Merger and Acquisition

Mergers and Acquisitions meaning A merger means combing two or more companies to form a new company in an expanded form. Both companies will cease to exist in a merger as they operate as another new company. A merger occurs when a company finds an advantage in joining the business with another company, such as an increased shareholder value.

Our expert team of M&A advisors works diligently to manage all aspects of the process, from planning to execution. Whether it’s aligning the goals of merging companies or facilitating acquisitions, we focus on creating synergistic partnerships that drive value for all stakeholders.

We meticulously analyse every transaction to uncover opportunities, identify risks, and negotiate favourable terms for our clients. Our primary objective is to ensure that every deal is executed effectively, yielding profitable outcomes for all parties involved.

Our M&A Services Include:

  • Buy-Side Advisory: Assisting clients in identifying potential acquisition targets, conducting due diligence, and negotiating favourable terms.
  • Sell-Side Advisory: Representing companies looking to sell and ensuring they achieve optimal value through strategic planning and market positioning.
  • Merger Support: Facilitating merger proposals, structuring deals, and ensuring compatibility between the merging entities.
  • Regulatory Compliance: Ensuring all transactions meet legal and regulatory requirements, avoiding potential pitfalls.
  • Post-Merger Integration: Assisting in the seamless integration of operations, systems, and cultures post-transaction to maximize synergies.

We have done merger of 24 companies as follows

  • 6 power companies into one listed power company
  • 16 companies’ merger into one non listed company
  • 1 company merger into one listed company
  • 1 listed company merger in one listed company

We have signed Special purpose financials of above 24 companies & filed revised tax audit report.

The acquisition is the process of selling one company to another, i.e. buying and selling the entire business between the entities. In an acquisition, one company takes over the other company either in a friendly or a hostile manner.

Difference between Merger and Acquisition

  • Two companies of similar size combine to form a new entity in a merger. A larger company acquires a smaller company and absorbs smaller company business in an acquisition.
  • A merger occurs when two companies combine forces to create one joint company. An acquisition takes place when one company takeovers the business of another company.
  • In a merger, the merged companies work under a new name. In an acquisition, the acquired company works under the parent company name (acquiring company name).
  • A merger leads to the issue of new shares to the shareholders of both companies. No new shares are issued to the acquired company shareholders in an acquisition.

Reasons for Mergers and Acquisitions

Expand performance

The common reason for mergers and acquisitions is to perform better in the market. The worth and performance of the two combined companies are more than the two individual companies. It can be due to cost reduction or higher revenues.

Higher growth

Inorganic growth through mergers and acquisitions is usually a quick way to achieve higher revenues for a company than organic growth. A company can benefit by merging or acquiring another company by getting the latest capabilities without spending on developing the same internally.

Stronger market power

In a horizontal merger, companies can get a high market share and the power to influence prices. Vertical mergers also lead to market power since the company will control the entire supply chain without disturbances in supply.

Diversification

Companies operating in cyclical industries should diversify their cash flows to avoid significant losses during an industry slowdown. Acquiring a company in a non-cyclical industry enables the company to reduce and diversify its market risk.

Tax benefits

The tax losses of the acquired company help the acquiring company to lower its tax liability. While acquiring a company, tax benefits are considered, where one company realises significant taxable income while the other incurs tax loss carry forwards. However, mergers are usually not done just to avoid taxes.

Types of Mergers and Acquisitions

The following are the types of mergers:

  • Horizontal merger- A merger between two companies which deal in the same service or product.
  • Vertical merger- A merger between two companies working in different stages in producing and supplying the same product.
  • Congeneric/conglomerate mergers- A merger between companies whose products or markets are unrelated or serve a different consumer base.
  • Cash mergers- A merger where company shareholders get cash instead of shares of the merged company.
  • Forward mergers- A merger between the supplier/vendor company and the buyer/client company.
  • Reverse mergers- Merger of a company with the company that supplies raw materials.

The following are the types of acquisitions:

  • Asset purchase- Acquisition is made by acquiring the target company’s assets. The acquiring company purchases the target company’s assets and pays them directly.
  • Stock purchase- Acquisition is made by buying the target company’s shares. The acquiring company pays cash to the target company’s shareholders or gives them shares in exchange for the target company’s shares. The target company’s shareholders receive compensation.

The following is the procedure to be followed for merger:

  1. Memorandum of Articles –to allow merger (else amend the MOA)
  2. Convene a preliminary board meeting
  3. Due diligence process kick off
  4. Share Swap ratio and preparation of valuation report
  5. Preparation of the scheme of Amalgamation
  6. Convene Board Meeting to approve scheme, valuation report and swap ration (also inform the stock exchanges)
  7. Application to be made to NCLT –to call for AGM
  8. Convene AGM
  9. Report the results of AGM to NCLT –for approval
  10. Approval for accounting entry as per Ind AS 103 and AS 14
  11. Obtain NCLT order seeking sanction on the scheme
  12. Filling the copy of the order of NCLT with ROC
  13. Transfer the assets and liabilities to the acquirer
  14. Allotment of the shares to shareholders of transferor company
  15. Listing of shares in the stock exchange (if listed)
  16. Post merger integration