Global mergers & acquisitions - casting the perfect amalgam

Abstract

The blitzkrieg of consolidation that the global steel industry has seen over the past decade has changed its landscape irreversibly. It has not only improved stability and competitiveness in the industry but also created steel super-powers that can handle the exploding demand for steel from the fastest growing economies of the world. In this report we attempt to study the effectiveness of these M&A activities and try to develop a predictive model that could predict the long term and short term success of future mergers and acquisitions. We plan to look at mergers and acquisition from three angles: Strategic, Finance and Technology. In the strategic angle we analyze the long term demand and supply dynamics in the industry and the relevance of the nature of M&A in that context. The finance angle explores the capital management and investments returns trends in the industry, also investigating company valuations in the process. The technology angle delves into technical know-how sharing and optimizations in operations consequent to the mergers and acquisitions. The predictive model we attempt to develop brings into focus all these three perspectives and combines them to give a consolidated view. The development of the predictive model involves a significant amount of data analysis. We finally apply the model on a couple of ongoing M&A deal to get a feel of how they are going to turn out in the future. This report identifies the biggest underlying reasons for M&A activities of largest steel conglomerate called Ispat International N.V. The company has apparently seen steel plants to be acquired as a financial instrument to make money rather than drive for consolidation and greater bargaining power with suppliers.