Submitted To Course Instructor

Submitted To Course Instructor:-
Mr. Mani Pratap

Assistant Professsor, Law
Subject:- Merger & Acquisition, Law 506
Continuous Assessment
Submitted By Student:-
Amitesh Tejaswi
BA.LLB (Hons)
2016-21, IXth Semester
CUSB1613125060
Project-Topic
Meaning and Concept of Merger
and Acquisition
Contents:-
• Introduction
• History of Merger and Acquisition
• Need of Merger and Acquisition
• Definitions of Merger
• Meaning and concept of Merger
• Types of Merger
• Definitions of Acquisition
• Meaning and concept of Acquisition
• Kinds of Acquisition
• Motive behind Merger and Acquisition
• Advantages of Merger and Acquisition
• Disadvantages of Merger and Acquisition
• Success & Failure of Merger and Acquisition
• Conclusion
Introduction:-
Mergers and acquisitions (M&A) are defined as consolidation of companies. Differentiating the two terms,
Mergers is the combination of two companies to form one, while Acquisitions is one company taken over
by the other. M&A is one of the major aspects of corporate finance world. The reasoning behind M&A
generally given is that two separate companies together create more value compared to being on an
individual stand. With the objective of wealth maximization, companies keep evaluating different
opportunities through the route of merger or acquisition.
Mergers & Acquisitions can take place:-
• by purchasing assets
• by purchasing common shares
• by exchange of shares for assets
• by exchanging shares for shares
In corporate finance, mergers and acquisitions (M&A) are transactions in which the ownership of
companies, other business organizations, or their operating units are transferred or consolidated with other
entities. As an aspect of strategic management, M&A can allow enterprises to grow or downsize, and
change the nature of their business or competitive position.
From a legal point of view, a merger is a legal consolidation of two entities into one, whereas an acquisition
occurs when one entity takes ownership of another entity's stock, equity interests or assets.
History of Merger & Acquisition:-
Merger and acquisition activity in the United States has typically run in cycles, with peaks
coinciding with periods of strong business growth. U.S. merger activity has been marked
by five prominent waves: one around the turn of the twentieth century, the second peaking
in 1929, the third in the latter half of the 1960s, the fourth in the first half of the 1980s, and
the fifth in the latter half of the 1990s.
This last peak, in the final years of the twentieth century, brought very high levels of
merger activity. Bolstered by a strong stock market, businesses merged at an
unprecedented rate. The total dollar volume of mergers increased throughout the 1990s,
setting new records each year from 1994 to 1999. Many of the acquisitions involved huge
companies and enormous dollar amounts. Disney acquired ABC Capital Cities z acquired
Citicorp for $72.6 billion, Nation Bank acquired Bank of America for $61.6 billion and
Daimler-Benz acquired Chrysler for $39.5 billion.
Need for Mergers & Acquisitions:-
• Growth
• Synergy
• Diversification
• Economies of scale
• Increase Market Share & Revenue
• Increase Supply-Chain Pricing Power
• Eliminate Competition
• Acquiring new technology
• Procurement of production facilities
• Market expansion strategy
• Financial synergy
• Own development plans
• Corporate friendliness
• General gains
• Taxes
Definitions of Merger:-
Mergers involve the mutual decision of two companies to combine & become
one entity. The combined business can cut cost of operation & increase profit
which will boost shareholders value for both groups of shareholders. In
Merger of two corporations, shareholders usually have their shares in the old
organization & are exchanged for an equal numbers of shares in the merged
entity.
According to the Oxford Dictionary “merger” means “combining of two
companies into one”. Merger is a fusion between two or more enterprises,
whereby the identity of one or more is lost and the result is a single enterprise.
In merger the assets and liabilities of the companies get vested in another
company, the company that is merged losing its identity and its shareholders
becoming shareholders of the other company.
Meaning and Concept of Merger:-
A merger can be defined as the fusion or the absorption of one company by
another. It may also be understood as an arrangement; thereby the assets of
two or more companies get transferred to or come under the control of one
company.
Amalgamation legal process by which two or more companies are joined
together to form a new entity or one or more companies are to be absorbed
or blended with another and as a consequence the amalgamating company
loses its existence and its shareholders become the shareholders of the new
company or the amalgamated company. The word amalgamation or merger
is not defined anywhere under the companies act 1956
Types of Mergers:-
• Horizontal Merger
• Vertical Merger
• Conglomerate Merger
• Congeneric Mergers
• Cash Merger
• Triangular Merger
Definition of Acquisition:-
An acquisition usually refers to a purchase of a smaller firm by a larger one.
Acquisition, also known as a takeover or a buyout, is the buying of one company by
another. Acquisitions or takeovers occur between the bidding company and the target
company. There may be either hostile or friendly takeovers. Acquisition in general
sense is acquiring the ownership in the property.
In the context of business combinations, an acquisition is the purchase by one
company of a controlling interest in the share capital, or the all or substantially all of
the assets and/or liabilities, of another company. A takeover may be friendly or hostile,
depending on the offeror company’s approach, and may be affected through
agreements between the offeror and the majority shareholders, purchase of shares from
the open market, or by making an offer for acquisition of the offeree shares to the
entire body of shareholders
Meaning and Concept of Acquisition:-
Acquisition in general sense is acquiring the ownership in the property. In the context of
business combinations, an acquisition is the purchase by one company of a controlling
interest in the share capital of another existing company.
Acquisition means an attempt by one firm to gain majority interest in the another firm called
target firm &dispose-off its assets or to take the target firm private by small group of
investors.
Kinds of Acquisition:-
• Friendly Takeover
• Hostile Takeover
Motives behind Merger and Acquisition:-
1. Economies of Scale
2. Operating Economies
3. Synergy
4. Tax Savings
5. Greater Value Generation
6. Gain in Market Share
Advantages of Merger and Acquisition:-

