CHAPTER-1 Introduction Concept of merger

The term mergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity. In simple words we can say a merger is said to occur when: Two or more companies may merge with an existing company They may merge to form a new company Two or more companies combine in to one company

ACQUISITION
An Acquisition usually refers to a purchase of a smaller firm by a larger one. Acquisition, also known as a takeover or a buyout, is the buying of one company by another. Acquisitions or takeovers occur between the bidding and the target company. There may be either hostile or friendly takeovers. Acquisition in general sense is acquiring the ownership in the property. In the context of business combinations, an acquisition is the purchase by one company of a controlling interest in the share capital of another existing company.

Methods of Acquisition An acquisition may be affected by:

1

(a) An agreement with the persons holding majority interest in the company management like members of the board or major shareholders commanding majority of voting power; (b) purchase of shares in open market; (c) making takeover offer to the general body of shareholders; (d) purchase of new shares by private treaty; (e) acquisition of share capital through the following forms of considerations viz. means of cash, issuance of loan capital, or insurance of share capital.

TYPES OF ACQUISITION There are different types of Acquisitions/takeover:1. Friendly takeovers 2. Hostile takeovers 3. Reverse takeovers Friendly takeovers Before a bidder makes an offer for another company, it usually first informs that company's board of directors. If the board feels that accepting the offer serves shareholders better than rejecting it, it recommends the offer be accepted by the shareholders. In a private company, because the shareholders and the board are usually the same people or closely connected with one another, private acquisitions are usually friendly. If the shareholders agree to sell the company, then the board is usually of the same mind or sufficiently under the orders of the shareholders to cooperate with the bidder.

2. Hostile takeovers

A hostile takeover allows a suitor to bypass a target company's management unwilling to agree to a merger or takeover. A takeover is considered "hostile" if the target company's board rejects the offer, but the bidder continues to pursue it, or the bidder makes the offer without informing the target company's board beforehand. A hostile takeover can be conducted in several ways. A tender offer can be made where the acquiring company makes a public offer at a fixed price above the current market price. Tender offers in the USA are regulated with the Williams Act.

An acquiring company can also engage in a proxy fight, whereby it tries to persuade enough shareholders, usually a simple majority, to replace the management with a new one which will approve the takeover. Another method involves quietly purchasing enough stock on the open market, known as a creeping tender offer, to effect a change in management. In all of these ways, management resists the acquisition but it is carried out anyway. 3. Reverse takeovers A reverse takeover is a type of takeover where a private company acquires a public company. This is usually done at the instigation of the larger, private company, the purpose being for the

private company to effectively float itself while avoiding some of the expense and time involved in a conventional IPO. However, under AIM rules, a reverse take-over is an acquisition or acquisitions in a twelve month period which for an AIM company would: amental change in its business, board or voting control; or in the case of an investing company, depart substantially from the investing strategy stated in its admission document or, where no admission document was produced on admission, depart substantially from the investing strategy stated in its pre-admission announcement or, depart substantially from the investing strategy

Types of Mergers
There are many types of mergers and acquisitions that redefine the business world with new strategic alliances and improved corporate philosophies. From the business structure perspective, some of the most common and significant types of mergers and acquisitions are listed below:

Horizontal Merger
This kind of merger exists between two companies who compete in the same industry segment. The two companies combine their operations and gains strength in terms of improved performance, increased capital, and enhanced profits. This kind substantially reduces the number of competitors in the segment and gives a higher edge over competition.

Vertical Merger
Vertical merger is a kind in which two or more companies in the same industry but in different fields combine together in business. In this form, the companies in merger decide to combine all the operations and productions under one shelter. It is like encompassing all the requirements and products of a single industry segment.

Conglomerate Merger
Conglomerate merger is a kind of venture in which two or more companies belonging to different industrial sectors combine their operations. All the merged companies are no way related to their kind of business and product line rather their operations overlap that of each other. This is just a unification of businesses from different verticals under one flagship enterprise or firm.

Advantage of merger
Merger and acquisition has become the most prominent process in the corporate world. The key factor contributing to the explosion of this innovative form of restructuring is the massive number of advantages it offers to the business world.

Following are some of the known advantages of merger and acquisition

Maintaining and accelerating a companies growth

Growth is necessary for a company, when there is a growth only then a company can earn maximum profit and company can achieve its growth objective by two ways Expanding its existing markets Entering in to new market Expanding its existing markets- it can be done in two ways

Expanding existing market

Internally
Internally
Physical and managerial Develop its operating facilities Manufacturing resource marketing

Eeternally

Externally
Combining its operation with other companies

Enhancing profitability
Merger may help companies in enhancing profitability because combination of two or more companies may result in more than the average profitability due to cost reduction and efficient utilization of resources profitability may be enhance because of Economies of scale Operating economies synergy

Diversification of Risk

Reduction in tax liabilities

Limiting the competition

Other motives For Merger

Merger may be motivated by two other factors that should not be classified under synergism. These are the opportunities for acquiring firm to obtain assets at bargain price and the desire of shareholders of the acquired firm to increase the liquidity of their holdings. Purchase of Assets at Bargain Prices Mergers may be explained as an opportunity to acquire assets, particularly land mineral rights, plant and equipment, at lower cost than would be incurred if they were purchased or constructed at the current market prices. If the market price of many socks have been considerably below the replacement cost of the assets they represent, expanding firm considering construction plants, developing mines or buying equipment often have found that the desired assets could be obtained where by cheaper by acquiring a firm that already owned and operated that asset. Risk could be reduced because the assets were already in place and an organization of people knew how to operate them and market their products. Many of the mergers can be financed by cash tender offers to the acquired firms shareholders at price substantially above the current market. Even so, the assets can be acquired for less than their current casts of construction. The basic factor underlying this apparently is that inflation in construction costs not fully rejected in
8

stock prices because of high interest rates and limited optimism by stock investors regarding future economic conditions. 2. Increased Managerial Skills or Technology Occasionally a firm with good potential finds it unable to develop fully because of deficiencies in certain areas of management or an absence of needed product or production 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. Of course, any merger, regardless of specific motive for it, should contribute to the maximization of owners wealth. 3. Acquiring new technology To stay competitive, companies need to stay on top of technological developments and their business applications. By buying a smaller company with unique technologies, a large company can maintain or develop a competitive edge.

