|










|





  



 Merger

þ Merger refers to a situation when two or more existing

firms combine together and form a new entity.
þ Either a new company may be incorporated for this
purpose or one existing company (generally a bigger
one) survives and another existing company (which is
smaller) is merged into it.
þ Laws in India use the term „ „
„ „for merger.
1. Merger through absorption
2. Merger through consolidation
 Pypes of Mergers

þ Vertical Combination

þ Horizontal Combination

þ Circular Combination

þ Conglomerate Combination
 2cquisitions

þ Refers to the acquiring of ownership right in the property and

asset without any combination of companies.
þ Phus in acquisition two or more companies may remain
independent, separate legal entity, but there may be change in
control of companies.
þ 2cquisition results when one company purchase the controlling
interest in the share capital of another existing company in any
of the following ways:
a.) controlling interest in the other company. By entering into an
agreement with a person or persons holding
b.) By subscribing new shares being issued by the other
company.
c.) By purchasing shares of the other company at a stock
exchange, and
d.) By making an offer to buy the shares of other company, to
the existing shareholders of that company
 |urpose of Mergers & 2cquisitions

þ |rocurement of supplies
þ Revamping |roduction facilities
þ Market expansion and strategy
þ Financial strength
þ General gains
þ Own development plan
þ Strategic purpose
þ Corporate friendliness
þ Desired level of integration
2dvantages of Mergers & 2cquisitions

þ From the standpoint of shareholders

þ From the standpoint of managers

þ |romoter¶s gains

þ Benefits to general public

 |rocedure of Merger & 2cquisitions

þ Examination of object Clauses

þ Intimation to stock Exchanges
þ 2pproval of the draft amalgamation proposal by the
Respective Boards
þ 2pplication to the National Company Law Pribunal
(NCLP)
þ Dispatch of notice to shareholders and creditors
þ Holding of Meetings of shareholders and creditors
 Conti«.

þ |etition to the NCLP for confirmation and passing of

NCLP orders
þ Filing the order with the Registrar
þ Pransfer of 2ssets and Liabilities
þ Issue of shares and debentures
 g




þ Net Value 2sset (N2V) Method

þ Yield Value Method

þ Market Value Method

 Demerger

þ It has been defined as a split or division.

þ 2s the same suggests, it denotes a situation opposite to that of
merger.
þ Demerger or spin-off, as called in US involves splitting up of
conglomerate (multi-division) of company into separate
companies.
þ Phis occurs in cases where dissimilar business are carried on
within the same company, thus becoming unwieldy and cyclical
almost resulting in a loss situation.
þ Corporate restructuring in such situation in the form of demerger
becomes inevitable.
þ Merger of SG chemical and Dyes Ltd. with 2mbalal Sarabhai
enterprises Ltd. (2SE) has made 2SE big conglomerate which
had become unwieldy and cyclic, so demerger of 2SE was done.
 îhy Mergers Fail?

þ Phey focus only on profits and revenues

þ Valuation is not done properly by looking at
all the factors like goodwill, employees and
customers of the company
þ Phey donot into account merger growth in
terms of market share.
 Contemporary Issues

þ Bangladesh's telecom regulator has approved Indian firm Bharti

2irtel's $300 million initial investment proposal to buy a 70%
stake in îarid telecom.
þ Bharti 2irtel will take over a 70% stake in îarid by creating new
shares at a nominal price.
þ Now, 2irtel has become the first Indian company to start its
operation in Bangladesh. Phe other joint ventures in the country
include Bangladesh-Norway joint venture Grameenphone, Egypt-
based Banglalink, Malaysia-Japan joint venture 2 PEL,
Bangladesh-Singapore joint venture Citycell and state-run
Peletalk.
 Conti«.

þ Phe Indian telecom operator had confirmed

that it was in exclusive talks with Zain's
2frican assets to buy the assets in a deal worth
$10.7 billion
þ Phey are in the last round of due diligence and
they are sure that will soon complete the
process in short time.
 Conti«

þ 2IG and |rudential are both playing for huge stakes

þ |rudential of Britain to buy 2IG¶s 2sian life-
insurance operations
þ the transaction would transform |rudential into the
region¶s dominant insurance company.
þ It will have a leading, if not the leading, presence in 15
big markets with a vast sales force offering critical
health and investment products to a population that is
becoming wealthy enough to appreciate them.
þ 2ssuming the transaction goes through successfully,
the proportion of sales |rudential generates from 2sia
should eventually expand from 30% to 80%.
 Conti«.

þ 2t last, GM finds a buyer

þ Phe agreement is reached by General Motors on
January 26th to sell Saab, its Swedish subsidiary, to
Spyker Cars, a boutique Dutch maker of sports cars.
þ Spyker will pay about $74m in cash. In addition, GM
will receive preference shares worth $326m in Saab
Spyker 2utomobiles and will keep about $100m from
Saab¶s operating capital.
 Conclusions

þ îith more than half of the M&2 deal failing to deliver their
expected results and only 2 out of every 10 M&2s can be coined
as successful. So a comparison of evaluation strategies in M&2 is
central to merger and acquisition decision making. Phis will
enable whether the two companies fit together in a practical or
financial sense and not on whether they could truly combine to
make a whole that was greater than the sum of its parts.
þ But before doing such competition, what becomes important is to
identify the sources of the firm¶s current and future competitive
strengths. In other words to determine, how sustainable and
unique are the identified strengths
P