Following are the some advantages:-
• The most common reason for firms to enter into merger and acquisition is to merge their power
and control over the markets.
• Another advantage is Synergy that is the magic power that allow for increased value
efficiencies of the new entity and it takes the shape of returns enrichment and cost savings.
• Economies of scale is formed by sharing the resources and services (Richard et al, 2007).
Union of 2 firm’s leads in overall cost reduction giving a competitive advantage, that is
feasible as a result of raised buying power and longer production runs.
• Decrease of risk using innovative.
Disadvantages of Merger and Acquisition:-
Following are the some difficulties encountered with a merger-
• Loss of experienced workers aside from workers in leadership positions. This kind of
loss inevitably involves loss of business understand and on the other hand that will be
worrying to exchange or will exclusively get replaced at nice value.
• As a result of M&A, employees of the small merging firm may require exhaustive re-
skilling.
• Company will face major difficulties thanks to frictions and internal competition that
may occur among the staff of the united companies. There is conjointly risk of getting
surplus employees in some departments.
• Merging two firms that are doing similar activities may mean duplication and over
capability within the company that may need retrenchments.
• Increase in costs might result if the right management of modification and also the
implementation of the merger and acquisition dealing are delayed.
Success & Failure of Merger & Acquisition:-
Factors responsible for successful mergers and acquisitions:-
• Strategy
• Motive
• Price
• Post-Merger Management
• Due Diligence
Factors responsible for failure of mergers and acquisitions:-

• Payment of high price
• Culture clash
• Overstated synergies
• Failure to integrate operations
• Inadequate due diligence
Conclusion:-
Mergers and acquisition transactions are often affected by government rules and regulations,
most of the countries do not allowed foreign companies to enter into local market alone. Such
foreign companies can enter only when they make merger with any local company.
Mergers and acquisition result in customers receiving more services which generally include
larger loan limits, more branches and more Automated Teller Machines (ATMs).These results
are further reiterated by the case study of merger of ICICI Bank with the Bank of Rajasthan.
The amalgamation of ICICI bank with Bank of Rajasthan came in to effect on August 13,
2010 when RBI approved the deal. Post-merger results are satisfactory. Merger has increased
the liquidity and profitability position of ICICI bank. HR issues have always being a major
concern for the merging firms because the major impact of this merger is on the employment
position of employees of BOR. The merger has increased no. of branches and no. of ATM’s.
Hence, the merger is beneficial for both the banks. Hence we conclude that mergers and
acquisitions are beneficial for the Indian banks and shall enable the Indian banking industry
to combat the global competition
Sources:-
Books-Referred:-
1. Merger Acquisitions & Corporate Restructuring: - By Rabi Naryan Kar & Minakshi
2. Corporate Mergers Amalgamations and Takeovers: - By J.C Verma
Websites:-
1. http://www.legalserviceindia.com/
2. https://corporatefinanceinstitute.com/
3. https://www.investopedia.com/
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