RAJARAM SHINDE COLLEGE

OF MBA

AT POST – PEDHAMBE, TAL -CHIPLUN, Dist –Ratnagiri, 415603

(Affiliated to University of Mumbai, Recognized by AICTE)

Presentation Subject

CORPORATE VALUATION & MERGERS ACQUISITION

Presentation On

Merger & Acquisition

Submitted by

Mr.OMkar Chalke

Under the guidance of prof.Mandavkar sir

Student sign faculty sign

What is a Merger?

A merger is an agreement between two or more

corporate firms, to create a new entity by exchange
of shareholding.

It is a transaction where two or more corporations

pool their resources and operations, and combined to
form a single corporation.

It can also refer to an event where the assets and

liabilities of two or more corporate organizations
are invested in another organization, which is the
merged organization.

A merger is basically a mutually agreed decision of

organizations for the joint ownership of a corporate
entity.

Merger in simple terms means the combination of two

or more corporations into one single organization.

In India, laws do not use the term merger, rather they

use the word “amalgamation”.
What is an Acquisition?

An Acquisition means the process by which a company

purchases another company or gains a majority in
another organization.

One firm takes ownership of another corporate firm

because of this. Acquisitions are commonly known as
Takeovers.

an acquisition takes place when an organization’s

capital resources are utilized. Such capital
resources include debt, cash, stock, etc.

It involves two parties; the acquiring party and the

acquired party.

Acquiring party is the one that buys the majority of

shares or gains ownership of the acquired company.

Acquired party is the one that surrenders their

majority of shares or ownership of the
acquiring company.
The latest trend in the Indian Corporate sector is the
acquisition of Foreign companies by the Indian
businesses.

Types of Acquisitions

There are generally 4 types of acquisitions –

 Friendly,
 Hostile,

 backflip and

 Reverse takeover.

A friendly acquisition is when both the acquiring and

acquired parties willingly corporate in negotiations
and in the process of takeover.

While a hostile acquisition is one when the acquired

party is not willing to sell or when the acquired
party’s board members have no knowledge of such an
offer.

Generally, acquisitions refer to the buying of

smaller corporate organisations by larger
corporate firms.
However, when a small unlisted private
company acquires a larger and well established
listed public company, it is called reverse takeover.
This takeover can be either friendly or hostile. This is
mainly done to achieve listing status.

When a bidding company becomes the subsidiary of the

acquired company, it is called Backflip takeover.

Backflip takeover is one where a bidding company

becomes the subsidiary of the taken over company. The
main reason for such a takeover is to have the
advantage of the brand value of the taken over firm.

Types of Mergers

There are generally 4 types of mergers – Horizontal,

Vertical, Concentric, Conglomerate.

If two or more companies that are involved in the same

business activity and are competitors merge
together, it is called Horizontal Merger. If these
companies are in direct competition for the same
product type and market and merge together, it would
be horizontal merger.
The main benefit of this kind of merger is that it
eliminates competition and helps the firm to increase
its market share, customer base, revenue and profits.

It increases cost efficiency, as wasteful activities

are removed from operations. If two or more
companies that are involved in different stages of the
operation of manufacturing merge together, it is
called Vertical merger.

If a supplier firm merges with a customer firm, it would

be a vertical merger.

This kind of merger is usually adopted to secure the

supply of essential goods, and avoid any disruption
and interruption in supply of goods.

They offer a high margin of profit and also cost

saving, since manufacturers share is no longer there.
This is opted for the smooth supply of raw materials
to the acquiring party.

If two or more companies that operate in the same

industry but not in the same line of products of
business merger together, it is called Concentric
merger. After such a merger, a new company is formed
all together so as to become more competitive. This
also helps increase the customer base.

Such mergers offer opportunities to corporate firms

to venture into other areas of the industries to
reduce risk and more access to resources. Markets
that were unavailable before would also be
available now.

If two or more companies that have no common business

areas or no common business activity merge together,
it is called Conglomerate merger.

This merger is usually adopted to diversify into new

industries, which helps reduce risks. The main risk of
such a merger is the sudden shift in business
operations. Such a merger is further divided into Pure
Conglomerate and Mixed Conglomerate merger.

When both companies have nothing in common, business

operations of both companies are unrelated, it is
called Pure Conglomerate merger.