: India slips behind Pak

India slipped two notches to 122nd rank, below neighbours including Nepal, Bangladesh and Pakistan in the 'Doing Business Report 2009' prepared jointly by the International Finance Corporation and the World Bank.

The report which ranks the country on the basis of ease of doing business has placed Nepal above India at 121st position, Bangladesh at 110th place and Pakistan at 77th place in the overall ranking.

The 2008 report had ranked India at 120th position, while Pakistan was at 74th place.

Singapore retained the first place in ranking, which covered 181 countries of the world that provides quantitative measure of regulation for starting a business, getting credit, paying taxes, enforcing contracts and closing a business reports Financial Express today .

Photo courtesy  :

Monday, September 8, 2008

Future Ventures IPO Cleared

Future Ventures will be the second Indian fund to be listed in stock markets, after IL&FS Investment Managers. Future Ventures India, the venture capital arm of the Future Group, has recieved the approval of market regulator Securities and Exchange Board of India (SEBI), for an initial public offering (IPO). Interestingly, SEBI has cleared the IPO with certain riders, when contacted officals from Future Group who confirmed the development. The market regulator has said that Future Ventures, which is modelled on the basis of a venture fund, has to invest the amount raised in three years and if not, it should be returned to the investors. Also if the firm decides to pick up a stake larger than 20%, then it has to seek shareholder approval. SEBI is looking to list the fund in a seperate segment, although details are not known repots

Saturday, September 6, 2008

Infosys-Axon Deal !

Hailed as the largest outbound deal by Indian IT Company Infosys-Axon, some market analysts believe it will have no major financial impact on the company. Agreed it’s a strategic buy in the SAP space, but any sharp appreciation in the rupee against various currencies and a prolonged recession in major user economies may be a difficult path  choosen by Infosys. 

Infosys announced acquiring UK-based Axon Group in a 407-million pound (Rs 3,310 crore) all-cash deal after market hours Monday. The deal is expected to be consummated by November 2008, with the payment being made in December, and would add to its earnings from January 2009,

There is  a mixed reaction for the deal in the market and most of them are worried as investing in a company that draws majority if its earnings from the US where slow down is the buzz word. Analysts feel that is not a very good buy.

Photo courtesy : Nasdaq

Thursday, September 4, 2008

Banks Ready For New IPO Payment Facilty

The Hindu Business Line reports that  eleven banks participated in the mock test carried out by the Bombay StockExchange (BSE) for the new IPO payment facility recently permitted by SEBI. The first IPO in which the facility will be used is that of 20 Microns, which opens on Monday.

This facility, called the Application Supported by Blocked Amounts (ASBA), allows banks to block IPO application money in the applicant’s bank account till the time of allotment of shares. Only that amount proportionate to the share allotment will be transferred from the account.

The markets regulator has said that ASBA will be operationalised from Monday. . This coincides with the opening of the IPO of 20 Microns, the first issue in which the ASBA process will be used by investors.

Interface tested

“BSE has successfully tested its interface with 11 banks for participation in the ASBA (Application Supported by Blocked Amounts) process,” said a BSE news release.

The exchange is in the process of testing the interface with other banks that have evinced interest in participating in the ASBA process, BSE said. Using this interface, the banks participating in the IPO process would be able to upload the bids with respect to their customers, into the electronic book of the BSE.

Wednesday, September 3, 2008

Corporate Fundraising Tips

Raising funds within a corporate setting takes creativity and good time management skills. With a little bit of planning and teamwork, however, your office can raise a large amount of money for purposes such as charitable donations or community resources. Regardless of the purpose behind the fundraising, there are a number of common principles that can be employed in order to maximize results and get the most out of the fundraising experience.

Decide What You Need

One of the first and most basic principles associated with corporate fundraising is to realize how much money or resources you intend to raise and work with that goal in mind. A solidified, concrete goal with which to work impacts the process of fundraising by allowing for accurate goal-setting. This will also assist in organizing the fundraising event and compiling the various resources needed to begin the fundraising.

By discovering and deciding on the fundraising goals, you can also begin to plan the basics. Watch out for any hidden costs associated with the fundraising process, as these can take away from your goal and can impact the amount of funds it may take to set up the fundraising venture in the first place. Hidden costs such as shopping for prizes or setup materials can impact the overall experience of fundraising.

Take Time to Prepare

Taking adequate time to prepare the fundraising event is critical. Select your fundraising program as early as possible to give a lot of time between the start date of the event and the present date. You will need ample time to collect materials, assemble a team of assistants, and advertise your fundraiser. Promote the fundraiser with posters and advertisements in schools, church groups, community centers, and other public places for the best turnout.

Stay Motivated

As the fundraising event continues on, it is important to keep your team motivated and excited. A lack of motivation can hamper the fundraising results and negatively impact your company's image. Instead, offer incentives along the way and organize your event properly so as to give sufficient time for breaks and time off. If the fundraiser is stretched out over several days and involves order taking, substitute workers frequently to avoid fatigue. Set a limit of ten to twelve days on order taking for the best results.

Communicate Clearly

Communication is of significant importance. It is vital that communication is accurate and timely, especially between fundraisers and potential clients. If people do not have a clear idea as to where their money or donation is going, they are not as likely to give a generous donation. Having clear and concise information to communicate with the client can make the fundraising process easy and exciting. It's also a great way to provide a good reputation for your company.

Have a Variety of Options

If you are selling items or auctioning off various goods in your fundraiser, make sure you have a wide variety of items. Dollhouses, rocking horses, and toys make great fundraisers for family friendly events, while other fundraisers may feature the auctioning of time-saving products or even vehicles.