“TAKEOVER IN CORPORATE RESTRUCTURING”

FINAL DRAFT SUBMITTED IN THE PARTIAL FULFILMENT OF THE

COURSE TITLED – CORPORATE LAW

SUBMITTED TO:
MRS. NANDITA JHA
FACULTY OF CORPORATE LAW

SUBMITTED BY:
NAME: MANDIRA PRIYA
COURSE: B.B.A., LL.B.(Hons.)
ROLL NO: 1832
SEMESTER – 7th

CHANAKYA NATIONAL LAW UNIVERSITY, NYAYA NAGAR,

MITHAPUR, PATNA – 800001

1
DECLARATION BY THE CANDIDATE

I hereby declare that the work reported in the B.B.A., LL.B.(Hons.) Project Report entitled

“Takeover in Corporate Restructuring” submitted at Chanakya National Law University is an

authentic record of my work carried out under the supervision of Mrs. Nandita Jha. I have not

submitted this work elsewhere for any other degree or diploma. I am fully responsible for the

contents of my Project Report.

SIGNATURE OF CANDIDATE
NAME OF CANDIDATE: MANDIRA PRIYA
CHANAKYA NATIONAL LAW UNIVERSITY, PATNA.

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 ACKNOWLEDGEMENT

I would like to thank my faculty Mrs. Nandita Jha whose guidance helped me a lot with

structuring my project.

I owe the present accomplishment of my project to my friends, who helped me immensely

with materials throughout the project and without whom I couldn’t have completed it in the

present way.

I would also like to extend my gratitude to my parents and all those unseen hands that helped

me out at every stage of my project.

THANK YOU,
NAME: Mandira Priya
COURSE: B.B.A., LL.B. (Hons.)
ROLL NO: 1832
SEMESTER – 7th

3
INDEX

INTRODUCTION …………………………………………………………………….…...pg5
 AIMS AND OBJECTIVES
 HYPOTHESIS
 RESEARCH METHODOLOGY
 SOURCES OF DATA

1) CORPORATE RESTRUCTURING: MEANING & FORMS…………………………..pg7

2) TAKEOVER: MEANING & KINDS…………………………………………………pg10
3) LAWS RELATING TO TAKEOVER IN INDIA ……………………………………pg12
4) ADVANTAGES AND DISADVANTAGES OF TAKEOVER………………………pg15

CONCLUSION……………………………………………………………………………pg19

BIBLIOGRAPHY…………………………………………………………………………pg20

4
INTRODUCTION

Corporate restructuring is one of the most complex and fundamental phenomena that
management confronts. Each company has two opposite strategies from which to choose: to
diversify or to refocus on its core business. While diversifying represents the expansion of
corporate activities, refocus characterizes a concentration on its core business. From this
perspective, corporate restructuring is reduction in diversification.

Corporate restructuring is an episodic exercise, not related to investments in new plant and
machinery which involve a significant change in one or more of the following

 Pattern of ownership and control

 Composition of liability

 Asset mix of the firm.

It is a comprehensive process by which a co. can consolidate its business operations and
strengthen its position for achieving the desired objectives:

(a) Synergetic

(b) Competitive

(c) Successful

It involves significant re-orientation, re-organization or realignment of assets and liabilities of

the organization through conscious management action to improve future cash flow stream
and to make more profitable and efficient.

5
 AIMS AND OBJECTIVES

The aim of the researcher is:

• To know about the laws relating to takeover in India.

• To find out is takeover boon or bane for a company.

HYPOTHESIS
• Takeovers leads to monopolistic markets and reduction of competition.

RESEARCH METHODOLOGY
Doctrinal method of research has been utilised to complete the project report.

SOURCES OF DATA:
The researcher has relied on both primary and secondary sources to complete the project.
1. Primary Sources: Acts.
2. Secondary Sources: Books, newspapers and websites

6
CORPORATE RESTRUCTURING: MEANING & FORMS

Corporate restructuring is the process of redesigning one or more aspects of a company. The
process of reorganizing a company may be implemented due to a number of different factors,
such as positioning the company to be more competitive, survive a currently adverse
economic climate, or poise the corporation to move in an entirely new direction. Here are
some examples of why corporate restructuring may take place and what it can mean for the
company.

