Mergers and Acquisitions in Global Scenario
In the post- liberalization era, the demand for intense growth and development in business has paved the way for the companies to undergo the process of amalgamation, takeover, reconstruction and re-organization. Mergers and acquisitions have become imperative tools in structuring a new generation of organizations with the clout and resources to withstand and compete on a global basis. The field of M&A has undergone drastic and dramatic changes over the previous decades. The daily newspapers are filled with case studies of M&A, corporate re-structuring, changes in ownership structures and struggles for corporate control. This subject matter plays an active role under the dominance of business enterprises on a global platform.
Keywords: Mergers and Acquisitions, globalization, Scenario
Universally being accepted as a corporate strategy, financial and management policy; Mergers and acquisitions have been practiced worldwide in myriad industries and sectors within and across the nations’ boundaries for guarding and shielding the corporate, business, market share and market power. In developed nations like in USA, Japan and European nations, mergers and acquisitions are a regular phenomenon of combinations and restructuring of the companies. Cross-border mergers and takeovers have become a major force behind the surge of foreign direct investment. Mergers and acquisitions have emerged as an eminent tool for the growth of global corporate in the last few years. The companies are not solely looking for acquiring companies within its nation but abroad too. Raising the fundamental and complex financing structure issues both for business decisions and for public policy formulation is the priority of the M&A deal. The handling of cultural differences, HR issues and changed environment requires proper due diligence procedures. The success story of any growing corporate is the strength of cultural-integration plan, systems, processes and programs Merger is defined as a combination, association, arrangement or unity of two or more undertakings together whereby the assets of the companies become vested in, or under the control of acquiring company. Here only one corporation survives and the target corporation becomes non-existent. Merger is distinguished from consolidation, which means that the two or more companies combine to form an entirely new company. Although merger is considered as a synonym to amalgamation, the other being absorption makes merger a part of amalgamation.
For example in 2005 in the sporting goods industry, Reebok International Ltd. Merged with Adidas Salomon AG. Adidas and Reebok claimed that the merger was decided upon because of the realization that their individual (company) goals would be best accomplished by joining instead of competing. Nike International Inc. (Nike) was the common competitor for both Reebok and Adidas. Another example of merger is Morgan Stanley with Dean Witter, former be in the largest investment banks in the US and latter being a retail firm specializing in stock brokerage, asset management and credit cards in 1997.Initially the merger proved successful but it sliding downwards with declining revenues and profits later on. An example of absorption is that Global Trust Bank Limited (GTB) was merged with Oriental Bank of Commerce (OBC) when the former was in its worst conditions. It is the case of absorption because the former GTB became non-existent and the identity of OBC is still retained. Acquisition is the term used to describe the willingness of the target company to sell. Acquisition occurs when one company, the buyer purchases the assets or shares of another company; the seller. The acquirer pays in cash, stock or other assets of value to the seller. From a legal point of view, the target company (seller) ceases to exist when the acquiring company (buyer) swallows the business and trade...
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* SEBI : Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations 1997, SEBI, Mumbai. 1997
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