Havells Case

Topics: Risk, Finance, Risk management Pages: 1 (307 words) Published: May 23, 2011
1. Does the proposed acquisition make sense for Havells? Why or why not?

Ans: The proposed acquisition makes sense for the following reasons: ❖ The acquisition of Sylvania will give Havells access to the wide marketing networks of SLI. It will serve as a good channel for marketing Havell’s products in Europe ❖ Access to the R&D and engineering capabilities of SLI ❖ Ownership of various brands of Sylvania: Sylvania, Zenith, Linolite, Claude, Concord and Marlin ❖ Exposure to lighting and lighting fixtures segment, as Sylvania was primarily engaged in this segment whereas Havells had a small presence in the lighting market.

2. What are the major risks associated with this acquisition? Can these be managed?

Ans: Major Risks associated with the acquisition are-

Strategic risk is the current and prospective impact on earnings or capital arising from adverse business decisions, improper implementation of decisions, or lack of responsiveness to industry changes. There is a risk that the acquisition fails to bring out the desired synergy

Operational risk is, as the name suggests, a risk arising from execution of a company's business functions. It is a very broad concept which focuses on the risks arising from the people, systems and processes through which a company operates. There is a huge difference in the culture of the two companies which presents a challenge of the integration of the European executives in the Indian team. y

Financial risk is an umbrella term for any risk associated with any form of financing. Risk may be taken as downside risk, the difference between the actual return and the expected return (when the actual return is less), or the uncertainty of that return. The acquisition deal of Sylvania was expected to cost more than $200 million, which is a huge amount for Havells. Also there is uncertainty about the returns from the acquisition
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