Restructuring a corporate entity is often a necessity when the company has grown to the point
that the original structure can no longer efficiently manage the output and general interests of
the company. For example, a corporate restructuring may call for spinning off some
departments into subsidiaries as a means of creating a more effective management model as
well as taking advantage of tax breaks that would allow the corporation to divert more
revenue to the production process. In this scenario, the restructuring is seen as a positive sign
of growth of the company and is often welcome by those who wish to see the corporation
gain a larger market share.

Corporate restructuring may also take place as a result of the acquisition of the company by
new owners. The acquisition may be in the form of a leveraged buyout, a hostile takeover, or
a merger of some type that keeps the company intact as a subsidiary of the controlling
corporation. When the restructuring is due to a hostile takeover, corporate raiders often
implement a dismantling of the company, selling off properties and other assets in order to
make a profit from the buyout. What remains after this restructuring may be a smaller entity
that can continue to function, albeit not at the level possible before the takeover took place

In general, the idea of corporate restructuring is to allow the company to continue functioning
in some manner. Even when corporate raiders break up the company and leave behind a shell
of the original structure, there is still usually a hope, what remains can function well enough
for a new buyer to purchase the diminished corporation and return it to profitability.

The "Corporate restructuring" is an umbrella term that includes mergers and consolidations,
divestitures and liquidations and various types of battles for corporate control. The essence of
corporate restructuring lies in achieving the long run goal of wealth maximisation. Generally
the term „merger and amalgamation‟ is used to refer to the process of restructuring. However

7
various modes of corporate restructuring exist depending on the primary object of
restructuring.

 Expansion: Where the objective of the business is the expansion and enlargement of
the business in that case, following modes can be adopted for restructuring.

a. Merger and Amalgamation: The combining of two or more companies, generally by

offering the stockholders of one company securities in the acquiring company in exchange
for the surrender of their stock is called Merger. When one company purchases a majority
interest in another company is called acquisition.
b. Takeover and Acquisition:
A takeover is a corporate action where an acquiring company makes a bid for an acquiree. If
the target company is publicly traded, the acquiring company will make an offer for the
outstanding shares thereby gaining control of the utilisation of corporate assets and resources.
This can be done either by taking control through share holding or by purchase of the asset
itself. The accounting treatment differs depending upon the method of takeover.
c. Joint Ventures: Cooperation between two or more companies in which the purpose is to
achieve jointly a specified business goal. Upon the attainment of the goal, the joint venture is
terminated. An example is when two businesses agree to share in the development of a
specific product. A joint venture, which is typically limited to one project, differs from a
partnership that can work jointly on many projects.
d. Strategic Alliances: It is an arrangement between two companies who have decided to
share resources in a specific project. A strategic alliance is less involved than a joint venture
where two companies typically pool resources in creating a separate entity.

 Sell off: The rapid selling of securities, such as stocks, bonds and commodities. The
increase in supply leads to a decline in the value of the security. a. Spin offs: The
creation of an independent company through the sale or distribution of new shares of
an existing business/division of a parent company is referred to as spin offs. A spinoff
is a type of divestiture. b. Split offs: A type of corporate reorganization whereby the
stock of a subsidiary is exchanged for shares in a parent company is referred to as
split offs. c. Split up: A corporate action in which a single company splits into two or
more separately run companies is referred to as split up. Shares of the original
company are exchanged for shares in the new companies, with the exact distribution

8
 of shares depending on each situation. This is an effective way to break up a company
into several independent companies. After a split-up, the original company ceases to
exist.

d. Divestiture: The partial or full disposal of an investment or asset through sale,

exchange, closure or bankruptcy is referred to as divestiture. Divestiture can be done
slowly and systematically over a long period of time, or in large lots over a short time
period. For a business, divestiture is the removal of assets from the books. Businesses
divest by the selling of ownership stakes, the closure of subsidiaries, the bankruptcy of
divisions, and so on.

