This document discusses various types of mergers and acquisitions, including mergers, amalgamations, acquisitions, divestitures, demergers, spin-offs, split-ups, split-offs, and carve-outs. It also discusses joint ventures and reduction of capital. Some key motivations for mergers are to diversify activities, achieve economies of scale, reduce duplicate expenses, and allow for inorganic growth. However, mergers can also reduce competition and increase market dominance, bringing potential inefficiencies.

1. Mergers and Acquisition

2.  Merger - combination of two or more enterprises
whereby the assets and liabilities of one are vested
in the other, with the effect that the former
enterprise loses its identity.
 Amalgamation – combination of two corporate
entities where the assets and liabilities of both are
vested in a third entity, with the effect that both
former entities lose their identities to form a new
entity.

3. Competition Act 2002
Section 2(a)
 Acquisition – the acquiring, directly or
indirectly of shares, voting rights, assets or control
over management or assets, of another enterprise.

4.  Divestiture- It means an out and out sale of all or
substantially all the assets of the company or any of
its business undertaking/divisions, usually for cash
(or for a combination of cash and debt) and not
against equity shares.

5. Demerger
Spin-off- involves transfer of all or substantially all the
assets, liabilities, loans and business (on a going concern
basis) of one of the business divisions or undertaking to
another company whose shares are allotted to the
shareholders of the transferor company on a
proportionate basis.

6.  Split-up- involves transfer of all or substantially all the
assets, liabilities, loans and business (on a going concern
basis) of the company to two or more companies in
which, again like spin-off, the shares in each of the new
companies are allotted to the original shareholders of
the company on a proportionate basis but unlike spin-
off, the transferor company ceases to exist.

7.  Split-off- is a spin-off with the difference that in
split-off, all the shareholders of the transferor
company do not get the shares of the transferee
company in the same proportion in which they held
the shares in the transferor company.

8. Carve-out
 It is a hybrid of divestiture and spin-off. In carve
out, a company transfers all the assets, liabilities,
loans and business of one of its
divisions/undertakings to its 100 % subsidiary.
Thus at the time of transfer, the shares are issued to
the transferor company itself and not to its
shareholders. Later on, the company sells the shares
in parts to outsiders-whether institutional investors
by private placement or to retail investors by offer
for sale.

9. Joint Venture
 A business arrangement in which two or more
parties agree to pool their resources for the purpose
of accomplishing a specific task. This task can be a
new project or any other business activity. In a joint
venture (JV), each of the participants is responsible
for profits, losses and costs associated with it.
However, the venture is its own entity, separate and
apart from the participants' other business interests.

10. Reduction of Capital
 This is a legal process u/s 100 to 104 of the
Companies Act, 1956 by which a company is
allowed to extinguish or reduce liability on any of its
shares in respect of shares capital not paid up or is
allowed to cancel any paid-up shares capital which
is lost or is allowed to pay off any paid-up capital
which is in excess of its requirement.

11. Why would a company reduce its
capital?
 By extinguishing or reducing the liability in respect
of share capital not paid up(since not called as yet)
 By writing off or cancelling the capital which is lost
 By paying off or reducing excess capital that is not
required by the company

12. Motivation for Mergers
 To diversify the areas of activity and thereby to
reduce business risks;
 To achieve optimum size so as to reap the benefits
of economy of scale;
 To reduce the duplicate expenses and thereby to
improve the profitability;
 To serve the customer better;

13. Motivation for Mergers
 To have cohesiveness in control of the organisation;
 To grow without any gestation period;
 Inorganic growth is believed to be much faster
compared to organic growth.

14. Adverse Effects of Mergers
 Mergers especially horizontal reduces the number
of players and consequently the competition in the
market;
 Mergers amongst rivals is invariably unfriendly to
consumers;
 Mergers often results in increased market share and
thereby leads to dominance which makes the
resultant enterprise complacent

15. Adverse Effects of Mergers
 and thereby brings inefficiency in the
organization;
 Mergers between healthy and unhealthy enterprises
reduces the tax liability and thereby makes the
State’s exchequer poor;
 Mergers often fail to create harmonization in
human relation.