Financial services mergers and acquisition

ADVISORY SERVICES
REGARDING
MERGERS AND
TAKEOVERS
BY
VIDHYA.K

 Merger refers to a situation where one
company acquires the net assets of another
company and the latter is dissolved.
 The acquired company pays the cash or
securities to the shareholders of that merged
company.
Merger of a healthy
company with a
sick company.

TYPES OF MERGERS
Horizontal merger.
Vertical merger.
Conglomerate merger.

HORIZONTAL MERGER
Combining two or more companies in
the
same line of business.
Two companies which are producing
essentially the same products or
providing
the same services and are in direct
competition with each other will joint
together.

• LIPTON INDIA AND BROOKE BOND
MERGED

VERTICAL MERGER
Two or more companies which are
engaged in the production of same goods
or services but at different stages of
production or services, may join together.

EXAMPLE
 RELIANCE TELECOMMUNICATIONS
AND FLAG TELECOM GROUP GOT
MERGED.

CONGLOMERATE MERGERS
Merging of two or more
companies whose business is
unrelated with each other
vertically or horizontally.

EXAMPLE:
 L&T COMPANY AND VOLTAS LTD...

TAKEOVERS:
It refers to acquiring the control by one
company over another company.
The control may be acquired through
purchase of majority of the shares of
the other company.
The acquiring company is termed as
HOLDING COMPANY.

CONT...
The company which holds majority of
the shares of another company is
called HOLDING COMPANY.
The SUBSIDIARY COMPANY is that
which is under the control of holding
company.

EXAMPLE:
RELIANCE INDUSTRIES
LIMITED, ACQUIRED 78%
OF SHARES IN NETWORK18
MEDIA AND INVESTMENTS
FOR RS.4000CRORES IN
MAY 2014

DIFFERENCE BETWEEN MERGERS AND
ACQUISITIONS
MERGERS
One company is
merged with another
and the latter is
dissolved.
It is a mutual
decision.
ACQUISITIONS
One company having
control over another
and the latter
continue to exist.
It can be friendly
takeover or hostile
takeover.

CONT...
MERGERS
Merger is more
expensive-legal cost
is high.
It is time consuming
and the company
has to maintain so
much legal issues.
 Dilution of
ownership occurs in
merger.
ACQUISITIONS
Less expensive than
mergers.
It is faster and easier
transaction.
The acquirer does not
experience the
dilution of ownership.

ROLE OF MERCHANT
BANKING IN MERGERS AND
TAKEOVERS:
Merchant bankers act as a middlemen
in setting negotiation between the
offeree and the offeror.
Merchant bankers are the
“professional expert”, they are in the
position to safeguard the interest of
the shareholders in both the
companies.

Cont....
Merchant banker will negotiate the
purchase consideration and the mode
of
Payment.
Merchant bankers will estimate
the financial positions of the
companies.
Merchant banker will get approval
from the government/RBI, draft the
format of mergers, amalgamations

The role of merchant bankers
falls in either of the Two:
SELLER /TARGET
REPRESENTATION
BUYER/ACQUIRER
REPRESENTATION

SELLER/TARGET
REPRESENTATION:
The company which planned to sell their
business, will request the merchant banker
to
help them in selling with appropriate
consideration.
The company that come for selling its
business,
sometimes have an idea to whom they want
to
sell their business. In this case, the merchant
bankers duty becomes easier that they can

BUYER/ACQUIRER REPRESENTATION
The company that wants to purchase
another company, will request the
merchant bankers for acquiring it and
sometimes asks for financing also.
In this case, the acquiring company will
already have an idea of purchasing a
particular company, or vice versa.
The merchant banker in this case can
act as a middlemen and complete his
duty by getting approval from
government/RBI.
Make the right price for transaction to be
held.

CONT....
If the buying company do not have an
idea regarding which company to
purchase, they will request the merchant
bankers to help them.
In this case, merchant bankers will
represent the buying company, search
for suitable business firm to purchase,
make negotiations regarding the
purchase consideration, payment mode
and completes his duty by framing the
merger/amalgamation/takeovers format,
get approval from GOVT/RBI.

LAWS REGULATING
MERGERS/TAKEOVERS:
Section 390 to 395 of the companies
act, deals with arrangements,
mergers, amalgamations, and the
procedure to be followed for getting
the arrangement or the scheme to be
approved.
The scheme must get approved by
majority of the shareholders.

CONT...
The companies should conduct the
meeting and give notice disclosing all
materials relating to the scheme.
The central government is also required
to file its report in an application seeking
approval of compromise, under section
394(A).
The merchant banker should value the
assets, liabilities and financial position of
both the firms and frame the report.

RULES FOR MERGERS AND
TAKEOVERS:
The acquirer must appoint a merchant
banker, holding a certificate of
registration as per the SEBI
regulations.
The merchant banker should complete
all the legal formalities which may
involve listing obligations of stock
exchanges, SEBI norms, companies
act, etc.

CONT...
Merger requires approval of the court,
it has the wider powers in merger
process.
In case of both merger and
acquisitions, the merchant banker is
appointed to finalise the details which
are made in accordance with the
guidelines framed by SEBI.
Then the merging company/ Takeover
company will inform to SEBI and stock
exchange.

CONT...
After the companies got merged or
acquisitions takes place, the merchant
banker will collect certain percentage as
fees for the service rendered by them.

Financial services mergers and acquisition

Financial services mergers and acquisition

More Related Content

What's hot (20)

Similar to Financial services mergers and acquisition (20)

Recently uploaded (20)

Financial services mergers and acquisition