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    Meaning of Mergers & Acquistions

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    20bal216
    Mergers involve the combination of two companies to form a new entity, while acquisitions refer to one company purchasing another. There are several types of mergers, including horizontal (between competitors), vertical (between companies in the same supply chain), and conglomerate (between unrelated companies). Mergers are classified as upstream, downstream, or reverse based on which company acquires the other. Takeovers allow a company to gain control of another, and can be friendly, hostile, or conducted as a bailout of a struggling company.

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    Meaning of Mergers & Acquistions

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    20bal216
    24 views9 pages
    Mergers involve the combination of two companies to form a new entity, while acquisitions refer to one company purchasing another. There are several types of mergers, including horizontal (between competitors), vertical (between companies in the same supply chain), and conglomerate (between unrelated companies). Mergers are classified as upstream, downstream, or reverse based on which company acquires the other. Takeovers allow a company to gain control of another, and can be friendly, hostile, or conducted as a bailout of a struggling company.

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    Mergers involve the combination of two companies to form a new entity, while acquisitions refer to one company purchasing another. There are several types of mergers, including horizontal (between competitors), vertical (between companies in the same supply chain), and conglomerate (between unrelated companies). Mergers are classified as upstream, downstream, or reverse based on which company acquires the other. Takeovers allow a company to gain control of another, and can be friendly, hostile, or conducted as a bailout of a struggling company.

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    © All Rights Reserved
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    Download as pptx, pdf, or txt
    24 views9 pages

    Meaning of Mergers & Acquistions

    Uploaded by

    20bal216
    Mergers involve the combination of two companies to form a new entity, while acquisitions refer to one company purchasing another. There are several types of mergers, including horizontal (between competitors), vertical (between companies in the same supply chain), and conglomerate (between unrelated companies). Mergers are classified as upstream, downstream, or reverse based on which company acquires the other. Takeovers allow a company to gain control of another, and can be friendly, hostile, or conducted as a bailout of a struggling company.

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    Mergers & Acquisitions

    • The terms "mergers" and "acquisitions" are


    often used interchangeably, but they differ
    in meaning.
    • In an acquisition, one company purchases
    another outright.
    • A merger is the combination of two firms,
    which subsequently form a new legal entity
    under the banner of one corporate name.
    Continue…
    • A merger has been defined as an arrangement where the
    assets of two (or more) companies become vested in, or
    come under the control of, one company. All or
    substantial majority of the shareholders of the two
    companies are retained.
    • In a merger, one of the two existing companies merges its
    identity into another existing company or one or more
    existing companies may form a new company and merge
    their identities into the new company by transferring
    their business and undertakings, including all assets and
    liabilities, to the new company (herein after known as
    merged company)
    Continue…
    • Types of Mergers
    • Horizontal Mergers: Mergers between two
    or more companies engaged in the same
    business activities are termed as horizontal
    mergers. Reduction in competition,
    achieving economies of scale and focussing
    on core competencies are some of the key
    drivers to conduct a horizontal merger.
    Continue…
    • Vertical Mergers: Mergers effected between
    two or more companies engaged in
    undertaking different functions within the
    value chain of a specific industry are termed
    as vertical mergers. Expansion within
    different segments of a value chain is a key
    reason for companies to undertake vertical
    mergers, resulting in an increased
    integration.
    Continue…
    • Conglomerate Mergers: Companies in
    conglomerate mergers typically operate in
    different segments. Conglomerate mergers
    help achieve diversification, product
    extensions, market expansion and reduction
    of the risk exposure of operating in one
    industry. Appropriate integration and
    implementation of a conglomerate merger is
    an intricate process and is crucial to achieve
    the benefits of diversification.
    Continue…
    • UP-Stream Merger: A subsidiary company is
    merged with its parent company.

    • Down-stream Merger: The parent company is


    merged with its subsidiary company.

    • Reverse Merger: A company with a sound


    financial track record combines with a loss-
    making or less profitable company.
    Continue…
    • Takeover: Gaining control over the management
    of a target company by the acquiring company is
    termed as takeover. It is conducted either by
    directly acquiring shares carrying voting rights or
    indirectly by participating in the management.
    Takeover of private limited or closely help
    companies can be undertaken based on mutual
    agreement with stakeholders. However, takeovers
    of publicly listed companies are in accordance
    with process set out in the SEBI (substantial
    Acquisition of Shares and Takeovers) Regulations,
    2011.
    Continue…
    • Takeovers may be broadly classified as under:
    • Friendly takeover: One of the key characteristics of a friendly
    takeover is that such acquisitions are consummated with a
    prior consent of the target company. Thus, the terms of the
    takeover are negotiated and prior approval of the directors
    and shareholders of the merging entities are obtained.
    • Hostile takeover: A hostile takeover is undertaken when a
    target company is acquired without the consent or buy-in
    from its management, either by purchasing the stake from
    the shareholders or through efforts to gain control of the
    management.
    Continue…
    • Bailout takeover: The takeover of a friendly weak
    company by financially stable company to bailout
    the former is known as a bailout takeover. The
    acquiring company presents a scheme for
    turnaround/rehabilitation of the financially weak
    company that is being acquired. Such scheme is
    approved by the financial institution, banks, and
    lenders who have funded the sick company on the
    principles of viability, sustainability and time
    frame for revival. Based on this assessment, a
    rehabilitation package is drawn up to protect the
    interest of various stakeholders associated with
    that cash-strapped company.

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