The document discusses the benefits of corporate mergers and acquisitions during an economic downturn. It states that cost cutting through economies of scale is needed, but companies must consider market and public sentiment. Mergers allow companies to expand while reducing costs. The types of mergers include horizontal between competitors, vertical between suppliers and customers, and conglomerate between unrelated industries. A recent example provided is HCL's acquisition of Axon, creating a large SAP services firm.

1. Global economic meltdown
• IS taking its toll on the world
• Cost cutting to achieve Economies of
scale is the need of the hour.
• While taking cost cutting steps companies
cannot ignore the sentiments of the
market as well the people
• Though these are normal corporate
procedures it could portray the company in
bad shape

2. • Thus for the current scenario companies
need to device methods
• Which not only expand business but also
provide for economies of scale
• Therefore a bright solution for the current
scenerio would be
CORPORATE MERGERS &
ACQUSITIONS

3. WHAT IS A MERGER?
• An arrangement whereby assets of two
companies become vested in
• or under the control of one company
• Shareholders of both companies
exchange their shares for shares of the
new company
• Or shareholders of a weaker company
surrender their shares for new shares

4. To know what is merger we need to know its
synonym Amalgamation though used
together they have a thin line of difference
• Amalgamation • Merger
• It is blending of 2 or • Joining together of 2
more existing companies to form a
undertaking into one third company
undertaking
• Only the company • Both the companies
which blends with the cease to exist after a
other ceases to exist MERGER

5. Benefits of corporate mergers
• Helps to achieve economies of scale in operation
• Helps to reduce gestation period for new
business which would be complementary to
existing business
• To be a Global player
• To use liquidity available with the new company
for achieving growth through diversification
• To acquire and minimise the available managerial
skill to increase the profitability
• To take advantage of concession given to tax laws

6. WAYS TO MERGE
a) Horizontal Mergers
• 2 or more companies which are producing or
rendering essentialy the same products or
services and compete with each other directly
like sugar artificial sweeteners
• Benefits
• Eliminates duplication
• Broadens productline
• Reduction in finance for working capital
• Reduces unhealthy competition
• Widens market area

7. b) Vertical mergers
• Companies which supply basic inputs for manufacture of
final product
• The latter company merges with former
• Benefits
• Assured of supplies , able to control quality of production
company achieves economies and improves profitability
of final product
• For instance a global infrastructure company acquires a
domestic cement company to reap the benefits
c) Conglomerate mergers
• 2 or more companies carrying different business are
acquired and merged to diversify products marketed
• Company may not be related to each other horizontally
• No relation in production marketing research

8. • Benefits
• Achieves stability through diversification of
business
• To utilize spare resources whether management
or capital
• Pooling of staff and allocating them to needy
sectors
• To provide outlet for ambitions of management
where anti monolpoly laws make further
acquisition in companies own field impracticable
Now why should a company go
for a merger?

9. Why H & co should wish to acquire
control of, or to merge with S & co
• H & co can aquire shares of S & co at a discount through merger
rather than open market operation which will be costly
• As S & co was unaware of the true value of assets and not utilized it
to the max
• Shares have a poor market rating for some irrational reason
• Ineficient capital structure
• Profits earned by H & co will be at a lower multiple owing to
acquisition of shares at a discount thus earning increase
• Bringing 2 companies together will result in the combined enterprise
producing greater or more earnings than the sum of 2 companies
thereby accelerating learning processand ensuring economies of
scale
• Takeover may also be on the desire of S & co for tax reasons to
provide a proprietor with capital gains on his profit after tax

10. A glimpse of the recent successful
HCL-AXON merger
• Country's fifth largest software exporter HCL Technologies
completed the acquisition of UK-based firm Axon in a 441 million-
pound deal and the new entity would pursue deals worth 1.2 billion
dollars
• HCL Axon will be the SAP services division of HCL Technologies
and has been formed by the reverse merger of HCL’s SAP practice
and Axon Group
• The combined entity will have 4,500 consultants, with the estimated
revenues of about $500-600 million.
• The acquisition catapults HCL among the top 10 SAP services
players globally
• The acquisition brings HCL Axon’s expertise in designing,
implementing and supporting solutions for companies using SAP as
their enterprise platform. From an 11% contribution to revenues,
EAS will now account for 25% of HCL revenues