MECHANICS OF MERGERS & ACQUISITIONS
Change is ubiquitous in contemporary society, and nowhere more so than in the operations of the large-scale, public corporation. Dramatic changes are underway, not only in the structure of corporate activity in areas such as the nature of work and the nature of organizational form, but also in the product and financial markets and the regulatory environment within which corporations operate. The depth and rapidity of these changes compel a reassessment of the ability of various governance structures to cope and adapt. Understanding this process will require not only an understanding of the nature of the changes that are underway, but also a reassessment of the paradigms of corporate governance and their ability to inform, respond to, and even shape such change. As we all know that a business flourishes over time as the utility of its products and services is recognized in the market. For the buyer, with the market changing so rapidly, product development has become a luxury that is not always a viable option. M&A has essentially become an efficient means to enter a new market. Buyers are more than willing to pay premium prices to gain market entry for a product that extends or diversifies their product line. Acquisitions can also expand customer bases, providing a more solid overall corporate business base. At times the growth process is dominated by certain inorganic processes, symbolized by an instantaneous expansion of work force, customers, and infrastructure resources, which thereby leads to an overall increase in the revenues, and profits of an entity. The concept of Mergers and Acquisitions is a manifestation of this similar inorganic growth process. In simple words, a ‘merger' is a marriage between two companies, usually of roughly equal size, although it is quite common to use the word ‘merger' to include takeover as well. But in market terms ‘Merger' refers to finding an acceptable partner, determining upon how to pay each other and ultimately creating a new company, which is a combination of both the companies unlike an ‘Acquisition' which refers to buying out another company and taking it into the fold of the acquiring company. This is done by paying the acquired company, the value of its capital and depending upon the circumstances, a premium over the capital amount. Since the differences are only technical, we refer to all such business restructuring measures as M&A activities. These are taken to be instruments of momentous growth and are increasingly getting accepted by the Indian business community as a critical tool of business strategy. They are widely used in a wide array of fields such as information technology, telecommunications, and business process outsourcing as well as in traditional business to gain strength, expanding the customer base, cut competition or enter into a new market or product segment. Mergers and Acquisitions may be undertaken to access the market through an established brand, to get a market share, to eliminate competition, to reduce tax liabilities or to acquire competence or to set off accumulated losses of one entity against the profits of other entity. It is therefore said to be an arrangement whereby the assets of two (or more) companies become vested in, or under the control of, one company (which may or may not be one of the original two companies), which has as its shareholders all, or substantially all, the shareholders of the two companies. There has been a steady increase in cross-border mergers with the increase in global trade by undertaking increased or combined activities, which help in the availability of floating capital, which is not permanently invested in fixed assets, along with the availability of stock in trade or cash/credit limits to enhance the operational efficiency. Through abiding the basic vital steps involved in the process of merger like: Internal Self-evaluation, Inter-managerial appraisal, Discussion...
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