MERGER

• Mergers and acquisitions (or combinations) refer to a situation where the ownership of two or more enterprises is joined together. A merger is said to occur when two or more companies combine to form a new company. In this, two or more companies may merge with an existing company or they may mergeto form a new company.

REQURIEMENT OF SUCCESSFUL MERGERS

1. DUE DILLIGENCE2. INTEGRATION3. POST MERGER INTEGRATION ORG.

DUE DILLIGENCE

Due diligence is a process of thorough and objective examination that is undertaken before corporate entities enter into major transactions such as mergers and acquisitions,issuing new stock or other securities, project finance, securitization, etc.

Types of Diligence

• The approach to due diligence depends on the type of transaction and what is intended to be achieved.

Due diligence may be of various types:· Commercial due diligence · Reputational due diligence · Financial due diligence· Legal due diligence

Conducting a Due Diligence

• Presentation/background information by the issuer.

• Sending the issuer a questionnaire.• Organizing a due diligence team.• Issuer to create a data room (virtual or physical).• Review of documentation/ discussion with

management.• Bring down due diligence questionnaires/calls

prior to closing of the transaction.

End use of Diligence

• Identification and mitigation Of risks in light of market practice and legal requirements.

• Changes in structure of the transaction.• Price adjustment.• Conditions precedent.• Representations and warranties.• Verification of disclosures.• Retention of purchase price.• Indemnity.• Conditions subsequent to closing the transaction.

PROCESS OF DUE DILIGENCE

INTEGRATION

BY INTEGRATION WE MEAN THE SELF ANALYSIS A COMPANY CARRIES OUT BEFORE GOING FOR ANY MERGERS.

REASON FOR MERGERS

• FUND RAISING• GROWTH DIVERSIFICATION• INCREASING MANAGERIAL SKILL OR

TECHNOLOGY• TEXT CONSIDERATIOBNS• SYNERGY• MERGERES AS A TOOL FOR DEFENSE AGAINST

TAKEOVER

THREATS FOR MERGERS

• REGULATIONS OF GOVT.• COST CUTTING THROUGH LAYOFF• POOR SYNERGY REALISATION• INDUCES COMPLEXITY, DUPLICATION OF

PEOPLE, PROCESS AND TECHNOLOGY

IMPACT OF MERGERS ON PEOPLE

• IMPACT ON WORKERS AND EMPLOYEES– LAYOFF

IMPACT ON TOP LEVEL MANAGFEMENT– CLASH OF EGOS– VARIATION IN CULTURE

SHARE HOLDERS– ACQUIRING FIRM– ACQUIRED FIRM

Post-Merger Integration

WAYS TO IMPLEMENT INTEGRATION

• You must send senior-level leaders out to talk with employees

• encourage cross-organizational reflections at the end of partnering experiments

• establish „one company “measurement processes to minimize the natural tendency to compare one group’s results to the others’.

To carry off this approach, however, the integration must be:

• Driven by a crystal-clear vision of the new organization, including its intended mission (core purpose),

• strategy, and essential values• Owned and executed by and with key stakeholders• Fluidly coordinated and flexibly self-adjusting• Continually providing communication laterally, as well

as vertically, across the system and in sync with the needs of ongoing day-to-day operations

• Open, interactive, and responsive to feedback• Cognizant of human needs for inclusion, order, self-

control, and choice

The Integrated Organization

MERGERS AND COMPETITION POLICY

• SETUP-OCTOBER 1999• CHAIRMAN- SHRI S.V.S.RAGHAVAN• PURPOSE- EXAMINING THE EXISTING MRTP

ACT, 1969

THE COMPETITION ACT ,2002

• UNDER THIS A COMPETITION COMMISSION OF INDIA HAS BEEN ESTABLISHED TO CONTROL ANTI-COMPETITIVE AGREEMENTS, ABUSE OF DOMINANT POSITION BY AN ENTERPRISE & FOR REGULATING CERTAIN COMBINATIONS.

ANTI COMPETITIVE AGREEMENTS

• TYPES OF ANTI COMPETITIVE AGREEMENT

– HORIZONTAL AGREEMENT

– VERTICAL AGREEMENT

AGREEMENTS COMES UNDER HORIZONTAL AGREEMENTS

• AN AGREEMENTS THAT DETERMINES PURCHASE OR SALE PRICE.

• LIMITS OR CONTROLS PRODUCTION SUPPLY, MARKETS, TRECHNICAL DEVELOPMENT, INVESTMENT OR PROVISION OF SERVICES.

• SHARES THE MARKET OR SOURCES OF PRODUCTION OR PROVISION OF SERVICES BY ALLOCATION OF GEOGRAPHICAL AREAS OR TYPES OF GOODS & SERVICES OR NUMBER OR CUSTOMERS IN THE MARKET

AGREEMENT COMES UNDER VERTICAL AGREEMENT

• TIE IN AGREEMENTS• EXCLUSIVE SUPPLY OR DISTRIBUTION

AGREEMENT

RAGHAVAN COMMITTEE

• THANK YOU