MERGERS MODULE 1
## Mergers and Acquisition : Important terms.Merger:
the share holders of two companies deciding to pool the resources of thecompanies under a common entity to do the business activity is called merger.
Two companies agree to go forward as a single company rather thanseparately owned and operated.
Both companies stocks are surrendered and new stock is issued in its place.
Daimler- Benz & Chrysler -> Daimler Chrysler.
It is also called as Amalgamation.##
Mergers or amalgamation may take two forms
Merger through absorption: absorption is a combination of 2 or morecompanies into an existing co. All co’s except one lose their identity in amerger through absorption.
Ex: Absorption of Tata Fertilizer Ltd (TFL) by Tata Chemicals LTd (TCL)
TCL an acquiring co (buyer); survived after merger while TFL an acquired co( a seller) ceased to exist.
TFL transferred its assets, liabilities and shares to TCL under the scheme of merger.##
Mergers through consolidationConsolidation:
two or more companies combine to form a new company. In this form of merger all companies are legally dissolved and a new entity is created.
In a consolidation, the acquired company transfers its assets, liabilities andshares to the new company for cash or exchange of share.
Ex : Merger or amalgamation of Hindustan Computers Ltd, HindustanInstruments Ltd, Indian software co Ltd and Indian Reprographics ltdin 1986 to an entirely new co, called HCL ltd.##Amalgamation:
is used when two or more companies carries on similar business go intoliquidation and a new company is formed to take over their business.
a takeover generally involves the acquisition of a certain stake in the equitycapital of a company which enables the acquirer to exercise control over theaffairs of the company.
Ex: HINDALCO took over INDAL by acquiring a 54% stake in INDAL from itsoverseas parent, Alcan. However, INDAL was merged into HINDALCO.##
WHAT IS CORPORATE RESTRUCTURING
Corporate restructuring refers to a broad array of activities that expand or contracta firm’s operations or substantially modify its financial structure or bring about asignificant change in its organisational structure and internal functioning.