 Change in ownership: Where the objective of the corporate restructuring is changing

the ownership of the companies, then the following modes may be adopted:

a. Equity Carve Out: A parent has substantial holding in a subsidiary. It sells part of that
holding to the public. „Public‟ does not necessarily mean a shareholder of the parent
company. Thus the asset item "Subsidiary Investment" in the balance-sheet of the parent
company is replaced with cash. Parent company keeps control of the subsidiary but gets
cash. This may be the first stage of a two-stage divestment (the process of selling an
asset) transaction.

b. Privatisation: The transfer of ownership of property or businesses from a government

to a privately owned entity is known as privatization. It implies transition from a publicly
traded and owned company to a company which is privately owned and no longer trades
publicly on a stock exchange. When a publicly traded company becomes private,
investors can no longer purchase a stake in that company. One of the main arguments for
the privatization of publicly owned operations is the estimated increases in efficiency that
can result from private ownership. The increased efficiency is thought to come from
the greater importance private owners tend to place on profit maximization as compared
to government, which tends to be less concerned about profits. Most companies start as
private companies funded by a small group of investors. As they grow in size, they will
often access the equity market for financing or ownership transfer through the sale of
shares. In some cases, the process is subsequently reversed when a group of investors or a
private company purchases all of the shares in a public company, making the company
private and, therefore, removing it from the stock market.

9
TAKEOVER: MEANING & KINDS

Takeover apart from merger and amalgamation is a very important mode of corporate
restructuring. To define, takeovers can be said to be a corporate action where an acquiring
company makes a bid for an acquiree.If the target company is publicly traded, the acquiring
company will make an offer for the outstanding shares. So far as the statutory definition is
concerned, no statute specifically defines the term “takeover”. „Takeover bid‟ has also been
defined as an attempt by outsiders to wrest control from the incumbent management of a
target corporation.1Takeover is generally understood to imply the acquisition of shares
carrying voting rights in a company in a direct in a direct or indirect manner with a view to
gaining control over the management of the company. However, acquisition and takeover can
be made by following different means such as purchase of assets or shares of a target
company or by means of scheme of arrangement following the procedure laid down under the
Companies Act,1956 under section 391-396 A. In the ordinary case, the company taken over
is smaller but in reverse takeover a smaller company gains the control over the larger
company. Where the shares are held by the public generally the takeover may be affected2:

 By agreement between the acquirers and the controllers of the acquired company.
 By purchase of shares on the stock exchange.
 By means of a takeover bid whereby the assets and liabilities of the target company is
acquired.

Friendly Takeovers

Takeovers can be through negotiations i.e. with the willingness and consent of acquiree
company‟s executives or Board of Directors. Such mergers are called friendly takeovers.
These takeovers are negotiated takeovers and if the parties do not reach to an agreement
during the negotiations, the proposal for takeover stands terminated and dropped out. This
kind of takeover is resorted to further some common objectives of both the parties. Generally,

1
Merger & Acquisition , Investopedia available at
http://www.investopedia.com/terms/t/takeover.asp#axzz1tpQ8fZpZ
, last seen on 15/10/2020.
2
Merger & Acquisition , Investopedia available at http://www.investopedia.com/terms/t/takeover.asp
, last seen on 15/10/2020.

10
friendly takeover takes place as per the provisions of Section 395 of the Companies Act,
1956. Section 395 of the Companies Act basically provides the power to acquire shares of the
shareholders dissenting from the scheme approved by the majority of shareholders.

Hostile Takeovers

An acquirer company may not offer to target company the proposal to acquire its undertaking
but silently and unilaterally may pursue efforts to gain controlling interest in it against the
wishes of the management. There are various ways in which an acquirer company may
pursue the matter to acquire the controlling interest in a target company. Such acts of the
acquirer are known as „takeover raids‟ in the corporate world. When organized in a
systematic way these raids are known as „takeover bids.‟ Both the raids and bids lead to
either takeover or merger. A takeover is hostile when it is in the form of „raid‟ The market
forces of competition and product failure provide strength and weakness to the rivals in the
industry, trade and commerce.
Typically, a company which wishes to acquire another company approaches the target
company's board with an offer. The board members consider the offer, and then choose to
accept or reject it. The offer will be accepted if the board believes that it will promote the
long term welfare of the company, and it will be rejected if the board dislike the terms or it
feels that a takeover would not be beneficial. When a company pursues takeover after
rejection by a board, it is a hostile takeover. If a company bypasses the board entirely, it is
also termed a hostile takeover3.

