india going global.indd - The IIPM Think Tank

PANORAMA
the Public Announcement, in the form of cash deposited
with a scheduled commercial bank or bank guarantee in
favor of the Merchant Banker or deposit of acceptable securities
with appropriate margin with the Merchant Banker.
The Merchant Banker is also required to confirm the firm’s
financial arrangements. If the acquirer fails to make the payment
then the MB has a right to forfeit the escrow account
and distribute the proceeds in the following way.
• 1/3 of amount to target company
• 1/3 to regional SEs, for credit to investor protection
fund etc.
• 1/3 to be distributed on pro rata basis amongst the shareholders
who have accepted the offer.
The Merchant Banker sends back the rejected documents
which are kept in the custody of the Registrar /
Merchant Banker to the shareholder through Registered
Post. Besides forfeiture of escrow account, SEBI can also
initiate separate action against the acquirer which may
include prosecution / barring the acquirer from entering
the capital market for a specified period etc.
Mandates:
Reporting is mandatory according to the Regulation 3(4)
in respect of acquisitions arising
out of firm allotment in public issues,
rights issues, inter-se transfer
amongst group companies, relatives,
promoters, acquirers and PACs, Indian
promoters and foreign collaborators
and transfer of shares from
state level Financial Institutions to
co-promoters of company.
Time frame:
The report is submitted to SEBI within 21 days from the
date of acquisition / allotment with a fee of Rs. 10,000/-
per report.
Scope of M & A:
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&A deals both inside and outside India. In the context
of the liberalised environment, M&As are emerging as a
major business for the financial community. There are a
host of factors propelling the Indian corporate sector to
move towards the M&A arena, including existence of several
domestic players seeking to consolidate their business
by acquiring firms in their core areas and shedding their
non-core businesses. This trend is further supported by
the presence of several foreign firms, which are looking to
14 Need the Dough July-October - 2007
The recipe for getting
a successful merger
starts from deal
making to merging of
cultures
buy their way into the Indian market by acquiring existing
plants and capacities.
Post merger effect:
Despite the rules and regulations; scrupulous efforts, hardwork,
money and time spent go down the drain as the
corporate marriages fail. As per the recent survey only
15% of mergers are successful. During the takeovers the
executives diligently synergize assets, equipments, technology
and strategies and neglect the complexity of the variant
cultures as they overlook the people factor.
Suggestions:
The recipe for getting a successful merger starts from
deal making to merging of cultures. In fact this is proven
to have attributed to the success of the Roman Empire.
As Nancy Rothbard, Management Professor at Wharton
University cites, `Developing a culture that is adaptable
- both to market conditions and to the firm’s leadership
- will help a company survive and grow.
The other growth strategies are:
• Be upfront and share information about intentions, targets,
benchmarks and the course of action. Establish
a rapport by explaining the reason
for imminent changes and letting the
others to voice their views, concerns,
queries and doubts.
• Patiently diluting away the resistance
of the members of the acquired
company with frequent interaction
and regular dialogue will go a long
way in rebuilding trust and morale levels.
• Leaders should let the individual companies retain
their distinctive identity and learn to live with the differences.
• They can accommodate variances by organising “firms
within the firm” rather than pushing for “one firm”. For
instance, instead of wiping away Ben & Jerry’s (U.S. icecream
manufacturer) unique essence and strength, Unilever
took the unconventional route and reaped windfall
gains from preserving and complementing the former’s
divergent character.
Finally, nothing sums it up better than what Chris
Burand, President of consulting firm Burand & Associates
said, `The merger of companies is very much like
the joining together of different families to celebrate the
holidays. Each family has its own traditions, and those
traditions must be merged carefully and thoughtfully to
ensure future harmony”. Then only two good companies
will transform into one great company with a happily ever
after culmination.