This document discusses mergers and acquisitions. It defines a merger as a combination of two companies where one is absorbed by the other. An acquisition occurs when a larger company takes over the shares and assets of a smaller one. The document outlines the differences between mergers and acquisitions and discusses reasons for and against each. It also describes the types of mergers and acquisitions as well as the process for mergers and acquisitions in India.

1. MERGERS &
ACQUISITIONBY
LERIE PERERA-
PRATIK SAVLA-135
RITESH TRIPATHI-161
VISHAL WAVAL-
SURAJ .J - 162
SAGAR SRIVASTAVA-155

2. WHAT IS MERGER?
A merger is a combination of two or more companies where one corporation is
completely absorbed by another corporation.
WHAT IS ACQUISITION?
Acquisition essentially means ‘to acquire’ or ‘to takeover’. Here a bigger company will
take over the shares and assets of the smaller company.

3. DEFNITIONS
 Parties to the acquisitions:
 The target company
 The acquiring company
 Classified based on endorsement of parties’ management:
 A hostile takeover
 A friendly transaction

4. DIFFERENCE BETWEEN MERGER AND
ACQUISITION:
i. Merging of two organization in to
one.
ii. It is the mutual decision.
iii. Merger is expensive than
acquisition(higher legal cost).
iv. Through merger shareholders can
increase their net worth.
v. It is time consuming and the
company has to maintain so much
legal issues.
vi. Dilution of ownership occurs in
merger.
i. Buying one organization by
another.
ii. It can be friendly takeover or
hostile takeover.
iii. Acquisition is less expensive than
merger.
iv. Buyers cannot raise their enough
capital.
v. It is faster and easier transaction.
vi. The acquirer does not experience
the dilution of ownership.
MERGER ACQUISITION

5. MERGER:WHY & WHY NOT
5
i. Increase Market Share.
ii. Economies of scale
iii. Profit for Research and
development.
iv. Benefits on account of tax
shields like carried forward
losses or unclaimed
depreciation.
v. Reduction of competition.
i. Clash of corporate cultures
ii. Increased business
complexity
iii. Employees may be resistant
to change
WHY IS IMPORTANT PROBLEM WITH MERGER

6. ACQUISITION:WHY & WHY NOT
6
i. Increased market share.
ii. Increased speed to
market
iii. Lower risk comparing to
develop new products.
iv. Increased diversification
v. Avoid excessive
competition
i. Inadequate valuation
of target.
ii. Inability to achieve
synergy.
iii. Finance by taking
huge debt.
WHY IS IMPORTANT PROBLEM WITH ACUIQISITION

7. TYPES OF M&A
M&A
Market-extension
merger
Two companies
that sell the same
products in
different markets
Product-extension
merger
Two companies selling
different but related
products in the same
market
Conglomeration
Two companies
that have no
common business
areas

8. PROCESS OF MERGER & ACQUISITION IN
INDIA:
The process of merger and acquisition has the following steps:
i. Approval of Board of Directors
ii. Information to the stock exchange
iii. Application in the High Court
iv. Shareholders and Creditors meetings
v. Sanction by the High Court
vi. Filing of the court order
vii. Transfer of assets or liabilities
viii. Payment by cash and securities
Maximum Waiting period:210 days from the filing of notice(or the order of the
commission - whichever earlier).

10. FAILED MERGERS

11. TYPES OF MERGER
1. Horizontal Merger
2. Vertical Merger
3. Conglomerate Merger
4. Concentric Merger

12. Horizontal Merger
 Horizontal mergers are those mergers where the
companies manufacturing similar kinds of commodities
or running similar type of businesses merge with each
other.

13. COMMON MOTIVATIONS
FOR M&A
 Synergies
 Achieving more rapid growth
 Increased market power
 Gaining access to unique capabilities
 Diversification

14.  Bootstrapping EPS
 Personal benefits for managers
 Tax benefits
 Unlocking hidden value
 Achieving international business goal

15. MOTIVES OF MERGER
 Factors are
 Need for capital.
 Need for resources.
 Degree of competition and the number of competitors.
 Growth opportunities .
 Opportunities for synergy.
 Industry’s stage in its life cycle.

16. FORM OF ACQUISTION
 In a stock purchase.
 A stock purchase needs shareholder approval.
 Target shareholders are taxed on any gain.
 Acquirer assumes target’s liabilities.
 In an asset purchase.
 An asset purchase may not need shareholder approval.
 Acquirer likely avoids assumption of liabilities.

17. M&AANALYSIS
 The discounted cash flow (DCF) method is often used in the valuation of the target
company.
 The cash flow that is most appropriate is the free cash flow (FCF).
 To estimate future FCF.
 Pro forma financial statements to estimate FCF
 We use a two-stage model when we can more accurately estimate growth in the near future and then
assume a somewhat slower growth out into the future.

18. BENEFITS OF MERGERS
 Mergers create value
 Acquirers tend to overpay in merger bids.
 The transfer of wealth is from acquirer to target company shareholders.
 Roll: Overpayment results from “hubris.”
 Acquirers tend to underperform in the long run.
 They are unable to fully capture any synergies or other benefit from the merger.