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7/31/2019 Case STUDY on New Balnace Shoes
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Liberalization opened doors to many businesses in India
TNS Technologies was born in 1993.
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TNS started in Mumbai with 10 IT engineers under the leadership of
Mr .K .V. Rao
Now the talent pool at TNS is as huge as 50,000 employees from over 30
nationalities and 42 plus global delivery centers in over 30 countries.
Their service span :o Product engineering
o Application development
o IT Infrastructure Management
o Testing
Keeping Business expansion in mind TNS offered a public issue in the year
2000
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More
Due to its excellent performance and history ,the issue observed a
subscription of about 20 times before it got listed on the NSE
In 2007, TNS had a client data base of more than 800 that includes major
giants from various sectors like :
Banking & Finance Health care
Manufacturing
Education Institutions
Government bodies
Media It was a 5bn industry competing with global leaders like Infosys and
cognizant
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Effect of Recession
Towards the end of 2008,the west observed a financial turmoil.
Many companies had to wind up their businesses and suffered huge losses
worth billions of dollars
The effect of recession was also felt by the IT sector and TNS became one
of its victims
Due to which many existing contracts were taken back, the receivables
turned into bad debts and now the future of TNS was at stake
The expenses of the company was steady but the income was declining
Q-o-Q.
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Some steps were taken by the company
to utilize its reserves and meet it
expenses :o Cost reduction at the senior level in the form of
reductions in their major allowances.
o All the talent transformation programmes as well
as trainings were put on hold
o HR terminated its employees who are not able toachieve the desired productivity
o Working hours were made intensive
o No increments
o No new recruitments
The entire company was at a freeze
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The Management, HR team as well as the Employees faced
tough time.
The company ran out of liquidity
The salaries of the Employees were not paid for two months As a result the company started taking some aggressive steps
in order to clear the pay rolls of the Employees
They started selling assets
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What went wrong for downfall for TNS
Effects of Recession
Inability in getting back its receivables on time
Down grading of credit ratings ; which lead to:
-No new bussiness orders-Expenses remain the same and income was declining
-Depletion of reserves
-Selling off assets to pay employees salary
-Huge Debt
-Stock were traded at discounted rate
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Options for sustain
TNS had excellent history
Temporary down turn
Other corporates believed that TNS will come back strongly
due to its strong work force with great technical expertise. TNS had three best options:
1. Joint venture with Eastern Communications
2. Merger with ACS Software
3. Acquisition by CH Technologies
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Joint Venture
A joint venture takes place when two parties
come together to take on one project. In a joint
venture, both parties are equally invested in the
project in terms of money, time, and effort to
build on the original concept
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Joint venture with
Eastern Communications
It is a Telecom company having business on
cellular and land based communication
Established in 1995 with yearly revenue of
$8Bn and net profit of $2.1Bn
Showed steady increase in number of
subscribers during recession
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Cont..
Management team identified serious issues with data
management system of customers
Due to which marketing team could not implement their CRM
(Customer Relation Management)
They concluded that to get it done by experts like TNS instead
of hiring a team to manage their data base
EC was also planning to come up with other services like dth
srvices,3rd generation mobile and broad band internet in
couple of years
Need to increase its IT Infrastucture management and Data
Base Management
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Cont..
EC analyzed to do it mutually by sharing profits through Joint
Venture instead of offering them a contract a getting it
outsourced
Profits earned by this JV will be channelized for upcoming
business which will initiate in next 2 years
Negotiation for JV would help EC as TNS was financially bad
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Disadvantages
Major share of the JV will be from EC.
Might lose core business after the down turn is over.
The business proposal of EC may be too optimistic
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Acquisition with CH Technologies
CH Technologies, a firm based out of China
It has acted as a rival to TNS technologies for long.
It has been successful in overpowering TNS technologies by
bagging high profile contracts
CH main intention is to monopolize the IT industry by offering
to acquire majority stake in TNS technologies at three times
the present value of the firm.
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Advantages
Capital infusion that TNS technologies can enjoy post
acquisition is not something that it can experience elsewhere
It can find itself in an altogether new base with fresh goodwill
and brand identity
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Disadvantages
Get acquired by this Chinese entity and be with a minority
stake
The chances of spinoff in future into its original identity would
stand nil
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Merger
The combining of two or more companies, generally
by offering the stockholders of one company
securities in the acquiring company in exchange for
the surrender of their stock.
Basically, two companies become one.
This decision is usually mutual between both firms.
To achieve greater efficiencies of scale and
productivity
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Merger with ACS Software
ACS is entity from Europe with 150 branches around 40
countries all over the world
Provides world class IT based and business solutions with 15
years of work experience
Exellence in execution
Deliver highly efficient products due to strategic alliance with
IT majors
Company earns revenue from E-commerce solution
The firm had revenue of $50 Million in year 2000 and it
crossed $5 Billion in 2010.
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Cont..
The sales turnover has raised 100 times in past 10 years
The net profit for the company was around $1.75 Billion
Company withheld the recession storm by searching for newuntapped market
During recession firm took various cost cutting measures andposted growth of over 20% over previous year
The company is also poised to grow over 20% for next 5 years
Signed many long term deals with renewed companies
Educated various other entities in the emerging market abouthow IT based solutions would help them to check cost andgrow their businesses
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Cont..
It is cash rich company with zero debt
It has cash reserves around $ 1 Billion which can be used for
any strategic Merger
Firm is also enjoying a credit rating of B++
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Advantages to TNS
Huge access to the domestic market of ACS software
Financial support & flow of new orders
International Competition
Protect it from closing its business Greater Efficiency
Diversification
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Advantages to ACS
ACS software will be able to use its human capital &
technology for further development
Expertise labour of TNS
Access to Advanced technology of TNS
Brand name and goodwill
Expand its business
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Final Result through Merger