There are some questions about how quickly a deal between the two could take place, with some thinking it's imminent, while others believe more time may be involved. Without a solid time frame, it's probably best to get an idea now of what the potential risks and rewards of a takeover (assuming Tata emerges as the winning bidder) will be for TTM shareholders. Let's examine both sides of the coin, beginning with the risks first.
The most obvious is headline risk. All of the potential hand-wringing in the press and moaning on the sell-side about how TTM paid too much for the two flagship companies and how it is going to mess up their balance sheet in the short-run.
The inevitable downgrades by ratings agencies like Moody's, S&P, etc., will likely take place. Most times after a big acquisition, especially if it's done with debt, these ratings agencies lower the credit rating on the acquirer due to increased costs.If the dollar continues to weaken against the pound, margins could be affected, as both brands are manufactured in the U.K., and about 25%-30% of the two brands' unit sales are in the United States.
Is TTM going to have to issue equity to complete the acquisition, which would be dilutive to current holders, or will it use cash from other sources like parent Tata Holding, or debt or a combination of both?
The employee unions (currently backing Tata Motors) have asked for strict assurances from the winning buyer that there will be no job cuts, and pensions will be maintained and warranties honored. This could add to the buyer's burden should it make more sense to transfer some jobs elsewhere.