In vertical Mergers and Acquisition what synergies exist?

Vertical mergers and acquisitions involve companies in different stages of the same supply
chain or value chain. The main purpose of vertical integration is to create synergies between
the two companies in order to improve operational efficiency, reduce costs, and enhance
competitiveness. Some of the synergies that may exist in vertical mergers and acquisitions
are:

Improved supply chain management: A vertical merger can allow companies to better
manage their supply chain and streamline operations by integrating production processes
and sharing resources. This can lead to cost savings and faster delivery times.

Better coordination and communication: By combining the resources and expertise of two
companies in different stages of the supply chain, vertical mergers can improve coordination
and communication between different departments and teams, leading to greater efficiency
and productivity.

Improved product quality and innovation: Vertical mergers can enable companies to leverage
each other's strengths in research and development, product design, and marketing to
create more innovative and higher-quality products.

Increased market power: Vertical mergers can give companies greater market power by
allowing them to control more of the supply chain, from raw materials to distribution. This can
lead to greater pricing power, market share, and profitability.

Reduced transaction costs: By integrating different stages of the supply chain, vertical
mergers can reduce transaction costs associated with buying and selling goods and services
from different suppliers and customers.

Why government is losers in LBO

In a leveraged buyout (LBO), a company is acquired using a significant amount of debt. The
debt is usually secured by the assets of the target company, and the acquiring company
aims to use the target company's cash flows to repay the debt. While LBOs can generate
significant returns for the investors and management team of the acquiring company, they
may not always benefit the government.

Here are some reasons why the government may be a loser in an LBO:

Reduced tax revenues: If the target company is highly leveraged after the LBO, it may have
less taxable income available to pay taxes to the government. This could result in lower tax
revenues for the government.

Job losses: In some cases, LBOs may result in layoffs or restructuring, which could lead to
job losses. This can be detrimental to the local economy and may result in increased
government spending on unemployment benefits and other social welfare programs.

Reduced investment: If the target company is burdened with significant debt after the LBO, it
may have less money available for investment in new projects or research and development.
This could reduce its ability to innovate and compete in the market, which could have a
negative impact on the broader economy.

Regulatory concerns: The government may have concerns about the acquiring company's
ability to manage the target company effectively and sustainably, especially if the acquisition
involves a company that is strategically important to the economy or national security.

In ICI PIc UK - Asian Paints case, would ICI PIc UK have succeeded in acquisition if
shares were in dematerialised form?
In India, the Securities and Exchange Board of India (SEBI) introduced a mandatory
dematerialization requirement for shares of all listed companies in 1996, one year before the
ICI Pic UK-Asian Paints case. Therefore, it is likely that the shares of Asian Paints were
already in dematerialized form at the time of the acquisition attempt.

However, the dematerialization of shares would not have necessarily affected the outcome
of the case. The legal and regulatory issues surrounding the case related to India's foreign
investment regulations and takeover code, as well as the interpretation of contractual
clauses and shareholder agreements. The case ultimately hinged on the interpretation of
these complex legal issues and the actions taken by the parties involved.

Therefore, while dematerialization of shares may have simplified the share transfer process
and reduced the risk of physical certificate loss or fraud, it is unlikely to have significantly
impacted the outcome of the ICI Pic UK-Asian Paints case.

Is it a pre-requisite to make the company private in an LBO?

No, it is not a pre-requisite to make the company private in a leveraged buyout (LBO). In an
LBO, a private equity firm or a group of investors use a significant amount of debt to acquire
a controlling stake in a company. The objective of an LBO is to restructure the company's
operations, reduce costs, increase efficiency, and eventually generate higher returns for the
investors.

In some cases, the LBO may result in the company being taken private, where the
company's shares are no longer traded on a public exchange. However, this is not always
the case, and some LBOs may result in the company remaining public

What was the basis on which Competition Commission of India (CCI) approved the
acquisition of Jet Airways by Ethihad?
● The parties agreed to limit the codeshare operations between Jet Airways and Etihad
to specific routes, which would be subject to review by the CCI.

● The parties agreed to maintain Jet Airways' brand and management independence,
and ensure that Jet Airways would continue to operate as a separate entity.

● The parties agreed to limit their joint operations to certain routes and coordinate their
schedules to avoid anti-competitive effects.
 ● The parties agreed to comply with applicable Indian laws and regulations, including
those related to competition, safety, security, and environmental protection.

● The parties agreed to share information with the CCI on their pricing, capacity, and
scheduling practices to ensure compliance with competition laws.

● The parties agreed to submit periodic reports to the CCI on their compliance with the
conditions and undertakings.

Under SEBI Takeover Code, the acquirer has to make a public offer at a price as paid
to the outgoing controlling group or market price, whichever is higher. The reference
is to which market price?

Under SEBI Takeover Code, the reference to market price is the market price discovered
through the stock exchange where the shares of the target company are most frequently
traded in the preceding 26 weeks before the public announcement of the proposed
acquisition. This is known as the "discovered price" and is used as a benchmark to
determine the offer price to be made by the acquirer to the public shareholders of the target
company.

