1. The document discusses various concepts related to mergers, acquisitions, and corporate restructuring including conceptual frameworks, financial frameworks, accounting treatments, and tax benefits. 2. The conceptual framework section defines different types of mergers like horizontal, vertical, and conglomerate mergers and their advantages. The financial framework covers valuation methods and capital budgeting techniques. 3. The accounting section explains the pooling of interest and purchase methods of accounting for amalgamations. Tax benefits for amalgamations include carry forward of losses, exemption from capital gains, and tax concessions for shareholders.

1. Merger,acquisition
And Corporate
Restructuring

2. Structure
• Conceptual framework
• Financial framework
• Corporate restructuring
• Accounting for amalgamation
• Tax benefits
• Exercise

3. CONCEPTIONAL
FRAMEWORK
MEANING OF
• MERGERS
• ACQUSITIONS
• AMALAMATIONS
• TAKEOVERS
• ABSORPTIONS

4. TYPES OF MERGERS
• HORIZONTAL MERGER – SIMILAR LINES
OF ACTIVITY
ADVANTAGES
• REDUCTION OF COMPETITION
• PUTTING AN END TO PRICE CUTTING
• ECONOMIES OF SCALE IN PRODUCTION
• RESEACH AND DEVELOPMENT
• MARKETING AND MANAGEMENT

5. VERTICAL MERGER –
FIRMS SUPPLYING RAW MATERIALS
MERGE WITH FIRM THAT SELLS
ADVANTAGE
• LOWER BUYING COST OF MATERIAL
• LOWER DISTRIBUITION COST
• ASSURED SUPPLIES AND MARKET
• COST ADVANTAGE

6. CONGLOMERATE MERGER
UNRELATED INDUSTRIES MERGE
PURPOSE
• DIVERSIFICATION OF RISK
• Egs Time warner-(they were into media &
movie production) & AOL-(leading
american website

7. FINANCIAL FRAMEWORK
IT COVERS THREE INTERRELATED
ASPECTS
1.DETERMINING THE FIRM’S VALUE
2.FINANCING TECHNIQUES IN MERGER
3.CAPITAL BUDGETING

8. DETERMINIG THE FIRMS
VALUE
QUANTITATIVE FACTORS – BASED ON
1. THE VALUE OF THE ASSETS
• BOOK VALUE – OWNERS EQUITY
• DEPENDS ON FIXED ASSETS AND WORKING
CAPITAL
2. APPRAISAL VALUE- INDEPENDENT APPRISAL
AGENCIES
3. MARKET VALUE – BASED ON STOCK MARKET
QUATATIONS ,BUT CHANCE FOR SPECULATION
4. EARNING PER SHARE AND P/E RATIO – IMPACT
OF EPS AFTER MERGER

9. EXERCISE
COMPANY A
• NO. OF SHARES 2
LACS
• MARKET VALUE
PER SHARE RS.25
• EPS RS.3.125
COMPANY B
• NO. OF SHARES 1
LAC
• MARKET VALUE
RS.18.75
• EPS RS.2.5

10. CONCLUSIONS
• EXCHANGE AT EPS – NO EFFECT ON
EPS AFTER MERGER
• EXCHANGE MORE THAN EPS RATIO –
COMPANY WITH LOWER EPS GAINS
• IF LESS THAN EPS RATIO – COMPANY
WITH HIGHER EPS BEFORE MERGER
GAINS

11. PRICE EARNING RATIO
APPROACH
• MEANING
• COMPUTATION :
P/E RATIO = MP/EPS
• EPS = EAT/NO. OF EQUITY SHARES
• MARKET PRICE = P/E (NO. OF TIMES)
* EPS

12. EXAMPLE
PRE MERGER
SITUATION
FIRM A FIRM B
EAT 6,25,000 2,50,000
NO. OF SHARES 2,00,000 1,00,000
EPS 3.125 2.5
P/E RATIO(TIMES) 8 7.5
MARKET PRICE PER
SHARE(MPS)
25 18.75
TOTAL MARKET
VALUE (N*MPS) OR
(EAT*P/E RATIO)
50,00,000 18,75,000

