india going global.indd - The IIPM Think Tank

PANORAMA
MERGERS AND
ACQUISITIONS :
GET THE BASICS RIGHT
Mergers and acquisitions
are a common
phenomenon in a
competitive and free
economy and as
India integrates into
the world economy,
there will be several
opportunities for
M&As...
Mergers and acquisitions are one of the tactics for continued growth in
a highly charged global scenario. The consolidation integrates two
organization to cut costs, reduces competition and consequently
increases market share. Mergers and acquisitions are manifestations of an
inorganic growth process.
Mergers can be classified into three categories: when two entities amalgamate
and give birth to a new entity; when a relatively small and less profitable
company merges with a big company; when a relatively big and profitable
company merges with a smaller company (sometimes even a loss-making
company for that matter).While mergers can be defined to mean unification
of two players into a single entity, acquisitions are situations where one player
buys out the other to combine the bought entity with itself. The usual form
of consideration for a merger is exchange of shares of the acquiring firm with
the shares of the target company. In acquisitions, the consideration may take
the form of cash consideration or loan instruments such as debentures. The
regulatory regime governing M&A is complex and straddles several areas of law
and accounting, not to mention business concerns. The restrictions on M&A
transactions in India have been substantially relaxed with the liberalisation of
the economy. Thus, the provisions concerning M&A under the Monopolies
and Restrictive Trade Practice Act, 1969 (MRTP) and the restrictions under
12 Need the Dough July-October - 2007