Final Merger

8/2/2019 Final Merger

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PRESENTATION

ONMERGERS ACQUISITION & JOINT VENTURE

PRESENTED BY:-

RASHMI

PARUL GUPTA

DINESH MITTAL

M.B.A. 3rd sem.


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MERGER


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A merger is a combination of two or more businesses into one

business. Laws in India use the term 'amalgamation' for merger.

The Income Tax Act,1961 [Section 2(1A)]defines amalgamation

as the merger of one or more companies with another or the

merger of two or more companies to form a new company, in such a

way that all assets and liabilities of the amalgamating companies

become assets and liabilities of the amalgamated company and

shareholders not less than nine-tenths in value of the shares in the

amalgamating company or companies become shareholders of the

amalgamated company.

MERGER


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A consolidation is a combination of two or more companies into a thirdentirely new company formed for the purpose. The new company absorbs the

assets, and possi bly liabilities, of both original companies which creates to

exists. When two firm merge, stock of both are surrendered and new stocks in

the name ofnew company are issued .Generally merger take place between two

companies of more or less the same size.

e.g. HCL

In a case of absorption one company absorb another company i.e. it

purchases either the assets or share of that company. The merger by

absorption is always friendly in nature i.e. both the companies agree to theterm of absorption.

e.g. TCL


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TYPES OF MERGERS

1. Horizontal

2. Vertical

3. conglomerate


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Types of merger

RAW METERIALGLASS Denim FABRIC

FINISHED GOODAUTO BLUE JEANS

T U V W X Y Z


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Types of merger

GLASS Denim FABRIC

FINISHED GOODAUTO BLUE JEANS

T U V W X Y Z

RAW METERIAL BUSINESSLEVELRAW METERIAL BUSINESSLEVEL


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Types of merger


FINISHED GOODAUTOBLUE JEANS

T U V W X Y Z

A B C D E F


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Types of Merger


BUSINESS LEVEL

FINISHED GOOD

T U V W X Y Z

A B C D E F

BLUE

JEANSAUTO


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HorizontalMergers

A horizontal merger results in the consolidation of firms that

are direct rivalsthat is sell substitutable products with inoverlapping geographic markets. This form of merger

results in the expression of a firms operation in a given line

product line and at the same time eliminates competitors


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Types of Merger


FINISHED GOOD

T U V W X Y Z

A B CD E F

BLUE JEANSAUTO

The merger of supplier T

and U represent thehorizontal merger


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VERTICAL MERGERS

When two firms working in different stages of production or distribution of the

same product join togetherit is called vertical merger.

A vertical merger is not in which the buyer expands backwards and merges

with the firm supplying raw material or expand foreword in the direction of the

ultimate consumer the economics benefits of this type of merger stem from thefirms increased control over the acquisition of raw material or the distribution

of finished goods.

Vertical mergers can best be understood from examining real world deals. One such merger

occurred between Time Warner Incorporated, a major cable operation, and the Turner Corporation,which produces CNN, TBS, and other programming. In this merger, the Federal Trade Commission

(FTC) was alarmed by the fact that such a merger would allow Time Warner to monopolize much

of the programming on television. Ultimately, the FTC voted to allow the merger but stipulated

that the merger could not act in the interests of anti-competitiveness to the point at which the

public good was harmed.


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Types of Merger

RAW METERIALGLASSDenim FABRIC

FINISHED GOOD

T U V W X Y Z

A B C D E F

BLUE JEANSAUTO

The mergerofsupplierFandZ

representthe verticalmerger


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Conglomerate Mergers

A conglomerate merger involve two firms in totally unrelated activities. A

conglomerate is a firm that has external growth through a number of merger ofcompanies through business are not related either horizontally and vertically . A

conglomerate may have operation in manufacturing electronic , banking, fast food

restaurants and other unrelated businesses this form of result in the expansion of a

firms operation in different unrelated lines of business with an increased sense of

operating synergies.


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Types of merger


FINISHED GOODAUTOBLUE JEANS

T U V W X Y Z

A B C D E F

Mergeringrelatedtounrelated

firmiscalledConglomeratemergers


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A mergercantakesPlaysinfollowingfourways:-

By purchase of assets

By purchase of common share

By exchange of share and assets

Exchange of shares for shares


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BY PURCHASE OF ASSET

The assets of company y may be sold to company x. once this is done ,company y is then legally

terminated and company x survives.

BY PURCHASE OF COMMON SHARES

The common share of company y may be purchased by company x .when company x holds all

the shares of company y, it is dissolved.

