Corporate Restructuring

Topics: Mergers and acquisitions, Stock, Corporate finance Pages: 105 (34428 words) Published: March 16, 2011
A report on the growing market of mergers, acquisitions, and restructurings in the corporate world. Roll No – A3906407G43 Enrolment No – A3906407403
Sudhanshu Gupta|
Final Report
Guided By – Mrs. Kavitha Menon


I wish to acknowledge my deep gratitude to Mrs. Kavitha Menon for her valuable guidance, wise suggestions, mellow criticism & above all unflinching moral support throughout the work. I wish to thank all the library and other member staffs for their co-operation & technical staffs for their assistance. I must also not forget to thank my family and friends for their constant support during the work.

Sudhanshu Gupta
B.B.A. (2007-10)
Roll No – A3906407G43
Enrolment No – A3906407403


1) Introduction8
2) Difference between Merger and Acquisition9
3) Mergers10
a. Classification of Mergers10
4) Acquisitions12
b. Classification of Acquisitions12
5) Motives Behind Acquisitions and Mergers14
c. Economies of Scale14
d. Synergy15
e. Fast Growth15
f. Tax Benefits15
g. Diversification16
h. Sales Enhancement16
i. Improved Management16
j. Information Effect16
k. Wealth Transfer17
l. Hubris Hypothesis17
m. Resource Transfer17
n. Management’s Personal Agenda17
o. Manager’s Compensation17
p. Vertical Integration18
6) Financial Framework18
q. Determining the Firm’s Value18
i. Book Value18
ii. Appraisal Value19
iii. Market Value19
iv. Earnings per Share21
r. Financing Techniques in Merger23
v. Cash23
vi. Ordinary Share Financing24
vii. Debt and Preference Share Financing24
viii. Deferred Payment Plan25
ix. Tender Offer26
s. Analysis of the Merger as a Capital Budgeting Decision27 x. The DCF Approach27
1. Determination of incremental projected Free Cash Flows to the Firm (FCFF)27 2. Determination of Terminal Value27
3. Determination of appropriate Discount Rate28 4. Determination of Present Value of FCFF28
5. Determination of Cost of Acquisition28
xi. The AVP Approach28
7) Taxation Aspects29
t. Tax Concessions to Amalgamated Company30
xii. Carry Forward and Set off of Business Losses and Unabsorbed Depreciation30 xiii. Expenditure on Scientific Research31
xiv. Expenditure on Acquisition of Patent Rights or Copy Rights31 xv. Expenditure on Know-how31
xvi. Expenditure for Obtaining License to Operate Telecommunication Services31 xvii. Preliminary Expenses31
xviii. Expenditure on Prospecting of Certain Minerals31 xix. Capital Expenditure on Family Planning32
xx. Bad Debts32
u. Tax Concessions to Amalgamating Company32
xxi. Free of Capital Gains Tax32
xxii. Free of Gift Tax32
v. Tax Concessions to Shareholders of Amalgamating Company32 8) Legal and Procedural Aspects33
w. Scheme of Merger / Amalgamation33
xxiii. Essential Features of the Scheme of Amalgamation34 x. Scheme of Acquisitions / Takeovers35
xxiv. The SEBI Substantial Acquisition of Shares and Takeover Code (SEBI Takeover Code)36 6. Disclosure of Shareholding and Control in a Listed Company37 a. Continual Disclosure38

b. Power to call for Information38
7. Substantial Acquisition of Shares / Voting Rights / Control Over a Limited Company38 c. Power to Remove Difficulties40
d. Acquisition of 15% or more Shares / Voting Rights40 e. Acquisition of Control41...

References: 2) Financial Management & Policy, James C. Van Horne, Twelfth Edition, Pearson Education Asia, Delhi, 2007
3) Financial Management, I M Pandey
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