Merger, Acquisition and Corporate Restructuring
Globalization has led to an increase in Mergers & Acquisitions (“M&A”) across the globe. In the last few years, India has witnessed a substantial growth in the M&A activity. The coming years are expected to witness a continuing trend of increased M&A activities for both commercial and tax reasons. Further impetus has been provided by the Indian Government’s liberalization policies and regulations for attracting and encouraging foreign investments in India.
M&A is a strategic decision for achieving economies of scale, increased market share, corporate synergies, growth in operations and diversification of business. It also serves as a vehicle for capital investment, shielding against competition, acquiring intellectual property and reducing tax liabilities.
M&A has now become an integral part of the Indian market. Cross border M&A is on the rise as Indian businesses are being viewed as attractive targets for acquisition by foreign entities.
Merger and Acquisition helps to:
- Perform portfolio reviews to understand your best path to growth and competitive advantage
- Assess the strategic fit of a business by evaluating the market opportunity and potential synergies
- Conduct diligence, including financial, tax, commercial, operational, regulatory, IT and cyber
- Determine the right valuation and approach to capital market for funding
- Operationalize the deal
Merger & Acquisition Services
- Due Diligence: Undertaking due diligence in a comprehensive manner across various industries and businesses.
- Structuring: Advice and formulate a creative and robust structure for M&A of the targeted business in India and abroad. Assistance on the issues that play a significant role in M&A transactions such as choice of transaction, investments, jurisdictions, etc.
- Contract Drafting, Opinions, Documentation: Drafting of the transaction documents keeping the objectives and structures in mind. It also assists clients in drafting opinions, side letters, guarantees, options, etc. which may be required for transactions.
- Negotiations: Assistance during negotiations to ensure closure of transaction.
Types of Merger :
- Horizontal Merger: -A horizontal merger occurs when two companies operating in the same market (and selling similar products or services) come together to dominate market share. This type is attractive for merging companies aiming to build economies of scale and decrease market competition. However, there are potential downsides. A horizontal merger comes with increased regulatory scrutiny and stringency, and can lead to a loss of value if the post-merger integration is not fully realized. Regulatory due diligence should be executed with extra special care.
- Vertical Merger: -Vertical mergers involve two companies in the same industry who operate in different stages of production. This type of merger is ideal for streamlining operations, boosting efficiencies, and cutting costs across the supply chain, but it can also reduce flexibility and result in new complexities for the business to manage.
- Congeneric merger: -In a congeneric merger, the acquirer and target company have different products or services, but operate within the same market and sell to the same customers. They could be indirect competitors, although their products often complement each other. As these companies already share similar distribution channels, production or technology, this type of merger can allow the new business entity to expand its product lines and increase market share. As a downside, the fact that these two companies already operate within the same industry could limit further diversification
- Market-extension and product-extension mergers: -A market extension merger describes two companies in the same industry who join forces with the aim of expanding market reach. Commonly, this type of transaction occurs across multiple geographic regions. A product extension merger occurs when a specific product is added to the product line of the acquirer from the acquired company.
- Conglomerate Merger: -Unlike the other types of mergers, a conglomerate merger occurs between two companies whose business activities and industries may be completely unrelated. In pure conglomerate mergers, the two firms may continue to operate separately within their own markets, whereas in a mixed one, they may look to expand product or market reach. While this type of merger can help the new entity increase market share and diversify its business, it can be especially challenging to integrate dissimilar companies, raising the risk of culture clashes and lost efficiency due to disrupted business operations.
Corporate Restructuring, in general, is a much wider concept and Merger is a way of Organizational Restructuring. Hence Merger can be called as a brain-child of Corporate Restructuring. Corporate Restructuring is an important technique for organizations to modify or change their operations, management, and financial structure. Mergers & Acquisition are a sub-type of Corporate Restructuring.
difference between Merger, Acquisition, Amalgamation and Corporate Restructuring?
A merger is a way of a business transfer wherein the assets of two companies are vested in a single company. This single company is not necessarily one of the two merging companies. The merging companies lose their old identity and amalgamate into a single entity and the shareholders of the old companies become shareholders of the newly formed entity.
Merger or Amalgamation is a combination of two or more companies into one company. Acquisition does not involve a combination of companies. The control can be acquired through a friendly manner or through forced manner. The former is called Acquisition while the latter is called Take over.
Amalgamation is an ‘arrangement’ or ‘reconstruction’. Amalgamation is a legal process by which two or more companies are joined together to form a new entity or one or more companies are to be absorbed or blended with another and as a consequence the amalgamating company loses its existence and its shareholders become the shareholders of new company or the amalgamated company.
Corporate Restructuring is an important technique for organizations to modify or change their operations, management, and financial structure. Mergers & Acquisition are a sub-type of Corporate Restructuring.
