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.