13. POST MERGER SITUATION 1
(BASED ON CURRENT
MARKET PRICE
SITUATION 2
EXCHANE RATIO/ SWAP
RATIO (ASSUMING)
2.5:3.125=.8 1 : 1
EAT(COMBINED FIRM) 6.25+2.5=8.75 8,75,000
NO. OF SHARES 2.8 lakhs 2,00,000+1,00,000=3,00,0
00
EPS 8.75/2.8=3.125 8,75,000/3,00,000=2.91/
P/E RATIO
(ASSUMED TO BE THE
SAME)
8 7.5
MPS 3.125*8=25 21.825
TOTAL MARKET VALUE 70,00,000 65,47,500

14. CONCLUSION
• IF SHARES ARE EXCHANGED BASED
ON CURRENT MARKET PRICE PER
SHARE , POST MARKET PRICE SHARE
INCREASED AT HIGHER RATE THAN
EXCHANGED BELOW THIS RATIO

15. • MARKET VALUE AFTER MERGER =
MARKET VALUE BEFORE MERGER =
68,75,000
• NET GAIN = 15,00,000
? IF EXCHANGE RATIO IS 2.5:1 WHO GAINS
WHO LOSES
? IF EXCHANGE RATIO IS 1:1 WHO GAINS
WHO LOSES
? HOW TO CALCULATE TOLERABLE SHARE
EXCHANGE RATIO

16. DETERMINATION OF
TOLERABLE SHARE
EXCHANGE RATIO
TOTAL MV
LESS: MINIMUM TO BE GIVEN TO B
75,00,000
10,00,000
NET BENEFIT TO A 65,00,000
NO. OF SHARES OF A TO A CO. SHARE
HOLDERS
1,00,000
DESIRED POST MERGER MPS 65 PER SHARE
NO. OF EQUTY SHARES TO BE ISSUED
BASED ON DESIRED MARKET PRICE
10,00,000/65 = 15,385 SHARES
TOLERANCE SHARE EXCHANGE
RATIO
50,000/15385 = 3.25 SHARES OF FIRM B,
1 SHARE IN FIRM A
1:3.25

17. CONCLUSION
• FIRM WITH HIGHER P/E RATIO CAN
ACQUIRE FIRM WITH LOWER P/E
RATIO WHICH WILL INVARIABLY
INCREASES MARKET VALUE AFTER
MERGER

18. CAPITAL BUDGETING
• THE TARGET FIRM SHOULD BE
VALUED BASED ON PV OF
INCREMENTAL CASH INFLOWS

19. CORPORATE
RESTRUCTURING
• FINANCIAL RESTRUCTURING
• RESTRUCTURING SCHEMES :
INTENAL AND EXTERNAL
RESTRUCTURING
• DEMERGERS
• BUYOUTS

20. ACCOUNTING FOR
AMALGAMATION
• POOLING INTEREST METHOD
CONDITIONS AS PER AS 14:
1. ALL ASSETS AND LIABILITIES OF TRANSFEROR CO. TO
BE THE ASSETS OF THE TRANSFREE CO.
2. AT LEAST 90% OF F.V OF EQUITY SHARE HOLDERS
SHOULD BE SHAREHOLDERS OF NEW CO.
3. PURCHACE CONSIDERATION TO BE SETTLED BY THE
NEW CO.
4. THE BUSINESS OF NEW CO. SHOULD CONTINUE
5. NO ADJUSTMENT IS INTENDED TO BE MADE TO BOOK
VALUE OF ASSETS AND LIABILITIES OF TRANSFEROR CO.

21. OTHER ACCOUNTING
TREATMENTS
1. CROSS HOLDINGS OF SHARES TO BE
CANCELLED SUBSIQUENT TO MERGER
2. INTER CO. TRANSACTIONS LIKE
DEBTORS AND CREDITORS – SALE OF
GOODS FROM ONE CO. TO ANOTHER
3. SALES TAX PAID ALREADY CAN NOT BE
RECOVERED

22. INCOME TAX RELATED
ISSUES FOR
AMALGAMATION
CONDITIONS OF AMALGAMATION UNDER INCOME TAX ACT SEC 2
(1B)
1. ALL ASSETS AND LIABILITIES OF TRANSFEROR CO. TO BE THE
ASSETS OF THE TRANSFREE CO.
2. SHARE HOLDERS HOLDING NOT LESS THAN 3/4TH
IN VALUE OF
SHARES OTHER THAN SHARES ALREADY HELD SHOULD
BECOME SHARE HOLDERS OF AMALGAMATED COMPANY
EX. NO. OF SHARES OF Altd CO. 1,00,000
NO. OF SHARES HELD BY Bltd IN Altd IS 20,000
NOMINAL VALUE OF SHARE IS RS.10
ASSUME Altd MERGE WITH Bltd THEN 75% OF 1,00,000- 20,000 =
60,000 TO BE THE SHARE HOLDES OF B CO.
NOTE:SHARE HOLDERS MAY BE EQUITY OR PREFERNCE SHARE
HOLDERS

