Fail Merger and Acquisition

The Jet-Sahara Fallout

Jet Airways is a major Indian airline based in Mumbai, Maharashtra. It is India's largest

airline and the market leader in the domestic sector. It operates over 400 flights daily to 67

destinations worldwide. Its main hub is Chhatrapati Shivaji International Airport, with

secondary hubs at Delhi, Chennai, Bengaluru, Pune and Kolkatta. It has an international hub

at Brussels Airport, Belgium. Jet Airways is owned by Naresh Goyal.

Head office

Jet Airways's head office is the S.M. Center, a rented, unmarked six storey building

in Andheri, Mumbai.[14][15] In 2008 Robyn Meredith of Forbes said that the complex was "as

shabby as [Jet Airways CEO Naresh] Goyal's home is posh" and that the complex was "in

need of a fresh coat of paint". Meredith also said that the complex was 15 minutes driving

time from Chhatrapati Shivaji International Airport

Air Sahara

Air Sahara flights have been operating since 1993 as one of the new creations of the Sahara

Parivar group. The initial Air Sahara flights took place with 2 Boeing 737-200s. Air

Sahara was initially named as Sahara Airlines and on 2004 it was renamed to Air

Sahara although its official listing was still Sahara Airlines . This move may have been done

to suit the change in the brand marketing policies. Air Sahara airlines became an international

carrier when the first Air Sahara flight flew from Chennai to Colombo in the year 2004.

Air Sahara has been recently taken over by Jet Airways in a move which makes the combined

market share of the Indian Aviation Industry to 32 percent. Air Sahara has been renamed as

Jet Lite Since then. Air Sahara as Jet Lite is expected to take Air Sahara flights to new routes

and destinations and continue to expand internationally. Air Sahara is also expected to benefit

from the combination in term of cost reduction of many operations and many other

operational benefits.

Merger and Acquisition of Jet and Sahara

On January 19, 2006, Jet Airways (India) Ltd. (JA) announced its decision to acquire Air

Sahara (AS), the third largest airline company in India. It was to be the first acquisition in the

history of Indian aviation industry. The deal valued at Rs.22.5 billion approx. ($500 million)

was expected to enable JA, a leader in the airline industry, to further strengthen its position in

the market.

With this acquisition, the company would havclose to a 50 percent share of the Indian

aviation market. In addition, the company would add aircraft, acquire more parking slots,

more airline staff, and more international routes. The announcement of the deal received a

mixed response. 

Problem Faced by airways during Merger and Acquisition

The major reasons due to which the much talked about aviation industry felt flat on its face

were:

a) The policy related to mergers and acquisition in the aircraft industry did not clearly

specify the terms of transfer for airport infrastructure. The guidelines though clear on

parking bays and landing slots, did not specify the status of aircraft hangars, check-in

counters, cargo warehouses, passenger lounges and other such airport facilities.

b) Also, Jet Airways enthusiastically overvalued Air Sahara, and later wanted a discount

on the original price (20 to 25 percent). This is typically a case of overvaluing a

company whose business model was not robust

There are the Some of the reasons why Mergers & Acquisitions have failed in recent times

are as follows :-

1. No Guiding principle

The merging companies i.e jet airwys and sahara fail to develop a set of guiding principles

linked to the merger's strategic intent. These principles should get at the very logic of the

transaction—is the merger absorption of one company into another or a combination

designed to take the best of both. Perfection may not be possible, but these principles will

ensure that all decisions drive the combined entity in the same direction which are lacking in

these merger which is the major eason for the failure of the merger.

2. No ground rules

Ground rules for planning provide nuts-and-bolts guidance for how the planning teams

should act as they begin to put the face of the merged entity on paper. These rules should

include processes for how decisions are to be made and how conflicts should be resolved

which are lack in this merger and acquisition resulting failure of the merger

3. Cultural disconnect

Culture connection play a very imported role in the merger and acquisition of any company.

If the culture of both the company become satisfied then merger will be successful but in the

case of jet and sahara the culture of both the airways does not met and resulting the failure of

the merger.

Model which is applied in this Merger & Acquisition

Kurt lewins three Stage model is applied in this merger and acquisition. There are three

phases in this model i.e Unfreezing, Moving, Freezing phases. There are two stages i.e status

quo and desired state is there and two types are force Driving forces and Restraining forces

act on it. Driving forces which helps the company to move into the desired state and in this

merger and acquisition driving forces are better customer deals, profit margin, customer

satisfaction, to become the number one Airways , development opportunities, techniques and

the other forces which is Restraining forces are No Guiding principle , No ground rules

Cultural disconnect In this case the restraining forces are high as compare to the driving

forces to achieve a desired state so that the merger between the Jet and Sahara Fail.