15-11-2012, 03:51 PM
Mergers And Acquisitions…
Growth through M&A.ppt (Size: 140 KB / Downloads: 39)
Definition
A merger is said to occur when
two or more companies combine into one company
an existing company or
entirely a new company.
Laws in India use the term amalgamation for merger.
For example, the Income Tax Act, 1961 defines
amalgamation as the merger of one or more companies with another company or the merger of two or more companies (called amalgamating company or companies)to form a new company(called amalgamated company)
Merger through absorption
An absorption is a combination of two or more companies into an existing company.
All companies except one lose their identity in a merger through absorption.
example : Reliance Petroleum by Reliance industries.
Merger through consolidation
A consolidation is a combination of two or more companies into a new company.
In a narrow sense, the terms, amalgamation and consolidation are sometimes used interchangeably.
An example of consolidation is the merger or amalgamation of Hindustan Computers Ltd., Hindustan Instruments Ltd. and Indian Reprographics Ltd.
Acquisition
An acquisition may be defined as an act of acquiring effective control by one company over assets or management of another company without any combination of companies.
Thus, in an acquisition two or more companies may remain independent, separate legal entity, but there may be change in control of companies.
Horizontal Merger
This is a combination of two or more firms in similar type of production, distribution or area of business.
Example,
India cement acquired Raasi Cement as well as Vishnu Cement.
Grasim’s acquisition of Digvijay Cement and Dharani Cement.
True motives and advantages
Maintaining or accelerating a company’s growth, particularly when the internal growth is constrained due to paucity of resources.
Enhancing profitability, through cost reduction resulting from economies of scale, operating efficiency and synergy.