Legal procedure of merger and acc

Permission for merger

Approval of board of director

Application in the high court

Share holders and creditors meeting

Sanction by the high court

Filing of the court order

Transfer of assets and liabilities

Payment by cash or securities

10

Expanding its existing markets

11

CHAPTER-2

12

13

CHAPTER-3 Review of Literature

Under this study various researchers reviewed research papers for the purpose of providing an insight into the work related to Merger and Acquisitions (M&As). After going through the available relevant literature on M&As and it comes to know that most of the work done high lightened the impact of M&As on different aspects of the companies. A firm can achieve growth both internally and externally. Internal growth may be achieved by expanding its operation or by establishing new units, and external growth may be in the form of Merger and Acquisitions (M&As), Takeover, Joint venture, Amalgamation etc. Many studies have investigated the various reasons for Merger and Acquisitions (M&As) to take place, Just to look the effects of Merger and Acquisitions on Indian financial services sector.

The work of Rao and Rao (1987) is one of the earlier attempts to analyse
mergers in India from a sample of 94 mergers orders passed during 1970-86 by the MRTP Act 1969. In the post 1991 period, several researchers have attempted to study M&As in India. Some of these prominent studies are; Beena (1998), Roy (1999), Das (2000), Saple (2000), Basant (2000), Kumar (2000), Pawaskar (2001) and Mantravedi and Reddy (2008).
14

Sinha Pankaj & Gupta Sushant (2011) studied a pre and post analysis of firms
and concluded that it had positive effect as their profitability, in most of the cases deteriorated liquidity. After the period of few years of Merger and Acquisitions (M&As) it came to the point that companies may have been able to leverage the synergies arising out of the merger and Acquisition that have not been able to manage their liquidity. Study showed the comparison of pre and post analysis of the firms. It also indicated the positive effects on the basis of some financial parameter like Earnings before Interest and Tax (EBIT), Return on share holder funds, Profit margin, Interest Coverage, Current Ratio and Cost Efficiency etc.

Kuriakose Sony & Gireesh Kumar G. S (2010) in their paper, they assessed
the strategic and financial similarities of merged Banks, and relevant financial variables of respective Banks were considered to assess their relatedness. The result of the study found that only private sector banks are in favor of the voluntary merger wave in the Indian Banking Sector and public sector Bank are reluctant toward their type of restructuring. Target Banks are more leverage (dissimilarity) than bidder Banks, so the merger lead to attain optimum capital Structure for the bidders and asset quality of target firms is very poor.

Anand Manoj & Singh Jagandeep (2008) studied the impact of merger
announcements of five banks in the Indian Banking Sector on the share holder bank. These mergers were the Times Bank merged with the HDFC Bank, the Bank of Madurai with the ICICI Bank, the ICICI Ltd with the ICICI Bank, the Global Trust Bank merged with the Oriental Bank of commerce and the Bank of Punjab merged with the centurion Bank. The announcement of merger of Bank had positive and significant impact on share holders wealth.

Mantravadi Pramod & Reddy A. Vidyadhar (2007) evaluated that the impact
of merger on the operating performance of acquiring firms in different industries by using pre and post financial ratio to examine the effect of merger on firms. They selected all mergers involved in public limited and traded companies in India between 1991 and 2003, result suggested that there were little variation in terms of impact as operating performance after merger.

15

16

CHAPTER-4 Limitation of the study

17

18

19

CHAPTER-6

20

21

22

23

24

Kkkkkdkkdkkds;;s;s;ss

25

26

27

28

Conclusion In a rapidly evolving world, the consumer goods and services industry tends to stay on the leading edge of global trends. It has to: Its core business is identifying and meeting the diverse needs of an equally diverse global population. As new economies gain strength, tastes and needs shift, and aggressive new competitors emerge, staying ahead of the curve becomes more important, and more difficult. 14 | Using Mergers & Acquisitions to Achieve Strategic Objectives and High Performance in the Consumers Goods and Services Industry For top CG&S companies, mergers and acquisitions are a powerful approach to keeping up to speed with this dynamic environment. In particular, industry leaders rely on three key capabilities that can be strengthened through M&A: strategic category leadership, consumer focus, and flexible, low-cost operations. In concert these capabilities enable global CG&S leaders to build market-dominating portfolios, stay close to legions of dissimilar customers around the world, and operate in ways that deliver superior value to customers, as well as to the business itself. In essence, M&A allows CG&S companies to go beyond what their internal efforts can achieve, allowing them to tap into the capabilities, market strength, and distribution networks of other leading firms in the markets and segments most central to their growth strategy. no wonder, then, that for leading global consumer goods and services companies, mergers and acquisitions are an increasingly important element of high performance.

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

52

53

54

55

56

57

58