Merger and Acquisition (M&A) in India
Merger is the two companies joining to become one company to become a bigger company whereas Acquisition means when one company buys the asset or share of another company. These strategies are being adopted globally to survive in a competitive market.
Amalgamation on the other hand means where both companies cease to exist and form a new entity and exist individually.
Why does Merger and Acquisition occur?
The company will decide to merge with the other company often when weaknesses and strengths of both the companies strengthen each other. Through M&A financing of both the companies gets better.
Further Merger and acquisition occurs to eliminate competition in the market, to establish a bigger market share, create a strong brand and to reduce tax liabilities and to set off losses of one company against the profit of the other.
Types of Merger and Acquisition in India
Following are the types of Merger and Acquisition in India-
Horizontal Merger- It is a merger between companies that deal in the same product or services.
Vertical Mergers- These merger happens between a company that deals in complementary goods and services
Co-Generic Mergers- These are mergers where two parties are related to each other.
Conglomerate Merger- This is a merger between organizations that deals in different businesses.
Cash Mergers- in this particular type of merger the shareholders get cash in hand instead of shares of the merged entities.
Forward mergers- In this the organization decides to merge with its buyers then it is known as forward mergers.
Reverse Mergers- the entity decides to merge with its suppliers of raw material then it is known as reverse merger.
Acquisition
Acquisition of business is known when one entity is taken over by another entity to buy and sell the asset and share of the company. The acquisition happens in either friendly manner or in a hostile manner.
Joint Ventures
When two companies pool their resources and expertise to achieve a particular goal then it is known as a joint venture. Joint ventures can be for a period of a specified period of time or for an unlimited period of time.
Process for Merger and Acquisition in India
The process of merger and acquisition is laid down in Companies Act, 2013, before the initiating process of merger and acquisition analysis of the company is required to be done regarding accessing company’s details, information etc.
The objective of merger and acquisition is to maximize the profit of the company and to minimize the level of risk.
Following are the methods for for Merger and Acquisition in India-
Dig into Memorandum To Examine the abject Clause
If any company is looking for M&A then they must primarily scrutinize the memorandum of association of the company and conduct search and check for that company whether it is best suited for merger or not.
Share a word wit Stock Exchange
It is important to share merger details along with relevant documents such as notices, resolutions, and orders to stock exchanges within a stipulated period of time.
Draft a Merger proposal
The Board of directors will direct both the organizations to draft a merger proposal in order to pass a resolution for approving its key administrative staff and different administrators to further puse the issue.
File an Application to the High Court
In order to get affirmation on the proposal by the Board of Directors, the merger organization should record an application to the Hon’ble High Court of the individual state where the organization is situated.
Notice sent to Shareholders and Creditors
After approval of the Hon’ble High court, a notification will be sent to all the investors and creditors of the organization about the meeting, and 21 days of timely notification is required. The notification must be sent in two languages i.e. one in the vernacular language of that particular state and one in English.
Filing of the Orders with Registrar of Companies
The order of High court must be documented with Registrar of companies within the limited time period as indicated by the High Court
Asset and Liabilities of both the companies should be merged
The assets and liabilities of both the companies must be merged after the merger.
Issue of subscription of share and Debentures
When the merged organization goes to the present as a different lawful substance then the organizations can give offers and debentures after listing on the stock exchange.
Conclusion
Merger and Acquisition happens for the benefit of both the organizations. It is always advisable to take assistance of experts while opting for Mergers and Acquisitions as it involves lengthy and complicated processes.
There are various firms that deal in Merger and Acquisitions that coro their customers through this change procedure, including complicated financial, legitimate and accounting issues.
Contact BIAT Legal LLP for availing Merger and Acquisition services.
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