2. CHAPTERISATION
Merger
Acquisition
Motive
M &A In India
Pre independent period
Post independent period
M&A after liberalization
Legal provision related to M&A
Major Laws Involved in M&A
Companies bill 2009
Conclusion
3. What is “Merger”
Merger refers to the managing of one
company into another or two
companies getting merged from a new
corporate entity.
Fusion of two companies
5. Types of Mergers and
Acquisitions
MERGER
Horizontal merger = A horizontal merger takes place
between two or more companies that compete in the
same business and geographical market.
Vertical merger = A vertical merger integrated the
operations of a supplier and customer
(i) backward vertical merger –
the customer acquires the supplier,
(ii) forward vertical merger -
the supplier acquires the customer
Conglomerate merger = between firms in totally
unrelated business
6. Cont…
Consolidation merger = between two
or more firms generally engaged in
same or similar business under the
control of same management……
7. ACQUISITION
Hostile Takeover = if the board
rejects the offer, but the bidder
continues to pursue it or the bidder
makes the offer without informing the
board beforehand.
Leveraged Buyouts = where the
acquisition is funded by borrowed
money. Often the assets of the target
company are used as collateral for the
8. Cont…
This is a common structure when
acquirers wish to make large
acquisitions without having to commit
too much capital, and hope to make
the acquired business service the debt
so raised
Bailout Takeovers. Another form of
takeover is a ‘bail out takeover’ in
which a profit making company
acquires a sick company.
9. Motive of Merger and Acquisition
Control over the market
Increase market power
Financial growth
10. Mergers and Acquisitions in India
M & A during pre-independent period
Played important role after 2nd World Wa
Because of economic and political
consolidation
11. Post independent period
Large number of M&A occurred in
industries like jute, cotton textiles, sugar,
insurance, banking, electricity and tea
plantation.
Government policies
(i) LIC
(ii) Takeover of 243 insurance companies
12. Post 1990 period
M&A scenario started changing after
introducing Liberalization in 1991
Several measures taken by the
government which includes
delicensing, dereservation, MRTP Act
relaxation, liberalization of policies
towards foreign capital and
technologies led to a structural
transformation in the Indian industries.
13. M&A : Legal Provisions And
Practices
Companies Act 1956
Sections 390 to 396-Aand section
111
14. Sections 390 & 394
Section 391 – 394 of the Companies
Act, 1956 deals with Compromises,
Arrangements and Reconstructions
and other related issues through
schemes of arrangement approved by
the High Courts. A resolution to
approve the scheme of arrangement
has to be passed by the shareholders
in the general meetings.
15. Cont…
The shareholders have to vote on the
resolutions on the schemes of
arrangement on the basis of the
disclosures in the notice/explanatory
statement. Section 393 of the
Companies Act, 1956 specifies the
broad parameters of the disclosures
which should be given to the
shareholders / creditors, for approving a
scheme of arrangement
.
16. Section 390 & 391
s/390 – arrengement
s/391- Power to compromise or make
arrangement with creditor or members
17. Cont…
Court’s power under the section are very wide and has
discretion to allow any sort of arrangement between the
company and members.
Scope and ambit of the Jurisdiction of the Court:
The sanctioning court has to see to it that all the requisite
statutory procedure for supporting any scheme has been
complied with along with requisite meetings.
That the scheme put up for sanction of the court is backed up
by the requisite majority vote.
That the concerned meetings of the creditors or members or
any class of them had the relevant material to enable the
voters to arrive at an informed decision for approving the
scheme.
That the proposed scheme is not found to be violative of any
provision of law and is not contrary to public policy.
18. SECTION 392
Under this section, the court has power to supervise the
carrying out of the compromise or an arrangement; and
may, at the time of making such order or at any time
thereafter, give such directions in regard to any matter
or make such modifications in the compromise or
arrangement as it may consider necessary for the
proper working of the arrangement.
If the court is of the view that a compromise
/arrangement sanctioned under section 391 cannot be
worked satisfactorily with or without modifications, it
may on it own motion or on the basis of an application
made by an interested party may order winding up of
the company under section 433 of the Act.
19. Section 393
This section prescribes the procedure
required for convening the meeting of the
members or creditors called under section
391.
The notice for the meeting should be sent
along with a statement setting forth the terms
of the compromise and or arrangement and
explaining its effect and in particular, the
statement must state all material interest of
the directors, managing directors of the
company, whether in their capacity as such or
as members or creditors of the company or
otherwise.