Bail out Takeovers

Bailout takeover is intended in respect of financially weak companies, i.e. a company not
being a sick industrial company, but which has the end of the previous financial year
accumulated losses, which has resulted in the erosion of more than 50 % but less than 100 %
of its net worth as at the beginning of the previous financial year, that is to say, of the sum
total of the paid-up capital and free reserves. The scheme of bailout takeover 4 provides for the
acquisition of shares in financially weak company in any of the following manner:

a. Outright purchase of shares

b. Exchange of shares
3
Merger & Acquisition , Investopedia available at http://www.investopedia.com/terms/t/takeover.asp
, last seen on 15/10/2020.
4
Chapter IV of the SEBI (Substantial Acquisition o
f Shares and Takeovers) Regulations 1996

11
 c. Combination of both
LAWS RELATING TO TAKEOVER IN INDIA
In 1991, India suffered a major economic crisis as a combination of the effects of oil price
shocks resulting from the 1990 Gulf War, the collapse of the Soviet Union which was a major
trading partner and source of foreign aid, and a sharp depletion of its foreign exchange
reserves caused largely by large and continuing government budget deficits.
In 1991, India had to service the country‟s $70 billion external debt, which had trebled over
the previous decade, as well as pay for the burgeoning costs of imports, especially oil. The
country‟s foreign exchange reserves dipped below $1 billion, barely enough to pay for two to
three weeks of imports. In addition, with the collapse of the Berlin Wall in November 1989,
the viability of socialism as an alternative model to capitalism had crumbled before the
world‟s eyes.5 Thus as a result of non-performance of the purely socialist system of economy
in our country, gates were opened to the outside world in order to synchronize itself with the
global market. The gates of the Indian market were opened for private companies, which
hitherto permitted only the public sector undertakings. And with the advent of the private
entities in the market, the corporate restructuring became more prominent and since then
Indian economy has witnessed a number of takeovers, mergers or amalgamations.
The companies rapidly underwent restructuring to make themselves globally competitive in
wake of the reduced tariff affording an opportunity to foreign players‟ advent in the Indian
market. The laws relating to the corporate restructuring is basically contained in the
Companies Act 19566 and the SEBI Regulations. 6The laws relating to takeovers in India
where not very organized until the year 1994. Prior to 1990, before the establishment of
SEBI, the takeover wasregulated by the Clause 40 of the listing agreement, which provided
for making a public offer to the shareholders of a company by any person who sought to
acquire 25 percent or more voting rights in the company. The purpose of this clause was
frustrated by the acquirers simply by acquiring voting rights a little below the threshold limit
of 25 percent which was required for making a public offer.

Pre-Takeover Code situation

In fact calling it unorganized would rather be an understatement because laws relating to
takeovers in India until 1994 hardly existed. Except for certain provisions of the Companies
5
Transforming Indian business from local to Global, available at
http://www.thinkers50.com/book_extracts/kumar.pdf,
last seen on 16/10/2020.
6
SEBI (Substantial Acquisition of Shares and Takeover) Regulations 1997

12
Act, 1956 such as Section 372, regarding inter-corporate loans by companies and Section
395, regarding acquisition of the shares of dissentient shareholders and clause 40 of the
listing agreement there was hardly anything solid enough to be called as organized takeover
laws7.

