K. Ghosh Ray (India)
Valuation, synergy, value added, value destruction, trauma of merger, and twin headed structure.
This is a case of a domestic acquisition of Flakt by ABB in India pursuant to the cross-border (Swiss-Swedish) merger that happened at their parent level. Analyses reveal that valuations of both the companies were not done meticulously and corresponding swap ratio was biased. Synergy perceived was hardly achieved. The gain on merger was less than the capital market (BSE SENSEX) growth. Shareholders of erstwhile Flakt India lost heavily. The case has detailed the process, valuation, post-merger integration and subsequent strategies to understand its failure from the view point of shareholders, especially from minority shareholders' perspective. Attempts have also been made to understand how ABB subsequently gained through assets stripping from Flakt's balance sheet [1]. It has also been analysed whether there could have been any other alternative model for the Flakt ABB combination.
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