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Mergers & Acquisitions

Companies Act 2013, define merger as the collaboration of two or more companies to form a new company. The acquisition, on the other hand, is defined as a process of selling one company to another. When one company decides to amalgamate with another company and setup itself as the new owner of the company, this process of purchase is called acquisition.

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Overview of Mergers & Acquisitions

Strategies of Mergers and Acquisitions are globally adopted by the companies to survive in this vying world. Mergers and Acquisitions are also known as M&A. Companies Act 2013, define merger as the collaboration of two or more companies to form a new company. The acquisition, on the other hand, is defined as a process of selling one company to another. When one company decides to amalgamate with another company and setup itself as the new company, this process is called acquisition.

In simple term, the merger can be defined as an agreement between two companies which decides to merge with the aim to form a new company. Merger is done with the desire to expand the business and to widen its reach in every corner of the market.

Whereas, acquisition is an act of unfriendly deals where target Company has no desire to be purchased. Therefore, a purchasing deal between two companies often falls under the criteria of merger and acquisition depending on the type of purchase, ie, whether the purchase is friendly or hostile.

Reason behind Mergers and Acquisitions

Merger and Acquisition are fundamental tools that are considered by the organizations to flare their business around the globe and furthermore to render sustainable development. Subsequently coming up next are the reason behind mergers & acquisitions

Reason behind Mergers and Acquisitions

Types of Merger & Acquisition in India

Types of Merger & Acquisition in India

Merger

  • Horizontal Merger

    A merger between two companies who deals in the same product or services

  • Vertical Mergers

    This type of merger happens between those entities who are involved in the dealing of complementary goods and services.

  • Co-generic Mergers

    A merger between two parties that are somehow related to each other

  • Conglomerate Mergers

    A merger between organizations that deal in different types of business

  • Cash Mergers

    A kind of merger where shareholders get cash instead of shares of the merged entity

  • Forward Mergers

    When an organization decides to merge with its buyers

  • Reverse Mergers

    When an entity decided to merge with its suppliers of raw material

Acquisition

Acquisition is also known as the takeover that includes selling and buying of entire business between the included entities. Acquisition can happen in either friendly manner or hostile manner. Well, it involves the process of either acquiring the assets and liabilities of the target company or buying the shares of the target company. A demerger is likewise a type of acquisition where a solitary element is divided into at least two elements.

Joint Ventures

At the point when at least two companies meet up for a characterized reason – it could be entering another market or another business or for a particular ability, that adjoining is known as the Joint Venture. It could be for a restricted period or for an unlimited term.

Process of Mergers & Acquisitions in India

Companies Act 2013 defines the whole process of mergers and acquisition in India. During the process of mergers and acquisitions, analysis of the companies is done which includes accessing company’s information, going through its insights and coming to a conclusion regarding implementing the process of mergers and acquisition. An effective and complete execution of mergers and acquisition process includes technique which is structured with the aim to maximize the profit and minimize the level of risk.

Steps to follow while going through Mergers and Acquisition in India

Process of Mergers & Acquisitions in India
  • Dig into Memorandum to Examine the Object Clause

    The primary and paramount thing to do while going for M&A in India is to scrutinize the memorandum of association of the company with the purpose to carry a search and check whether the power of merger is endowed in it or not.

  • Share a word with Stock Exchange

    It is a good idea to illuminate the stock exchange about the proposed merger and acquisition occurring and send all the relevant documents such as notices, resolutions, and the orders to the stock exchange within a stipulated time.

  • Draft A Merger Proposal

    The Board of the Director of both the organizations will introduce an affirmation on the draft of the merger proposition and furthermore pass the resolution for approving its key administrative staff and different administrators to further pursue the issue.

  • File an Application to the High Courts

    In the wake of getting the affirmation on a proposal by the Board of the Director, the merger organizations should record an application to the Hon'ble High court of the individual state where the organization’s headquarter is situated.

  • Notice Dispatched to Shareholders and Creditors

    With the earlier approval of the High court, a notification ought to be sent to all the investor and creditors of the organizations about the gathering to be held and 21 days timely notification is required. The notification will be distributed in two papers one in the vernacular language of the state and the other one is an English paper.

  • Filing of the Orders with the Registrar of Companies

    The genuine confirmed copy of the request for the High Court of the state must be documented with the registrar of companies within the limited time period as indicated by the High Court.

  • Assets and Liabilities of both the Company Should be Merged

    The assets and the liabilities of both the organization ought to be passed on to the blended organization.

  • Issue for Subscription of Shares and Debentures

    When the merged organizations go to the presence as a different lawful substance then the organization can give offers and debentures after listing on stock exchange.