Post Takeover Code situation

The guidelines of the Securities and Exchange board of India (Substantial acquisition of
shares and takeover) 1994 was the maiden Indian attempt towards an organized set of laws
for regulating takeovers in India. The need for changes in the regulation was felt just two
years after its inception. A need was certain changes in the regulation had been felt and so a
committee under the chairmanship of Justice P.N Bhagwati was constituted to review the
regulations and suggest the necessary changes required under the act.
Establishment of SEBI in 1990 and Amendment of clause 40:
SEBI after establishment in 1990, in order to regulate the takeovers and the abuse of clause
40 of the listing agreement amended the same thereby including the following provisions:

 lowering the threshold acquisition level for making a public offer by the acquirer,
from 25% to 10% ;
 introducing the requirement of acquiring a minimum of 20% from the shareholders
 stipulating a minimum price at which an offer should be made;
 providing for disclosure requirements through a mandatory public announcement
followed by mailing of an offer document with adequate disclosures to the
shareholders of the company; and
 requiring a shareholder to disclose his shareholding at level of 5% or above to serve
as an advance notice to the target company about the possible takeover threat8.

These changes helped in making the process of acquisition of shares and takeovers
transparent, provided for protection of investors‟ interests in greater measure and introduced
an element of equity between the various parties concerned by increasing the disclosure
requirement. But the clause suffered from several deficiencies - particularly in its limited
applicability and weak enforceability. Being a part of the listing agreement, it could be made
7
Transforming Indian business from local to Global, available at
http://www.thinkers50.com/book_extracts/kumar.pdf
, last seen on 16/10/2020.

8
Merger & Acquisition, Investopedia available at http://www.investopedia.com/terms/t/takeover.asp
, last seen on 15/10/2020.

13
binding only on listed companies and could not be effectively enforced against an acquirer
unless the acquirer itself was a listed company. The penalty for non-compliance was one
common to all violations of a listing agreement, namely, delisting of the company's shares,
which ran contrary to the interest of investors. The amended clause was unable to provide a
comprehensive regulatory framework governing takeovers; nonetheless, it made a positive
beginning.

 Objectives of Regulations

The objective of the Regulations should therefore be to provide an orderly framework within
which such processes could be conducted. The Regulations should also help in evolving
goodbusiness standards as to how fairness to shareholders can be achieved, as maintenance of
such standards is of importance to the integrity of the financial markets, and they should not
concern themselves with issues of competition, or financial or commercial advantages or
disadvantages of a takeover. The committee also noted that the process of substantial
acquisition of shares and takeovers is so intertwined with the warp and weft of the industry,
especially in the wake of economic reforms, that it would be unrealistic to make Regulations
in this area without taking into account the ground realities of the Indian industry.9
The Committee also recognised that the process of takeovers is complex and is interrelated to
the dynamics of the market place. It would therefore be impracticable to devise regulations in
such detail as to cover the entire range of situations which could arise in the process of
substantial acquisition of shares and takeovers. Therefore the committee recommended some
general principles to be kept in mind during the interpretation and operation of the of the
regulations, more so in the circumstances which may not be covered by the regulations.
The regulations were amended in 1997 and they finally were implementation. Since then the
regulations have been known as, Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeover) Guidelines, 1997 or Takeover Code 1997. Since then
many amendments have been made to the regulations. However, the Takeover Code 1997 has
been succeeded by the new Takeover Code 2011 that has become effective from 22nd
October 201110.

9
Takeover in corporate restructuring available at
http://www.takeovercode.com/committee_reports/pnb_approach_committee.php
, last seen on 15/10/2020.
10
Takeover in corporate restructuring available at
http://www.takeovercode.com/committee_reports/pnb_approach_committee.php
, last seen on 15/10/2020.

