Negotiation Process

Negotiation process :
 Several bidders offered cash offers merely because they did not have an option for a merger.
 A competing bid from Nestle, which is also a listed company in India, would have meant that
GSK Consumer Healthcare ended up with a considerably high stake in Nestle India, which,
considering the big gap in Nestle and HUL market caps, has a market capitalization of ⁇ 1.03
trillion.
 This was not a favorable situation for successful bargaining, as the withdrawal of GSK
owners from the stock in the short to medium term could negatively affect the combined
entity's value.
 Given its scope and distribution, HUL is much better positioned to expand the business, cut
out costs, increase reach and thereby assist GSK Customer shareholders to invest in the
production of value.
 The negotiating arrangement framework demonstrates that all-stock mergers are emerging as
the preferred path for high-value and high-multiple M&A deals in India, provided that most
buyers are reluctant to collect debt and exploit themselves further at a time when the credit
market is tight and also to separate them from incompatibility in the earning cycle, where
payback cycles will be very high.
 It is important that HUL enjoys at least some of GSK's simple IP privileges in order to
successfully leverage the said agreement. What is the important matter in dispute and to what
extent the problem perseveres was something that is private.
Value creation:
 The agreement will help HUL boost its refreshment and food sector as HUL will enter the
Health Food beverages that have seen late entry of many global as well as Indian businesses.
 The loss of GSK's market share and the challenge of competition from other major players
such as Mondelez International (Bournvita), Pediasure and Complan can be dealt with
efficiently after the acquisition.
 Acquiring powerful brands in the HFD segment will improve HUL's food sector by 900 bps
to 27 percent with sustained profitable growth from the current 18 percent of revenue, which
generates a massive value for HUL in the Indian industry.
 The transaction produces a tremendous benefit for GSK as it generates a good sign for GSK
owners as they can receive a decent value under the share swap agreement.
 HUL has decided to conduct the distribution of OTC (Over the Counter) goods from GSK
such as Sensodyne, Eno, otrivin, Crocin, etc., which generates tremendous value for the
distribution management of GSK.
 HUL has very strategically located its factories based on those locational advantages,
considerations of distribution costs and fiscal advantages of that state, which helps to create a
tremendous value for its distribution network.
 Around 3500 workers employed with GSK will shift to HUL as per the arrangement, which
aims to improve the skills of HUL's staff.
 Post takeover, the nutrition business will be part of the HUL Foods & Refreshment group,
helping HUL to use capital on its balance sheet and create shareholder value. Moreover, in a
local sense, it will allow HUL to produce better salience.
Companies financial scenario during acquisition:
Particulars HUL GSK Combined ( Amount in CR)

Total Revenue (2017/18) 35,785.00 4,634.00 40,419.00
EBITDA 7,783.00 1,141.00 8,924.00
Profit after tax 5,237.00 700.00 5,937.00
Net worth 7,075.00 3,485.00 10,560.00
Regulatory Issues:
 Steer Engineering has moved to the high court after the declaration of the agreement between
HUL and GSK, arguing that it wants proper defense of its rights. Steer Engineering argues
that it has supplied GSK with some essential IP and that upon the transfer of the same to third
parties it has rights over the same.
Anticipated Post merger Integration Issues:
 As the key question, employee merging is something that HUL should be worried about.
HUL faced employee integration. While the deal would not contain any provision specifying
that GSK staff are absorbed, the specialists of this brand are expected to be retained.
 HUL may not have very many problems with Investor Relations, but this merger could
produce one.
 A major issue will also be the payroll of persons consumed by GSK.
 HUL's Human Resources would have a rough time deciding who to hold and what to let go.
Conclusion:
 For HUL, which aims to lead in the food and refreshment market, the benefits of synergy are
projected to be much greater in the long run. This offer would give HUL a lift in the future in
the true sense of the word.
 Unilever & GSK's amalgamation will be beneficial to all firms and establish value
enhancement by increased market revenue and customer growth from vast FMCG segments.
 The value-creation rationale of the amalgamation of both businesses will lead to a rise in
sales through proximity to new and large client markets and the ability to cross-sell through
overarching distribution networks in the FMCG business.
 Another part of the synthesis of the two giants, HUL & GSK, is the motivation for research
and development (R&D). By purchasing GSK, HUL will easily reduce the cost.
Learnings:
 Learnt how an effective negotiation helps in mergers and acquisition.

 Understood the circumstances that can occur due to regulatory and post-merger integration
issues. Noted some steps taken by the HUL and GSK in order to rectify it.
 Learnt how other party’s issues, interests and resources by the trade associations, research
agencies etc, helped me to learn how beneficial it is while negotiating and how we should use
it in-order to gain authority while negotiating.
 Understood how to spot the differences that can occur while negotiating and how we should
overcome and manage that.

Negotiation Process

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Negotiation Process

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Negotiation process :

Companies financial scenario during acquisition:

Particulars HUL GSK Combined ( Amount in CR)

Anticipated Post merger Integration Issues:

 Learnt how an effective negotiation helps in mergers and acquisition.

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