MERGER AND ACQUISITION: CONCEPTUAL FRAMEWORK
The present chapter discusses the conceptual framework of mergersand acquisitions. It focuses on demarcations between various termslike mergers, acquisitions, takeovers, consolidations, reversemergers, management buyouts etc. The concept of demerger is alsointroduced. Various Indian laws and statutes having a bearing onmerger process have been outlined and trends traced. Few otherrelated procedural issues are also covered.
“The decision to invest in a new asset would mean internal expansion for the firm. Thenew asset would generate returns raising the value of the corporation. Mergers offer anadditional means of expansion, which is external, i.e. the productive operation is notwithin the corporation itself. For firms with limited investment opportunities, mergerscan provide new areas for expansion. In addition to this benefit, the combination of twoor more firms can offer several other advantages to each of the corporations such asoperating economies, risk reduction and tax advantage
.”Today mergers, acquisitions and other types of strategic alliances are on the agenda of most industrial groups intending to have an edge over competitors. Stress is now beingmade on the larger and bigger conglomerates to avail the economies of scale anddiversification. Different companies in India are expanding by merger etc. In fact, therehas emerged a phenomenon called
The terms merger, amalgamations, take-over and acquisitions are often usedinterchangeably to refer to a situation where two or more firms come together andcombine into one to avail the benefits of such combinations and re-structuring in theform of merger etc., have been attempted to face the challenge of increasingcompetition and to achieve synergy in business operations.
1.1 Corporate Restructuring
Restructuring of business is an integral part of the new economic paradigm. As controlsand restrictions give way to competition and free trade, restructuring and reorganization become essential. Restructuring usually involves major organizational change such asshift in corporate strategies to meet increased competition or changed marketconditions.
Schall, L.D. and Hally C.W., Introduction to financial Management, McGraw HillBook Company, New York, P.682.Mergers & Acquisitions
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