If the acquirer has already acquired shares from the outgoing controlling group at a price
higher than the discovered price, then the acquirer is required to make a public offer to the
public shareholders of the target company at a price not lower than the price paid to the
outgoing controlling group.

If the acquirer has not acquired shares from the outgoing controlling group, then the acquirer
is required to make a public offer at a price not lower than the discovered price. The acquirer
may offer a higher price than the discovered price, but it cannot offer a lower price.

What was unique about CCI's decision regarding merger of Ranbaxy and Sunpharma?
The Competition Commission of India's (CCI) decision regarding the merger of Ranbaxy and
Sun Pharmaceutical Industries was unique in several ways:

The merger was the first merger in the Indian pharmaceutical sector to be reviewed by the
CCI under the Indian competition law.

The CCI conducted a detailed analysis of the potential competition issues arising from the
merger, particularly with respect to the overlaps between the product portfolios of the two
companies.

The CCI examined the potential impact of the merger on consumers, particularly in terms of
pricing and availability of medicines.

The CCI considered the potential impact of the merger on innovation and research and
development in the Indian pharmaceutical sector.
The CCI imposed certain conditions on the parties to address the potential competition
concerns arising from the merger, such as divestitures of certain overlapping products and
non-compete obligations on the promoters of the merged entity.

What is creeping acquisition?

Creeping acquisition is a strategy used by companies to gradually increase their
shareholding in a target company over time, without triggering the mandatory open offer
requirement under the SEBI Takeover Code.

Under Indian Bankruptcy Code (IBC), what is the position of home buyers?

Under the Indian Bankruptcy Code (IBC), home buyers are considered as financial creditors
of a real estate company or a builder that has defaulted on its payments.

This means that home buyers have the right to initiate insolvency proceedings against a
builder or a real estate company if they have not received possession of their homes or have
not been refunded their money after a builder defaults on its payments.

In addition, home buyers have the right to be represented on the committee of creditors
(CoC) that is formed during the insolvency proceedings. The CoC decides on the resolution
plan submitted by potential buyers or investors and determines the distribution of the
proceeds of the sale of the assets of the defaulting builder or real estate company.

What was the purpose of introducing Sec 29A in IBC Code 2016?
The key objectives of Section 29A are:

To prevent persons who have contributed to the default of the corporate debtor from
participating in the resolution process. This includes persons who are promoters or in
management of a company that has defaulted on its debt, as well as persons who have
been classified as willful defaulters.

To prevent persons who are associated with non-performing assets (NPAs) of other
companies from participating in the resolution process. This includes persons who are
associated with companies that have NPAs, as well as persons who are associated with
companies that have been classified as NPAs themselves.

To ensure that only persons with a clean track record participate in the resolution process.
The section specifies that persons who have been convicted of certain offences or have
been disqualified by a regulatory authority cannot participate in the process.

Renaisance Steel challenged the eligibility of Vedanta to acquire Electrosteel since an

affiliate of Vedanta in Zambia had been found guilty of violating certain environmental
laws punishable with imprisonment or fine. What was NCLAT judgement?
In the case of Renaissance Steel India Pvt. Ltd. v. Vedanta Ltd. & Ors., the National
Company Law Appellate Tribunal (NCLAT) ruled in favor of Vedanta's eligibility to acquire
Electrosteel Steels Ltd. The NCLAT held that the mere fact that an affiliate of Vedanta in
Zambia had been found guilty of violating environmental laws did not make Vedanta
ineligible to acquire Electrosteel under Section 29A of the Insolvency and Bankruptcy Code,
2016.

The NCLAT observed that the relevant provision of Section 29A required that the person or
entity in question be convicted of an offence punishable with imprisonment for more than
seven years or with a fine of more than Rs.1 crore. The environmental violation in Zambia
did not meet this requirement as the maximum penalty for the offence was a fine of ZMW
90,000 (approximately Rs. 3.3 lakhs).

The NCLAT further noted that the eligibility of Vedanta had been approved by the Committee
of Creditors (CoC) of Electrosteel and the resolution plan had already been approved by the
National Company Law Tribunal (NCLT). Therefore, any challenge to Vedanta's eligibility
should have been raised earlier in the process.

Based on these findings, the NCLAT dismissed the appeal by Renaissance Steel and upheld
the eligibility of Vedanta to acquire Electrosteel Steels Ltd.

When the resolution fails in the stipulated time, firm is to be liquidated. What is the
change brought about in IBC on 28th March 2018 in this regard?
The Insolvency and Bankruptcy Code (IBC) was amended on 28th March 2018 to introduce
a new provision, Section 12A, which allows for the withdrawal of insolvency proceedings
after they have been initiated. This provision was introduced to promote resolution over
liquidation and to provide flexibility in the insolvency resolution process.

Under Section 12A, if the committee of creditors (CoC) approves the withdrawal of the
insolvency proceedings by a 90% majority vote, the proceedings can be terminated and the
company can continue as a going concern. This allows for the possibility of reaching a
settlement between the debtor and creditors outside the insolvency resolution process.

Prior to the introduction of Section 12A, if a resolution plan was not approved within the
stipulated time frame, the company was to be liquidated. The new provision provides an
additional option for the parties involved to seek a mutually agreeable resolution even after
the initiation of insolvency proceedings.