Merger and Acquisition in India
Mergers and acquisitions (M&A) refers to the aspect of corporate strategy,corporate finance and management dealing with the buying, selling andcombining of different companies that can aid, finance, or help a growingcompany in a given industry grow rapidly without having to create anotherbusiness entity.An acquisition, also known as a takeover or a buyout, is the buying of onecompany (the ‘target’) by another. The acquisition process is very complex and various studies shows that only50% acquisitions are successful.An acquisition may be friendly or hostile. In a friendly takeover a companiescooperate in negotiations. In the hostile takeover, the takeover target isunwilling to be bought or the target's board has no prior knowledge of the offer.Acquisition usually refers to a purchase of a smaller firm by a larger one.Sometimes, however, a smaller firm will acquire management control of a largeror longer established company and keep its name for the combined entity. Thisis known as a reverse takeover.Although merger and amalgamation mean the same, there is a small differencebetween the two. In a merger one company acquires the other company and theother company ceases to exist. In an amalgamation, two or more companiescome together and form a new business entity.
The Companies Act, 1956 does not define the term 'Merger' or 'Amalgamation'.It deals with schemes of merger/ acquisition which are given in s.390-394 'A',395,396 and 396 'A'.
Classifications of mergersHorizontal merger
– is the merger of two companies which are in produce of same products. This can be again classified into Large Horizontal merger andsmall horizontal merger.