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TAKEOVER CODE 1997 VIS A VIS THE TAKEOVER CODE 2011
Disclosure Requirement
Regulation 7 of the Code 1997 stated that any person who along with the persons acting in
concert, if any, acquires shares or voting rights which when taken with the existing holdings
would entitle him to 5% or 10% or 14% or 54% or 74% shares or voting rights of the target
company, is required to disclose at every stage the aggregate of his shareholding or voting
rights to the target company and the Stock exchange where the shares of the target company
are traded within 2 days of the receipt of intimation of allotment of shares or acquisition.
thereof. However an acquirer making an acquisition under the Takeover Code, 2011 in a
Target Company where the acquired shares and voting rights together with any existing
shares or voting rights of the Acquirer and PAC amount to 5% or more of the shareholding
of the Target Company, shall make disclosures of their aggregate shareholding and voting
rights in such Target Company and every Acquisition or disposal of shares of such Target
Company representing 2% or more of the shares or voting rights in such Target Company.
Open Offer
Where an acquirer intends to acquire shares which along with his existing shareholding
would entitle him to more than 15 % voting rights can acquire such additional shares only
after making a public announcement to acquire such shares through an open offer. 11 Under
the Takeover Code, 1997, an acquirer was mandated to make an open offer if he, alone or
through persons acting in concert, were acquiring 15% or more of voting right in the target
company.
This threshold of 15% has been increased to 25% under the Takeover Code, 2011. This is a
significant raise from the threshold prescribed in the old Takeover Code, 1997. It is perceived
that the increase in the threshold will be beneficial to private equity funds and institutional
investors who had to earlier restrict their stake to 14.99%. Now investors, including private
equity funds and minority foreign investors, will be able to increase their shareholding in
Target Companies up to 24.99% and will have greater say in the management of the Target
Companies.
Consolidation of Offers
No acquirer who, together with persons acting in concert with him, has acquired, in
accordance with the provisions of law, 15 per cent or more but less than fifty five per cent
11
Takeover in corporate restructuring available at
http://www.takeovercode.com/committee_reports/pnb_approach_committee.php,
last seen on 15/10/2020.

15
(55%) of the shares or voting rights in a company, shall acquire, either by himself or through
or with persons acting in concert with him, additional shares or voting rights entitling him to
exercise more than 5% of the voting rights, in any financial year ending on 31st March unless
such acquirer makes a public announcement to acquire shares in accordance with the
regulations12
Further if an acquirer together with the persons acting in concert holds more than 55percent
but less than 75 percent of the shares or voting rights in the target company, for the purpose
of acquiring additional shares either by himself or through persons acting in concert thereby
entitling him to exercise voting rights, such an acquirer has to make public announcement to
acquire such shares in accordance with these regulations.13
Where an acquirer who together with persons acting in concert with him holds fifty-five per
cent (55%) or more but less than seventy-five per cent (75%) of the shares or voting rights in
a target company, is desirous of consolidating his holding while ensuring that the public
shareholding in the target company does not fall below the minimum level permitted by the
Listing Agreement, he may do so by making a public announcement in accordance with these
regulations.14
Modes of Takeover
The acquirer company can acquire the target company either by:
a. Takeover Bid
i. Mandatory Bid
ii. Partial Bid
iii. Competitive bid
b. Tender Offer
A takeover bid gives impression of the intention reflected in the action of acquiring shares of
company to gain control of its affairs.
Regulation 10 and 12 of the SEBI Takeover Code 1997 provide for the making public
announcements which is in fact the mandatory bid. The situation in which such bid by way of
public announcement is to be made has been discussed earlier.
Conditions for Mandatory Bid 15

12
Regulation 11(1) of the Takeover Code 1997
13
Regulation 11(2) of the Takeover Code 1997.
14
Regulation 11(2A) of the Takeover Code 1997
15
Takeover in corporate restructuring available at
http://www.takeovercode.com/committee_reports/pnb_approach_committee.php
, last seen on 15/10/2020.

