Merger and Acquistion

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  • Topic: Indira Gandhi International Airport, Airline, Chhatrapati Shivaji International Airport
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Mergers, Acquisitions and Takeovers in Indian Civil Aviation: A Critical Analysis By : Shubha Rathore Bhatia

TABLE OF CONTENTS

INTRODUCTION OVERVIEW REGULATIONS GOVERNING MERGERS & ACQUISITIONS IN INDIA AVIATION INDUSTRY AND ITS CLASSIFICATION IN INDIA MERGERS AND ACQUISITIONS: FACTORS, CONCERNS AND MAJOR ISSUES BASICS OF DOMESTIC AIR TRANSPORT POLICY CASES OF AIRLINE M & A IN INDIA CONCLUSION BIBLIOGRAPHY

Introduction Mergers and acquisitions ("M&A") are strategic decisions taken for maximization of a company's growth by enhancing its production and marketing operations. They are being used in a wide array of fields in order to gain strength, expand the customer base, cut competition or enter into a new market or product segment. Aviation sector is one of the least researched sectors in India as it has limited number of players. However, as the sector is growing rapidly, it becomes essential to have knowledge about the sector and the activities which are taking place in the sector. The aviation market and scenario in India has seen major developments in the last 5 years. Not merely has the market grown very rapidly, but the industry has seen, M&A, the entry of a number of new carriers with aggressive pricing policies and significant additions of capacity leading to cutthroat competition. This assignment makes an attempt to give a brief overview of the meaning of M&A, and the regulations dealing with the same in India.It then tries to comprehensively deal with the Aviation Industry in India and M&A in the aviation sector. Finally, it offers few important cases dealing with M&A in the said sector both at domestic and international front.

Overview Merger A merger is a combination of two or more businesses into one business. Laws in India use the term 'amalgamation' for merger. It is a process where one company blends with another company (both being existing companies and carrying on business), provided that following conditions are met with: • • • All properties are transferred to the amalgamated company. All liabilities are transferred to the amalgamated company. Shareholders holding at least 3/4th in the value of shares of the amalgamating company become shareholders of the amalgamated company.

Types of Mergers Horizontal Mergers: A Horizontal Mergers occurs when one firm combines with the other in the same line of business. This kind of merger takes place between entities engaged in competing businesses which are at the same stage of the industrial process. Vertical mergers: Vertical mergers refer to the combination of two entities at different stages of the industrial or production process. For example, the merger of a company engaged in the construction business with a company engaged in production of brick or steel would lead to vertical integration. Conglomerate Mergers: A conglomerate merger occurs when unrelated enterprises combine. The principal reason for a conglomerate merger is utilization of financial resources, enlargement of debt capacity, and increase in the value of outstanding shares by increased leverage and earnings per share, and by lowering the average cost of capital. Acquisition An acquisition or takeover is the purchase by one company of controlling interest in the share capital, or all or substantially all of the assets and/or liabilities, of another company. A takeover may be friendly or hostile.

Regulations governing M&A in India Before going into the issues pertaining to M&A of airlines, we will first have a look at the current policy framework for M&A in India. Regulations governing M&A in India may be divided in to the following categories: 1. National M&A transactions • • • • Companies Act, 1956. Companies Court Rules, 1959. Income Tax Act, 1961. Central Sale Tax Act, 1956.

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Indian Stamp Act, 1899 Competition Act, 2002 (It has been enacted but is not yet fully enforced)

2. M&A transactions involving listed companies • The Securities and Exchange Board of India...
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