20. Cont…
Where the compromise or arrangement
affects the rights of debenture holders of
the company, the statement shall give
the information and explanation in
respects to the trustees of any deed for
securing the issue of the debentures as it
is required to give in respect of directors.
Any default in complying with the
requirements under this section may
lead to a fine of Rs. 50, 000 against the
concerned official of the company, who is
found guilty.
21. Section 394
Where the court is of the view that the proposed
arrangement/scheme is of such nature that
• the scheme is for the reconstruction of any
company or for amalgamation of any two or more
companies; and
• that under the scheme the whole or any part of
the undertaking property or liabilities of any
concerned company is to be transferred to
another company;
the court may make provision for all or any of the
following matters.
The transfer to Transferee Company of the
property or liabilities of transferor company.
22. Cont…
The allotment or appropriation by the
transferee company of any shares,
debentures or other like interest in that
company which, under the arrangement, are
to be allotted or appropriated by that
company to.
The continuation of any legal proceeding
against the transferee company by the
transferor company.
The dissolution, without winding up, of any
transferor company.
The provisions for any dissenting persons.
Who are opposing such scheme or any other
matter, which the court deems fit
23. Section 394-A & 395
Section 394-A - Notice to given to
the central government for
applications given under sections 391
and 394.
Section - 395 Power and duties to
acquire shares of shareholders
dissenting from scheme or contract
approved by majority.
24. Section 396 & 396-A
Section 396 power of central
government to provide for
amalgamation of companies in
national interest.
Section 396-A - papers and book of
amalgamated company shall not be
disposed without prior permission of
central government.
25. THE COMPANIES BILL, 2009
Clauses 200 to 211 deals about
Mergers and Acquisitions
No major change in new bill of 2009
related to M&A
26. Major Laws Involved in M&A
SEBI (substantial Acquisition of shares &Takeovers)
Regulations 1997.
Securities and Exchange Board of India (Issue of
Capital and Disclosure Requirements) Regulations,
2009
The Securities and Exchange Board of India Act,1992 .
Security Contract Regulation Act ,1956 .
The Depositories Act,1956.
SEBI Disclosure and Investor Protection Guidelines
2000.
Securities and Exchange Board of India (Prohibition of
Insider Trading Regulation ),1992.
Securities and Exchange Board of India (Merchant
Bankers) Rules/Regulation 1992.
SEBI (Delisting of Securities )Guidelines,2003.
Foreign Exchange Management Act,1999.
Companies Act,1956.
Income Tax Act
27. list of Total Mergers and
Acquisition(M & A) of Domestic
deals, 2010 in India.
Acquirer Target Sector Deal
Domestic Deals in January, 2010: 32 Deals of value $2.16 Billion
Penta Homes
Agro Dutch
Industries
Agriculture
S ($4.26 mn, up from
32.5% to 57.7%)
ACC
Encore Cement
and Addictive
Cement A
Dalmia Cement Orissa Cement Cement S ($37.66mn, 45.4%)
Crompton
Greaves
Brook Crompton
Greaves
Electricals M
28. Havells India Standard Electricals Electricals A ($25.53mn)
Srei-led Consortium DPSC Energy S ($36.6mn, 57%)
Greenko Group Plc
20.25 MW hydro
power assets
Energy A ($32.98mn, 57%)
Avantha Power and
Infrastructure
Malanpur Captive
Power (subsidiary of
crompton greaves)
Energy S ($10.94mn, 59%)
Almondz Global
Securities
Almondz Insurance
Brokers
Financial Sector S (51%)
Infrastructure
Development
Finance
Company(IDFC)
IDFC – SSKI
Securities
Financial Sector S (from 80% to 100%)
Indian Infoline
(Orient Global
Tamarind Fund)
Indian Infoline
Investment services
Financial Sector S ($72mn, 22%)
Edelweiss Capital Anagram Capital Financial Sector A ($34.89mn)
Vista Vyapaar
Mathew Easow
Research Securities
Financial Sector S ($0.84mn,69.2%)
Ruchi Soya
Industries
Solvex, General
Foods, Param
Industriess
FMCG, Food
Processing
M
WF
Henkel India Brands
‘Aramusk’ and ‘Moloy’
soaps and
‘Mahabringol’ hair oil
FMCG, Food
Processing
S ($9.57mn, 50%)
29. Conclusion
Mergers and Acquisitions plays
important role in corporate
restructuring and development of
country. In India it is also playing same
role. But some times it represent
market and financial power. And after
liberalization it increased due to liberal
government policies