BY EXCHANGE OF SHARE OF ASSETS

Company x may give its shares to the shareholders of company y for its net assets . Then

company y is terminated by its shareholders who now holds shares of company x.

EXCHANGE OF SHARES FOR SHARES

Company x gives its shares to the shareholders of company y and then company y is terminated.


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EXAMPLES

ASIAN PAINTS-BERGER INTERNATIONAL

IN THE YEAR 2002

Asian paints acquired 50.1%controlling stake in bergerinternational.

Deal of Rs. 57.6 crores

Berger international has no operation in INDIA but formed Berger paints

INDIA ltd. In Calcutta (subsidiary)

Objective enterinto the south Eastasian market growth.

Such as Singapore, Thailand, Myanmar, Bahrain ,Malta ,UAE, Jamaica.


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ITCWITHITCBHADRACHALAM PAPERBOARDS

LTD.

2001March end.

ITCBPL- is subsidiary of ITC

ITCBPL had a accumulated losses of RS.125 crores.

The loss due to high depreciation rate.

ITC had a profit of RS.1000crores

Take over benefits one time to reduce tax of RS.100 crores.

MAHINDRA AND SATYAM


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Acquisition refers to one company buying out another to combine the bought

entity within itself. Acquisition increases the interest of the acquiring company

in the target or acquired company. A transaction where one firm buys another

firm with the intent of more effectively using a core competence by making the

acquired firm its subsidiary within its portfolio of business. ACQUISITIONS

ACQUISITION

With acquisition, one firm takes over another and establishes its power as the

single owner. Generally, the firm which takes over is the bigger and stronger

one. The relatively less powerful, smaller firm loses its existence, and the firm

taking over, runs the whole business with its own identity. Unlike the merger,

stocks of the acquired firm are not surrendered, but bought by the public prior to

the acquisition, and continue to be traded in the stock market.


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When a deal is made between two companies in friendly terms, it is typically

proclaimed as a merger, regardless of whether it is a buy out. In an unfriendly

deal, where the stronger firm swallows the target firm, even when the target

company is not willing to be purchased, then the process is labeled as

acquisition. Often mergers and acquisitions become synonymous, because, in

many cases, a bigger firm may buy out a relatively less powerful one and compel

it to announce the process as a merger. Although, in reality an acquisition takes

place, the firms declare it as a merger to avoid any negative impression.

Whether the deal results in a merger or an acquisition also depends on the way

it is announced. In other words, the difference lies in how the purchase is

communicated to and received by the target company's board of directors,

shareholders and employees.


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ProcedureforEvaluatingThe Decisionfor

MergersandAcquisitions

Planning

Search and scanning

Financial Evaluation


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Planning:- of acquisition will require the analysis of industry-specific and firm-specificinformation. The acquiring firm should review its objective of acquisition in the context of

its strengths and weaknesses and corporate goals. It will need industry data on market

growth, nature of competition, ease of entry, capital and labor intensity, degree of

regulation, etc. This will help in indicating the product-market strategies that are

appropriate for the company. It will also help the firm in identifying the business units that

should be dropped or added. On the other hand, the target firm will need information about

quality of management, market share and size, capital structure, profitability, production

and marketing capabilities, etc.

Search and Screening:- Search focuses on how and where to look for suitable

candidates for acquisition. Screening process short-lists a few candidates from

many available and obtains detailed information about each of them.


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Financial Evaluation:- of a mergeris needed to determine the earnings and cashflows, areas of risk, the maximum price payable to the target company and the best

way to finance the merger. In a competitive market situation, the current market

value is the correct and fair value of the share of the target firm. The target firm

will not accept any offer below the current market value of its share. The target

firm may, in fact, expect the offer price to be more than the current market value of

its share since it may expect that merger benefits will accrue to the acquiring firm.A mergeris said to be at a premium when the offer price is higher than the target

firm's pre-merger market value. The acquiring firm may have to pay premium as an

incentive to target firm's shareholders to induce them to sell their shares so that it

(acquiring firm) is able to obtain the control of the target firm.


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Motives forMerger and

Acquisitions

Eliminationofcompetition

Adoption ofmodern

technology

Lack oftechnical andmanagement

talent

Desire to enjoymonopoly

power

Government pressure

Effect oftrade cycles

Desired tounified control

and selfsufficiency

MotivesforMergerandAcquisitions


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RegulationsforMergers& Acquisitions

The companiesact ,1956

The companiesact, 2002


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Documents

Final Merger