India Entry & Business Startup Consultings

Mergers & Acquisitions Advisory

Mergers & Acquisitions Advisory

What are Mergers and Acquisitions?

Merger & Acquisitions advisory is a combination of two or more companies into one, wherein the merging companies lose their identities. No fresh investment is made during this procedure. However, an exchange of shares takes place between the companies involved in such a process. Generally, the company that lasts is the buyer which preserves its identity and the seller company is extinguished.

India is the second-fastest emerging economy in the world. Investors, big companies, industrial houses view the Indian market in a rising and flourishing phase, whereby returns on capital and shareholder returns are high. Both mergers and acquisitions have increased dramatically.

MERGERS ARE IN TRUTH ACQUISITIONS

Under Mergers and Acquisitions Advisory, one business buys another and incorporates it into its business model. Because of the misuse of the term merger, most of the information on mergers is presented for the joint mergers and acquisitions (M&A Advisory) that are happening. This gives a wider and more precise view of the merger market.

What are the major reasons behind Mergers and Acquisitions Advisory?

The basic reason behind mergers and acquisitions services is that organizations combine and form a single entity to attain economies of scale, widen their reach, obtain strategic skills, and advance competitive advantage.

In simple terms, mergers are considered as a significant tool by companies to increase their operation and increase their profits. Indian markets have seen a growing trend in mergers which may be due to the business alliance by large industrial houses, merging of business by MNC’s operating in India, growing competition against imports, and acquisition activities.

What are the different kinds of Mergers?

From the perception of entities, there is a whole host of distinct mergers. However, from an economist's point of view which is built on the relationship between the two companies intending to merge.

Basically, mergers are classified into three broad categories:

  1. Horizontal merger: When two companies are in direct competition and share the same product lines and markets i.e. it results in the consolidation of firms that are a direct competitor.
  2. Vertical merger: Where exists a customer and business or a supplier and corporation i.e. merger of firms that have a definite and potential buyer-seller relationship.
  3. Conglomerate merger: Merger between companies that do not have any common business areas or no common relationship of any kind. Consolidated companies may sell related products or share marketing and distribution channels or production processes. Such kind of merger be classified into the following:
  4. Product-extension merger: Conglomerate mergers are those in which the companies selling different but related products in the same market or sell non-competing products and use similar marketing channels of the manufacturing process.
  5. Market-extension merger – Conglomerate mergers wherein companies that sell the same products in different markets/ geographic markets.
  6. Pure Conglomerate merger- When two companies merge having no obvious relationship of any kind.

It can be resolved that Horizontal mergers eradicate sellers and hence reshape the market structure i.e. they have a direct effect on seller concentration whereas vertical and conglomerate mergers do not effectively market structures directly. They do not have anticompetitive concerns.

What is the Legal Procedures for Merger, Amalgamations, and Take-over?

The Law related to mergers is codified in the Indian Companies Act, 1956 which works about several regulatory policies.

The general law relating to mergers, amalgamations, and reconstruction is described in sections 391 to 396 of the Companies Act, 1956. It deals with the concession and preparation with creditors and members of a company needed for a merger.

Section 391 gives the Tribunal the power to accept a compromise or arrangement between a company and its creditors/ members subject to certain given conditions.

Section 392 gives power to the Tribunal to enforce and/ or oversee such compromises or arrangements with creditors and members.

Section 393 provides for the accessibility of the information required by the creditors and members of the concerned company when agreeing to such an arrangement.

Section 394 makes provisions for enabling reconstruction and amalgamation of companies, by making a suitable application to the Tribunal.

Section 395 gives power and duty to obtain the shares of shareholders dissenting from the scheme or contract approved by the majority.

What are the Advantages of Mergers & Amalgamations?

The importance behind mergers and acquisition services by Mergers and Acquisition consultant is that it offers a productive platform for the entities to grow, though much of it relies on the way the deal is implemented. It is a way to raise market penetration in a specific area with the help of a recognized base. Few reasons for Mergers & Amalgamations are:

  • Retrieving new markets
  • Maintenance of growth momentum
  • Acquiring international brands and visibility
  • Buying cutting edge technology instead of importing it
  • Global competition
  • Improving operating margins
  • Evolving new product mixes

M&A ADVISORY SERVICES

We offer all aspects of M&A advisory under Mergers and Acquisition services, providing critical assistance in the following areas:

  • Appraising and evaluating companies
  • Designing and executing an acquisition strategy
  • Introducing probable buyers or sellers
  • Providing supervision for the timing of specific transactions
  • Developing and formulating offering memorandums
  • Negotiation of sale agreements or terms of a purchase
  • Intermediating the compromise of compensation agreements with management teams
  • Negotiating agreements with capital sources for deal funding
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