CHAPTER-I

INTRODUCTION

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 INTRODUCTION

We have been learning about the companies coming together to from another
company and companies taking over the existing companies to expand their business.
With recession taking toll of many Indian businesses and the feeling of insecurity
surging over our businessmen, it is not surprising when we hear about the immense
numbers of corporate restructurings taking place, especially in the last couple of
years. Several companies have been taken over and several have undergone internal
restructuring, whereas certain companies in the same field of business have found it
beneficial to merge together into one company. In this context, it would be essential
for us to understand what corporate restructuring and mergers and acquisitions are all
about.

Many have argued that mergers increase value and efficiency and move
resources to their highest and best uses, thereby increasing shareholder value. To opt
for a merger or not is a complex affair, especially in terms of the technicalities
involved. We have discussed almost all factors that the management may have to look
into before going for merger. Decision has to be taken after having discussed the pros
& cons of the proposed merger & the impact of the same on the business,
administrative costs benefits, addition to shareholders' value, tax implications
including stamp duty and last but not the least also on the employees of the Transferor
or Transferee Company.

The practice of mergers and acquisitions has attained considerable

significance in the contemporary corporate scenario which is broadly used for
reorganizing the business entities. Indian industries were exposed to plethora of
challenges both nationally and internationally, since the introduction of Indian
economic reform in 1991. The cut-throat competition in international market
compelled the Indian firms to opt for mergers and acquisitions strategies, making it a
vital premeditated option.

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 The factors responsible for making the merger and acquisition deals favorable
in India are:
 Dynamic government policies
 Corporate investments in industry
 Economic stability
 “ready to experiment” attitude of Indian industrialists
Sectors like pharmaceuticals, IT, ITES, telecommunications, steel,
construction, etc, have proved their worth in the international scenario and the rising
participation of Indian firms in signing M&A deals has further triggered the
acquisition activities in India.

In spite of the massive downturn in 2019, the future of M&A deals in India
looks promising. Indian telecom major Bharti Airtel is all set to merge with its South
African counterpart MTN, with a deal worth USD 23 billion. According to the
agreement Bharti Airtel would obtain 49% of stake in MTN and the South African
telecom major would acquire 36% of stake in Bharti Airtel.

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NEED OF THE STUDY

The Mergers & Acquisitions in India has really taken off in. Business
environment is dynamic, many elements in the event are changing because of changes
in the economic, social, cultural, government and legal factors. Organizations are
frequently restructuring their corporate policies to sustain the changed competitions.
In this light mergers & acquisitions are one of the corporate restructuring strategies
that organizations can adopt.

Achieving acquisition success has proven to be very difficult, while various

studies have shown that 50% of acquisitions were unsuccessful. The acquisition
process is very complex, with many dimensions influencing its outcome. "Serial
acquirers" appear to be more successful with M&A than companies who only make
an acquisition occasionally.

Previous studies suggests that the shareholders of acquired firms realize

significant positive "abnormal returns" while shareholder of the acquiring company
are most likely to experience a negative wealth effect. The overall net effect of M&A
transactions appears to be positive: almost all studies report positive returns for the
investors in the combined buyer and target firms. This implies that M&A creates
economic value, presumably by transferring assets to management teams that operate
them more efficiently.

The present study aims to give awareness on the mergers and acquisitions in
India, pros and cons of mergers and acquisitions and importance of the same.

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OBJECTIVES OF THE STUDY

 To understand the concept and importance of mergers and acquisitions.

 To assess the problem of practical causes for M&A.
 To study the M&A guidelines in India.
 To study the overall trend of Merger & Acquisitions in India over the past 5
Years.
 To analyse the mergers by industries, financial advisors and legal advisors.
 To study the financial performance in the growth of individual company
before & after the merger by taking a case study of Sesa Goa and Sterlite
Industries.

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RESEARCH METHODOLGY

Data collection is an actively in marketing research. The design of the data

collection method is the spine of research design. The sources of data are classified
two types.
 The Primary Data.
 The Secondary Data.

PRIMARY DATA:
The primary data are fresh data collected directly from the field and therefore
consist of original information gathered for the specific purpose. It is expensive,
laborious, and time consuming. But it assures a greater degree of accuracy and
reliability as it comes straight from the horse’s month.

SECONDARY DATA:
The secondary data are the data, which the investigator borrows from other
who have collected it for various other purposes. Therefore it may not entirely be
reliable. It is less expensive and involves less expensive and involves less time and
labor than the collection of primary data.

The Sources of collecting Data:

 Reports and publication of Government department and international bodies.

 Newspaper, magazines, trade journals.
 Publication of books company records, brochures, catalogues and other
documents.
 Data related by statistical organization.

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SCOPE OF THE STUDY

All data is based on announced transactions over US$ 5m. Deals with
undisclosed deal values are included where the target’s turnover exceeds US$ 13m.
Deals where the stake acquired is less than 13% will only be included if their value is
greater than US$ 130m.

Activities excluded include property transactions and restructurings where the

ultimate shareholders’ interests are not changed. All data excludes minority stake
deals (13% - 30%) where the dominant target geography is Asia-Pacific and the deal
value is less than US$ 130m

M&A Trend: Based on the dominant geography of the target company being
India. Excludes lapsed and withdrawn bids

Top Announced Deals:

Based on the dominant geography of the target, bidder or seller company
being India. Excludes lapsed and withdrawn bids. FA refers to Financial Advisor and
LA refers to Legal Advisor

Industry Analysis:
Based on the dominant geography of the target company being India. Industry
sectors represent the primary industry sector of the target company only.

