Mergers & Amalgamations

Presented by Priya G S

Contents
Introduction Merger? Amalgamation?

Introduction
Merger is restricted to a case where the assets and liabilities of the companies get vested in another company, the company which is merged losing its identity and its shareholders becoming shareholders of the other company.

 On the other hand, Amalgamation is an arrangement, whereby the assets and liabilities of two or more companies become vested in another company (which may or may not be one of the original companies) and which would have as its shareholders substantially, all the shareholders of the amalgamating companies."

Purpose/Objectives
Economy of scale. Economy of scope To increase revenue or market share. Cross selling. Synergy. To acquire&maximize the available managerial skills. To diversify the task.

 To avail the taxation advantage under the income tax act,1961. In the public interest. Vertical integration Absorption of similar businesses under single management

MERGERS..

Is a combination of two or more companies into a third entirely new company formed for the purpose. Is a transaction that results in the transfer of ownership and control of a corporation. X + Y = X; X + Y = Y.

 Parent stocks are usually retired and new stocks are issued. Name of the Co. may be one of the parents or a combination. One of the parent usually emerges as the dominant management.

Types
Horizontal Between Co.s producing similar goods/services. Larger Co.s attempting to create more efficient economies of scale. Eg: Bank of Mathura with ICICI,Lipton India with Brook Bond. Vertical Betweeen two Co.s producing different good/services for one specific finished product. Have actual/potential buyer-seller relationship Eg: Reliance purchasing FLAG Telecom Group.