merger and acquisitin (2)

Merger and Acquisition

Shivani SharmaB. Com Final

Meaning of Merger It is combining of different

business organizations having similar entities which results in creation of new business organization which grows

more rapidly and success in global market by expanding

customer base.

Meaning of merger can be understood by following aspects:

TYPES OF MERGER:

1. Horizontal merger2. Vertical merger3. Conglomerate merger4. Concentric merger

AbsorptionConsolidati

on

EXAMPLES BAE Systems results merger of BRITISH

AEROSPACE AND MES (Marconi Electronic Systems).

Indian Fisheries results merger of Air India and Kingfisher Airlines

Sikkim Bank Ltd. And Union Bank of India.

New Bank of India and Punjab National Bank.

Global Trust Bank Ltd and Oriental Bank of Commerce.

Meaning of Acquisition

By keeping the view that, Corporate remain with their separate legal entity and being independent, one corporate controls management and assets of other corporate to attain effective control.

ExamplesThe biggest deal was done by Reliance

Communication which merged its telecoms tower business with GTL infrastructure Ltd for USD 11 billion.

Bharti Airtel acquired Kuwait based Zain Telecom's African business for USD 10.7 billion.

Reliance Industries acquired Infotel broadband for USD 1 Billion.

The biggest deal in Pharmaceutical sector was the acquisition of the generic drug unit of Piramal Health care by USA based drug maker Abbot Laboratories (ABT) for USD 3720 million.

Meaning of TakeoverTakeover means control. Under Monopolies And

Restrictive Trade Practices Act 1969, Takeover is defined as Acquisition by having at least 25% of voting right of one business , in hands of other business.

EXAMPLESTata’s takeover of Tetley Tea.

Essel Packaging owned by Subhash Chandra of Zee acquired Switzerland's Propack AG.

Cadbury by Kraft foods in 2010.

OBJECTIVES :To hold a sizeable market share.To improve profitability.Accelerate growth and reduces risks.Utilization of financial strengths.Cost of diversifying products and services

delivered to customers within an industry.Divest poor performing elements.Gain of valuable and potentially valuable assets.Usage of expertise of acquired company.Serve the customer better.To compete with international banks.For mushroom growth of banks.Economy of Scale.

MAIN ISSUES AT TIME OF MERGER

Shareholders Interest.Accounting.Issues related to technology.Taxation.Integration of products and services.Human resources.

Legal Issues:Banking Regulation Act 1949 Section 44 A :

2/3 rd majority of shareholders for passing resolution.

Compulsory amalgamation and voluntary amalgamation.

Co-operative bank can be merged with Co-operative banks only.

ADVANTAGES OF MERGEREfficiencies in Operations.Revenue Encashment.Benefits to worldwide Banking.Deregulation.Preparing for future.Spreading fixed cost.enhance market image.Easy supervision.

Disadvantages of MergerBrand Projection.Big size and scale.Customer Services.Lack of Human Approach.Valuation problems.Dysynergy effect.Failure to integrate well.Long Incubation Period.

SUGGESTIONSMerger banks of same technology.Technology should be upgraded.Productivity should be enhanced.Improve knowledge and attitude of

Employees.For Indian Banking System, merger is a

effective way of making banking system strong and sound.

THANK YOU