Accretion and Dilution
A merger is a combination of two companies where one corporation is completely absorbed by another corporation. The less important company loses its identity and becomes part of the more important corporation, which retains its identity. It may involve absorption or consolidation.
Merger is also defined as amalgamation. Merger is the fusion of two or more existing companies. All assets, liabilities and the stock of one company stand transferred to Transferee Company in consideration of payment in the form of:
(i) Equity shares in the transferee company,
(ii) Debentures in the transferee company,
(iii) Cash, or
(iv) A mix of the above mode
Motives Behind Mergers Of The Company
Economies of Scale:
Increased revenue /Increased Market Share
Cross selling:
Corporate Synergy:
Taxes:
Geographical or other diversification:
Types Of Mergers
Horizontal merger-
Vertical merger
Conglomerate merger
Legal Procedure For Bringing About Merger Of Companies (1) Examination of object clauses:
(2) Intimation to stock exchanges
(3) Approval of the draft merger proposal by the respective boards:
(4) Application to high courts:
(5) Dispatch of notice to share holders and creditors:
(6) Holding of meetings of share holders and creditors:
(7) Petition to High Court for confirmation and passing of HC orders:
(8) Filing the order with the registrar:
(9) Transfer of assets and liabilities:
(10) Issue of shares and debentures:
Role of Investment banker in M&A
* They help in organising mergers. * They help target companies to develop and implement defensive tactics. * They help in valuing the target company. * They help in financing mergers and, * They invest in stock of firms which are likely to merge.
Investment bankers gain huge profits through these merger related activities.
1. Organizing Mergers: Suppose steel manufacturers interested in merging with one of its suppliers such as iron or coal mining firm.
Merger is also defined as amalgamation. Merger is the fusion of two or more existing companies. All assets, liabilities and the stock of one company stand transferred to Transferee Company in consideration of payment in the form of:
(i) Equity shares in the transferee company,
(ii) Debentures in the transferee company,
(iii) Cash, or
(iv) A mix of the above mode
Motives Behind Mergers Of The Company
Economies of Scale:
Increased revenue /Increased Market Share
Cross selling:
Corporate Synergy:
Taxes:
Geographical or other diversification:
Types Of Mergers
Horizontal merger-
Vertical merger
Conglomerate merger
Legal Procedure For Bringing About Merger Of Companies (1) Examination of object clauses:
(2) Intimation to stock exchanges
(3) Approval of the draft merger proposal by the respective boards:
(4) Application to high courts:
(5) Dispatch of notice to share holders and creditors:
(6) Holding of meetings of share holders and creditors:
(7) Petition to High Court for confirmation and passing of HC orders:
(8) Filing the order with the registrar:
(9) Transfer of assets and liabilities:
(10) Issue of shares and debentures:
Role of Investment banker in M&A
* They help in organising mergers. * They help target companies to develop and implement defensive tactics. * They help in valuing the target company. * They help in financing mergers and, * They invest in stock of firms which are likely to merge.
Investment bankers gain huge profits through these merger related activities.
1. Organizing Mergers: Suppose steel manufacturers interested in merging with one of its suppliers such as iron or coal mining firm.