MERGERS & ACQUISITIONS With the liberalization of the Indian economy and the removal of restrictive arrangements such

as monopolies and restrictive trade practices, corporate India is advancing more and more towards a merger culture. In India, the real reasons for a merger are not purely economic. In a recent survey of 60 companies conducted by Capital Mar et, !6 per cent of the e"ecutives interviewed stated that they would prefer vertical integration, #! per cent horizontal e"pansion, only $ per cent were in favour of mergers for ta" purposes and none were willing to go for unrelated diversification. %here is however, a discrepancy between what the e"ecutives say and the underlying reality. %he reason has to do with core competence rather than economic factors. &ther related terms used with reference to mergers 'and (uite often used interchangeably) are amalgamations, consolidations, ac(uisitions and ta e*overs. +owever all of these are different from one another to a certain e"tent. %he following are the proper definitions of the above*mentioned terms, Merger: - merger is defined as the combination of two or more companies into a single company where one survives and the other loses its corporate identity. %he survivor ac(uires the assets as well as the liabilities of the merged company or companies. Amalgamation: +alsbury.s /aws of 0ngland describes amalgamation as a blending of two or more e"isting underta ings into one underta ing, the shareholders of each blending company becoming substantially the shareholders of the company which is to carry on the blended underta ing. -t times, amalgamation is described as encompassing both mergers as well as ac(uisitions, while at others it is used interchangeably with mergers. Consolidation: %echnically, consolidation is the fusion of two e"isting companies into a new company in which both the e"isting companies are e"tinguished. %he difference between consolidation and merger is that in a merger one of the two or more merging companies retains its identity, while in a consolidation all the consolidating companies are e"tinguished and a completely new company is born. Acquisition: -n ac(uisition is the purchase by one company of a controlling interest in the share capital or another e"isting company. %his means that even after the ta e* over, although there is a change in the management, both the firms retain their separate legal identity. Ta e!o"er: - ta e*over is an ac(uisition and both these terms are used interchangeably.

/egislation having a bearing on ac(uisitions and mergers include the Companies -ct 1$!6, the 2ic Industrial Companies '2pecial 3rovisions) -ct 1$4! and the 2ecurities and 0"change 5oard of India '2ubstantial -c(uisition of 2hares and %a eovers) 6egulations 1$$7. 2ections #$1*#$6 of the Companies -ct 1$!6 deal with the merger and ac(uisition of companies. 2ection #$8 of the Companies -ct 1$!6 is the main section dealing with the reconstruction and amalgamation of companies. Court#s A$$ro"al %his section re(uires companies to ma e application to the court under section #$1, which empowers the court to sanction the compromise or arrangement proposed by the companies. 2ection #$9 further empowers the +igh Court to enforce a compromise or arrangement ordered by the court under section #$1 of the Companies -ct. 2ection #$# provides supporting provisions for compliance with the provisions or directions given by the court. 2ections #$!, #$6 and #$6- are supplementary provisions relating to amalgamation. 2ection #$! deals with the power to amalgamate without going through the procedure of the court.