16
a. Consideration offer should be in cash and if in other securities, the same should be
undertaken for cash offer.
b. Offer price must be the highest price which offerer paid in past 12 months for same class
of shares.
Partial Bid
Partial bid is understood when a bid is made for acquiring part of shares of a class of capital
where the offerer intends to obtain effective control of the offeree through voting power.
Such a bid is made for equity shares carrying voting rights. Also in a situation where offerer
bids for whole of the issued shares of one class of capital in company other than equity share
capital carrying voting rights. Regulation 12 of SEBI Takeover Code 1997 qualifies partial
bid in the form of acquiring control over the target company irrespective of whether or not
there has been acquisition of shares or voting rights in a company.
Competitive Bid
There may be a situation, where a person other than the one being the acquirer having already
made the public announcement with respect to the acquisition of shares of the target
company, makes a bid to acquire the same target company. Such situation is regulated by
Regulation 25 of SEBI Takeover Code 1997 whereby „any person, other than the acquirer
who has made the first public announcement, who is desirous of making any offer, shall,
within 21 days of the public announcement of the first offer, make a public announcement of
his offer for acquisition of the shares of the same target company.‟ No public announcement
for an offer or competitive bid shall be made after 21 days from the date of public
announcement of the first offer.16
No public announcement for a competitive bid shall be made after an acquirer has already
made the public announcement under the proviso to sub-regulation (1) of regulation 14
pursuant to entering into a Share Purchase or Shareholders‟ Agreement with the Central
Government or the State Government as the case may be, for acquisition of shares or voting
rights or control of a Public Sector Undertaking.17

16
Regulation 25(2) of Takeover Code 1997
17
Regulation 25(2A) of the Takeover Code 1997

17
ADVANTAGES AND DISADVANTAGES OF TAKEOVER

Advantages:

 Results in growth and diversification of the existing corporations, which opt ofr
mergers or acquisitions.

 Enables dynamic firms to takeover inefficient firms and turn them into a more
efficient and profitable firm.

 New firm may benefit from economies of scale and share knowledge.

 Greater profit may enable more investment in research and development. For
example, this is important for pharmaceutical firms which engage in much risky
investment.

 Increases managerial skills and technology. If the firm cannot hire the management or
the technology it needs, it might combine with a compatible firm that has needed
managerial, personnel or technical expertise.

 Increase in the market share by reducing the competitors, and thereby enables to
secure more profit.

Disadvantages

 In a way takeovers lead to reduction of competition in the market leading to consumer

exploitation.

 The problem related to the human aspects of takeovers leads often to the failure of
takeovers ultimately leading to loss of time and money.

 Leads to development of monopolistic markets.

 Cartel formations and collusions may not be rules out.

18
CONCLUSION

Growth is always essential for the existence of a business concern. A business is bound to die
if it does not try to expand its activities. The expansion of a business may be in the form of
enlargement of its activities or acquisition of ownership. Internal expansion results gradual
increase in the activities of the concern. External expansion refers to “business combination”
where two or more concerns combine and expand their business activities. Takeovers in the
present scenario are often considered as prelude to mergers. However, as a matter of fact the
question arises that whether takeovers in the ultimate analysis, are boon or bane. Having a
glance at the advantages that are there, takeovers certainly for the corporate entities are
benediction. But how far are takeovers in the public interest; this question remain to be
examined. In this global market, acquisition of a domestic company by a foreign firm is not a
new concept and this is where the concerns like general public interest, national interest
come. Where a foreign entity is involved in takeovers, the regulations must take care of the
aspects related to the public interest and the national interest. In India, the bodies like the
Competition Commission, SEBI, and RBI (in case there is involvement of Banking
institutions) take care of these aspects. But still another aspect that renders most of the
takeovers futile is the human aspect where the synchronization of two different cultures has
to be made. It has manifold individuals and societal implications as discussed earlier. Thus
observed from this point of view takeovers may seem to attract more futility than utility.
However, with proper HR management, this problem of takeovers may be done away with
and then if they are not contrary to the public and national interest then they are certainly a
boon.

19
BIBLIOGRAPHY

Books:

 J.C. Verma, Corporate Mergers, Amalgamation and Takeover, 68(5th ed., 2008).
 Taxmann, SEBI Manual,20 (13th ed. 2009).

Websites:

 Corporate Restructuring: Takeover , Tax Management India.Com available at

https://www.taxmanagementindia.com/visitor/detail_manual.asp?ID=625 last seen on
27/10/2020.
 S.S. Rana & Co. Advocates, India: Takeover: A Corporate Restructuring, Mondaq
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291d73c91901#:~:text=Acquisition%20or%20takeover%2C%20may%20be,liabilities
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