23. OTHER CONDITIONS
• THE AMALGAMATED CO. IS AN INDIAN CO.
EXCEPTION
1. IF SHARES OF INDIAN CO.HELD BY FOREIGN BEFORE
MERGER AND SUCH FOREIGN CO. TAKEN OVER BY
ANOTHER FOREIGN CO.
2. ATLEAST 25% OF THE FOREIGN CO. (BEFORE MERGER)
TO BE SHARE HOLDERS OF THE NEW FOREIGN CO.
? WHAT IS THE BENEFIT TO THE AMALGAMATED CO.
AMALGAMATING CO.(OLD CO.)

24. • NO CAPITAL GAIN ON TRANSFER ON CAPITAL ASSETS BY THE
TRANSFEROR CO. UNDER SEC 47(VI) OF I.T ACT
? CAN NEW CO. CARRY FORWAD AND SET OF LOSS AND
DEPRECIATION
SEC 72 A TO BE FULFILLED
1. ACCUMULATED LOSSES REMAIN UNABSORBED FOR 3 OR MORE
YEARS
2. 75% OF BOOK VALUE TO BE HELD ATLEAST FOR 2 YEARS
BEFORE AMALGAMATION
3. THE AMALGAMATED CO. CONTINUES TO HOLD 3/4TH
OF BOOK
VALUE ATLEAST FOR 5 YEARS
4. NEW CO. SHOULD CONTINUE FOR ANOTHER 5 YEARS
5. NEW CO. SHOULD ACHIEVE ATLEAST 50%OF INSTALLED
CAPACITY BEFORE END OF 5 YEARS AND SHOULD CONTINUE
FOR 5 YEARS

25. 6. THE NEW AMALGAMATED CO. SHOULD FURNISH TO ASSESSING OFFICER
ABOUT PARTICULARS OF PRODUCTION
BENEFIT
• THIS SCHEME IS ALSO APPLICABLE TO BANKING INSTITUTIONS
?TATA VOLTAS & KELVINATOR HYDERABAD DIVISION vs. CBDT

26. EXAMPLE
A LTD AMALGAMATES WITH B LTD
AS ON 2007
PARTICULARS DOES NOT
SATISFY SEC
2(1B) & 72 A
SATISFIES 2(1B)
BUT DOES NOT
SATISFY 72 A
SATISFIES
BOTH 2(1B) & 72
A
A MERGES WITH
B (A GOES OUT)
NO BENEFIT
TO A & B
DOES NOT
ATTRACT
CAPITAL GAIN
FOR A BUT NO
GAIN FOR B
NO CAPITAL
GAIN TAX &
ACCUMULATED
LOSSES &
UNABSORBED
DEPERICIATION
CAN BE
CARRIED
FORWARD

27. ? If b merges with a & b goes out of market
who gains under above 3 situations
? If a&b merge with c what are the tax
implication under above situations
Assume b is a loss making co.& Have
accumulated losses & unabsorbed
depreciation
? If c is not an Indian co.

28. OTHER TAX BENEFITS
1. Expenditure on amalgamation or de-merger – allowed under sec
35DD both revenue and capital expenditure allowed
2. Expenditure on scientific research can be carried forward
3. Expenditure on acquisition of patent rights copyrights –
depreciation can be provided
4. Expenditure for obtaining license for tele-communication service
can be written off
5. Preliminary expenses
6. Capital expenditure on family planning
7. Bad debts are allowed

29. Tax Concession To Share
Holders Of Amalgamating Co.
• No capital gain tax provided new co. Is a
Indian co.& Shareholders are acquired
everything in shares

30. EXERCISE
PARTICULARS CO. A CO. B
EAT 1,40,000 37,500
NO. OF SHARES 20,000 7,500
EPS 7 5
MARKET PRICE 70 40
P/E RATIO 10 8

31. • Co. A is acquiring co. B Exchanging one share for
every 1.5 shares of B ltd & p/e ratio will continue
even after merger
? Are they better or worse of than they were before
in merger
? Determine the range of minimum & maximum
ratio between the two firms
? A is an Indian co.
? A is a foreign co.
? A merges with T & formed a new co. AT ltd
? What are the tax planning required before & after
merger