Merger and Acquisition – Tata Motors & Jaguar

After the acquisition of the British Jaguar Land Rover (JLR) business, which also includes the Daimler, Lanchester and Rover brands, Tata Motors became a major player in the international automobile market. On 27 March 2008, Tata Motors reached an agreement with Ford to purchase their Jaguar Land Rover operations for US$2.3 billion. The sale was completed on 2 June 2008.

The all-cash deal, which was agreed in March, includes all necessary intellectual property rights, manufacturing plants, two advanced design centres in the UK and a worldwide network of sales companies, Tata Motors said in a statement. The brands were bought from Ford Motor Co, which has contributed about $600 million to the Jaguar and Land Rover pension plans, and long-term agreements have been entered into for the supply of engines, stampings and other components.

The Ford Motor Credit Company will continue to provide financing for Jaguar Land Rover dealers and customers for a period, and Tata Motors said it was in advanced negotiations with auto finance providers in the UK, Europe and the United States. The Tata Group has always sought to be a value-driven organisation.

These values continue to direct the Group’s growth and businesses. The five core Tata values underpinning the way we do business are: Integrity: We must conduct our business fairly, with honesty and transparency. Everything we do must stand the test of public scrutiny. Understanding: We must be caring, show respect, compassion and humanity for our colleagues and customers around the world, and always work for the benefit of the communities we serve.

Excellence: We must constantly strive to achieve the highest possible standards in our day-to-day work and in the quality of the goods and services we provide. Unity: We must work cohesively with our colleagues across the Group and with our customers and partners around the world, building strong relationships based on tolerance, understanding and mutual cooperation.

Tata Motors has been in the process of acquiring foreign brands to increase its global presence. Through acquisition, Tata has operations in the UK, South Korea, Thailand and Spain. Among these acquisitions is Jaguar Land Rover, a business comprising two struggling iconic British brands that was acquired from the Ford Motor Company in 2008.

Tata Motors Ltd, India’s top vehicle maker, completed the $2.3 billion acquisition of Jaguar and Land Rover, adding the luxury brands to a line-up that also includes the low-cost Nano.

Tata Motors, India’s top bus and truck maker and No. 3 car maker, has sought to expand its presence in the global markets through alliances and acquisitions in recent years. Today some analysts are raising red flags about the possible adverse impact on earnings of the acquisition by the company of the Jaguar and Land Rover (JLR) operations from Ford Motor Company. But nobody questions the company’s credentials to make cars.

The JLR acquisition too needs to be seen not merely in terms of the prospective cash it will generate over the years (which is, of course, important) but also from the point of view of the substantial intangible benefits it will bring to Tata Motors, the most important of which will be the opportunity to transform itself to an advanced automotive business with global competencies. Look at it this way, and you see no contradiction in the company’s trying to straddle an entire industry, from its humble small cars, including the Indica and the Nano to the sophisticated Jaguar and Land Rover global brands.

It is a mistake to see the strategy as one of making products for diametrically opposed market segments; what the company is doing is building the competencies to offer products in a wide range of the market. The high-end acquisition may be the most glamorous event yet; but the action thrust of the future will have to come in the mass markets and in new areas like alternative fuel vehicles. In today’s world companies have to keep running to stay in the same place. If they have to grow, they have to do much more.