MERGER & ACQUSITION

BY..RAGHAV JHA

MERGER

WHEN TO OR MORE COMPINIES COMBINE IN TO ONE COMPANY TO SHARE THEIR RESOURSES

FORM A NEW COMPANY

SHAREHOLDERS ARE TREATED AS JOINT OWNERS OF COMBINED / NEW COMPANY

MERGER ALSO KNOWN AS AMALGAMATION

OR

PARTY INVOLVE IN MERGER

MERGER

MERGING COMPANY CALLED AMALGAMATING CO.

NEW COMPANY CALLED AMALGAMATED CO.

WAYS OF MERGER

MERGER

MERGER BYABSORPTION

MERGER BY CONSOLIDATION

MERGER BY ABSORPTION

IT IS A COMBINATION OF TWO OR MORE COMPANIES INTO ONE EXISTING COMPANY

ALL AMALGAMATING COMPANY LOSE THER IDENTITY.

E.g. ABSORPTION OF TATA FARILIZER LTD (TFL) BY TATA CHEMICAL LTD.(TCL)

TATA OIL MIL LTD.(TOMCO) BY HINDUSTAN LIVER LIMITED (HLL)

MERGER BY CONSOLIDATION

IT IS A COMBINATION OF TWO OR MORE COMPANIES IN TO A NEW COMPANY.

ALL COMPANY LOOSE THER IDENTITY (DESOLVE) TO FORM A NEW COMPANY

Ex.

• HINDUSTAN COMPUTERS LTD.

• HINDUSTAN INSTRUMENT LTD.

• INDIAN SOFTWARE CO. LTD.

• INDIAN REPOGRAPHIC LTC.

• HINDUSTAN COMPUTERS LTD.(HCL)

TYPES OF MERGER

HORIZENTAL MERGER VERTICAL MERGER CONGLOMERATE MERGER

HORIZENTAL MERGER

MERGER BETWEEN COMPANIES OFFERING / PRODUSING SAME SERVICES OR PRODUCTS.

DIRECT COMPETITORS SAME MARKET SAME PRODUCT

e.g. MERGER OF BANK OF MATHURA WITH ICICI BANK

VERTICAL MERGER MERGER BETWEEN COMPANIES

PRODUSING DIFFERENT GOODS AND SERVICES FOR A SPECIFIC FINISHED GOODS .

MERGER BETWEEN COMPANIES HAVING BUYER OR SELLER RELATIONSHIP.

CONGLOMERATE MERGER

Merger of companies which do not either sell any related product and nor they are in related market .– E.g TATA SKY– PEPSICO- PIZZA HUT

ACQUISITION

In an ACQUISITION, one firm purchases the assets and / or shares of another co.

The acquired firm becomes the subsidiary of the acquirer.

The acquired firm’s shareholders cease to be owners of that firm.

TATA- CORUS JAN 30 2007PAY 428 / SHARE OF CORUS

HDFC BANK – CENTURION BANK OF PUNJAB FEB2008 @9510 CRORE

RIL – RPL MARCH 2009(Reliance petroleum with reliance industries ltd.)

Process of merger & acquisition

APPROVEL OF B.O.D

INFORM TO STOCK EXCHANGE

APPLICATION INHIGH COURT

SHAREHOLDERS & CREDITORS PERMISSION

SANCTION BY HIGH COURT

TRANSFER OF ASST. &LIABLITES

PAYMENT

DIFFERENCE B/W M & A

MERGER1. COMBINATION OF TWO

ORGANISATION IN TO ONE2. HIGH LY EXPENSIVE (HIGH

LEGAL COST)3. TIME CONSUMING4. INCREASE IN SHAREHOLDER

WEALTH5. SO MUCH LEGAL WORK6. DILUTION IN OWNERSHIP7. NO CHANGE EMPLOYEE

BEHAVIOUR

ACQUSITION1. ONE ORGANATION BUY THE

ANOTHER ORGANATION2. LESS EXPENSIVE3. LESS TIME REQUIRED4. SHAREHOLDER CAN’T

INCREASE THEIR WEALTH5. LESS LEGAL WORK6. PURCHASER BECOME THE

WHOLE OWNER7. EMPLOYEE BEHAVIOUR MAY BE

NEGATIVE

REASION / BENEFIT OF M&A

Synergy effect Maximizing profit Expansion of business Economy of scale Elimination of competition Increasing market share Diversification of risk Mutual benefit goodwill