Benefits, History, Examples

2.  Mergers and acquisitions (M&A) is a general
term that refers to the consolidation of
companies or assets. While there are several
types of transactions classified under the
notion of M&A, a merger means a
combination of two companies to form a
new company, while an acquisition is the
purchase of one company by another in
which no new company is formed.

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In a merger, the boards of
directors for two companies
approve the combination and
seek shareholders’ approval.
After the merger, the acquired
company ceases to exist and
becomes part of the acquiring
company. A merger in 2007
was a deal between Digital
Computers and Compaq,
where
Compaq absorbed Digital
Computers.

4. In an acquisition, the acquiring company
obtains the majority stake in the
acquired firms, which does not change
its name or legal structure. An example
of this transaction is Manulife Financial
Corporation's 2004 acquisition of John
Hancock Financial Services, where both
companies preserved their names and
forms of organization.
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History of merger and
acquisition in India
•The concept of M and A in India was not popular until the year 1988.
•The key factor contributing to fewer companies involved in the merger is the regulatory and
prohibitory provisions of MRTP Act ,1969. (Monopolies and Restrictive Trade Practices Act
1969)
•The year 1988 witnessed one of the oldest business acquisitions or company mergers in
India.
•As for now the scenario has completely changed with increasing competition and globalization
of business . It is believed that at present India has now emerged as one of the top countries
entering into M and A.

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Different Types of Merger
• Horizontal Merger
• Vertical Merger
• Conglomerate Merger

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8. Increase in Capital
Base
Increase in
Customer
Base
Synergy Reduction in
Competition
Reduction in Cost
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9. Whenever M or A takes
place, the capital base
of the newly formed
firm always increases
i.e the equity share
capital increases. This
own capital will help
newly formed
organization to expand
its existing business. 9

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In case of a M&A their existing customer will remain
the same but their customer base will increase.
At the same time due to broader capital base,cost
of production will decrease or this newly formed
firm can sell the product at lesser pofit margin.

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4.Reduction in Competition
When two companies merge together, or a giant company
acquires small organization there will be reduction in
competition for given industry, whereby unfair trade
practices are reduced.At the same time the proposal of
M&A is to be submitted to the ROC(Registar of Companies)
as well as to the Competition Tribunal(Competition Act
2003) where their approval is must.

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5.Reduction in cost
In case of M&A, the newly formed firm can afford to purchase raw
material at wholesale price, can opt for contractual labours and
high tech machines which will contribute automatically for the
reduction in the cost.

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Examples of Merger and
Acquisitions
The $26.2 billion acquisition of LinkedIn by
Microsoft
• LinkedIn has 433 million users, more than a
quarter of whom are in the US.
• LinkedIn knows about people better than
Microsoft does

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Foodpanda acquires food ordering portal Just Eat
India
• To strengthen its presence in India.
• Foodpanda will assume full ownership of
Just Eat India.
• According to Rohit Chadda, the two
companies will continue to operate
independently and the Just Eat brand will
continue to exist separately.
• He does not rule out an integration of the
two platforms going forward. “I can’t rule it
out and we will take a decision in due
course of time. As of today, we will keep the
brands and teams separate,” he added.

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Flipkart- Myntra
• In order to accelerate growth- by exploiting
mutual synergies (like the technology
at Flipkart and market leadership of Myntra)
• Mukesh Bansal said, “Fashion industry is so
diversified that it cannot be constrained in one portal.
There’s enough scope for multiple players to sustain
and grow. Hence, both Flipkart fashion business
and Myntra will keep on operating as separate
entities (and different websites/portals).”

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Snapdeal acquires Freecharge for $400million (2400 cr)
• Snapdeal co-founder and CEO Kunal Bahl said
here on Wednesday that the joint entity would
create the country's largest mobile commerce
platform with over 40 million customers. About half
of that comes from FreeCharge.
• FreeCharge gives Snapdeal access to a much
younger audience.
• Bahl said Snapdeal and FreeCharge would be able
to cross-sell services on each other's platforms.

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