Need of M&A Advisory Services

Mergers and Acquisitions are incredible way to accomplish development for an organization yet include complex steps and procedures to be trailed by the involved companies to shape the new business. The Companies Act, 2013 should be followed for M&A to traverse, with inclusion from Court, SEBI (Securities Exchange Board of India) in the event of listed organizations, the Central Government as an Official Liquidator (OL) and the Regional Director of the Ministry of Corporate Affairs and so on. Since there are various parties involved, the procedure is for quite some time drawn, monotonous and on occasion problematic.

Consequently it is insightful to counsel an expert for the merger and acquisition or to take mergers and acquisitions advisory administrations as the procedure includes rigid ramifications of laws and rules and contradicting which, makes an issue in future. There are various Mergers and Acquisitions advisory firms who control their customers through this change procedure including complicated financial, legitimate and accounting issues.

Mergers and Acquisitions Services Provided by Different Firms

  • Investment Banks that go about as money related advisors to their customers. They have some expertise in endorsing, additionally go about as brokers and take up mergers and acquisitions advisory jobs as well.
  • Law offices - driving global and local law offices to provide M&A counselling services particularly to business elements that are being merged or acquired cross borders.
  • Audit and Accounting Firms – these organizations work in auditing, bookkeeping, and tax assessment matters. They give expert advice in the financial matter related to M&A advisory firms.
  • Consulting and M&A Advisory firms – these organizations give committed M&A support whether it is cross-industry or cross-border as their group has industry specialists to help choose the best M&A strategy.

Frequently Asked Questions

  • Eliminate Competition
  • Establish a bigger market share
  • Create a strong brand
  • Reduce tax liabilities
  • Set off the losses of one entity against the profit of the other
  • Horizontal Merger
  • Vertical Mergers
  • Co-generic Mergers
  • Conglomerate Mergers
  • Cash Mergers
  • Forward Mergers

Mergers and acquisitions occur for some, key business reasons, however the most widely recognized explanations behind any business mix are monetary at their centre. Increasing a competitive advantage or bigger piece of the overall industry. Companies may choose to merge into request to increase a superior distribution or advertising system.

Also, from the getting organization's point of view, it's very normal for the business focal points they looked for – a mix of access to new items, access to new markets or geographies, piece of the overall industry expands, development quicker than natural development, and additionally economies of scale –simply fail to materialize.

A merger happens when an organization finds an advantage in joining business tasks with another organization such that will add to increased shareholder value.

As indicated by examined inquire about and an ongoing Harvard Business Review report, the failure rate for mergers and acquisitions (M&A) sits between 70 percent and 90 percent.

Mergers and acquisitions (M&A) are mind boggling business exchanges with much on the line. If a merger or acquisition isn't effective, a business can lose considerable resources.

Acquisition is also known as the takeover that includes selling and buying of entire business between the included entities. Acquisition can happen in either friendly manner or hostile manner. Well, it involves the process of either acquiring the assets and liabilities of the target company or buying the shares of the target company. A demerger is likewise a type of acquisition where a solitary element is divided into at least two elements.

At the point when at least two substances meet up for a characterized reason – it could be entering another market or another business or for a particular ability, that abutting is known as the Joint Venture. It could be for a restricted period or for a boundless term.

  • Dig into Memorandum to Examine the Object Clause

    The primary and paramount thing to do while going for M&A in India is to scrutinize the memorandum of association of the company with the purpose to carry a search and check whether the power of merger is endowed in it or not.

  • Share a word with Stock Exchange

    It is a good idea to illuminate the stock exchange about the proposed merger and acquisition occurring and send all the relevant documents such as notices, resolutions, and the orders to the stock exchange within a stipulated time.

  • Draft A Merger Proposal

    The Board of the Director of both the organizations will introduce an affirmation on the draft of the merger proposition and furthermore pass the goals for approving its key administrative staff and different administrators to additionally seek after the issue.

  • Draft A Merger Proposal

    The Board of the Director of both the organizations will introduce an affirmation on the draft of the merger proposition and furthermore pass the resolution for approving its key administrative staff and different administrators to further pursue the issue.

  • File an Application to the High Courts

    In the wake of getting the affirmation on a proposal by the Board of the Director, the merger organizations should record an application to the Hon'ble High court of the individual state where the organization’s headquarter is situated.

  • Notice Dispatched to Shareholders and Creditors

    With the earlier approval of the High court, a notification ought to be sent to all the investor and creditors of the organizations about the gathering to be held and 21 days timely notification is required. The notification will be distributed in two papers one in the vernacular language of the state and the other one is an English paper.

  • Filing of the Orders with the Registrar of Companies

    The genuine confirmed copy of the request for the High Court of the state must be documented with the registrar of companies within the limited time period as indicated by the High Court.

  • Assets and Liabilities of both the Company Should be Merged

    The assets and the liabilities of both the organization ought to be passed on to the blended organization.

  • Issue for Subscription of Shares and Debentures

    When the merged organizations go to the presence as a different lawful substance then the organization can give offers and debentures after listing on stock exchange.

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