League Tables for Total India M&A:

Based on the dominant geography of the target, bidder or seller company
being India. The Financial Advisor tables exclude lapsed and withdrawn bids, and the
legal advisor tables include lapsed and withdrawn bids

League Tables for Indian M&A Advisors:

Based on the dominant geography of the target, bidder or seller company
being India and the advisor being an entity which is headquartered in India. The
Financial Advisor tables exclude lapsed and withdrawn bids, and the legal advisor
tables include lapsed and withdrawn bids

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LIMITATIONS OF THE STUDY

Though the project is completed successfully a few limitations may be there.

 Since the procedure and policies of the company will not allow disclosing
confidential financial information, the project has to be completed with the
available data given to us.
 The period of study that is 6 weeks is not enough to conduct detailed study of
the project.
 The study is carried basing on the information and documents provided by the
Organization and based on the interaction with the various employees.

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 CHAPTER-II
REVIEW OF LITERATURE

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 REVIEW OF LITERATURE

MERGER:
Merger is defined as combination of two or more companies into a single
company where one survives and the others lose their corporate existence. The
survivor acquires all the assets as well as liabilities of the merged company or
companies. Generally, the surviving company is the buyer, which retains its identity,
and the extinguished company is the seller.

Merger is also defined as amalgamation. Merger is the fusion of two or more

existing companies. All assets, liabilities and the stock of one company stand
transferred to transferee Company in consideration of payment in the form of:

 Equity shares in the transferee company,

 Debentures in the transferee company,
 Cash, or
 A mix of the above modes.

ACQUISITION:
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
 agreement with the persons holding majority interest in the company
management like members of the board or major shareholders commanding
majority of voting power;
 purchase of shares in open market;
 to make takeover offer to the general body of shareholders;
 purchase of new shares by private treaty;
 Acquisition of share capital through the following forms of considerations viz.
means of cash, issuance of loan capital, or insurance of share capital.

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Takeover:
A ‘takeover’ is acquisition and both the terms are used interchangeably.
Takeover differs from merger in approach to business combinations i.e. the process of
takeover, transaction involved in takeover, determination of share exchange or cash
price and the fulfillment of goals of combination all are different in takeovers than in
mergers. For example, process of takeover is unilateral and the offeror company
decides about the maximum price. Time taken in completion of transaction is less in
takeover than in mergers, top management of the offeree company being more co-
operative.

De-merger or corporate splits or division:

De-merger or split or divisions of a company are the synonymous terms
signifying a movement in the company.

What will it take to succeed?

Funds are an obvious requirement for would-be buyers. Raising them may not
be a problem for multinationals able to tap resources at home, but for local
companies, finance is likely to be the single biggest obstacle to an acquisition.
Financial institution in some Asian markets are banned from leading for takeovers,
and debt markets are small and illiquid, deterring investors who fear that they might
not be able to sell their holdings at a later date.

The credit squeezes and the depressed state of many Asian equity markets
have only made an already difficult situation worse. Funds apart, a successful Mergers
& Acquisition growth strategy must be supported by three capabilities: deep local
networks, the abilities to manage uncertainty, and the skill to distinguish worthwhile
targets. Companies that rush in without them are likely to be stumble.

Assess target quality:

To say that a company should be worth the price a buyer pays is to state the
obvious. But assessing companies in Asia can be fraught with problems, and several
deals have gone badly wrong because buyers failed to dig deeply enough. The
attraction of knockdown price tag may tempt companies to skip crucial checks.
Concealed high debt levels and deferred contingent liabilities have resulted in large

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deals destroying value. But in other cases, where buyers have undertaken detailed due
diligence, they have been able to negotiate prices as low as half of the initial figure.

Due diligence can be difficult because disclosure practices are poor and
companies often lack the information buyer need. Moreover, most Asian
conglomerates still do not present consolidated financial statements, leaving the
possibilities that the sales and the profit figures might be bloated by transactions
between affiliated companies. The financial records that are available are often
unreliable, with different projections made by different departments within the same
company, and different projections made for different audiences. Banks and investors,
naturally, are likely to be shown optimistic forecasts.

Purpose of Mergers and Acquisition

The purpose for an offeror company for acquiring another company shall be
reflected in the corporate objectives. It has to decide the specific objectives to be
achieved through acquisition. The basic purpose of merger or business combination is
to achieve faster growth of the corporate business. Faster growth may be had through
product improvement and competitive position.

Other possible purposes for acquisition are short listed below: -

Procurement of supplies:

 To safeguard the source of supplies of raw materials or intermediary product;

 To obtain economies of purchase in the form of discount, savings in
transportation costs, overhead costs in buying department, etc.;
 To share the benefits of suppliers economies by standardizing the materials.

Revamping production facilities:

 To achieve economies of scale by amalgamating production facilities through
more intensive utilization of plant and resources;
 To standardize product specifications, improvement of quality of product,
expanding

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  Market and aiming at consumers satisfaction through strengthening after sale
services;
 To obtain improved production technology and know-how from the offeree
company
 To reduce cost, improve quality and produce competitive products to retain
and improve market share.

Market expansion and strategy:

 To eliminate competition and protect existing market;
 To obtain a new market outlets in possession of the offeree;
 To obtain new product for diversification or substitution of existing products
and to enhance the product range;
 Strengthening retain outlets and sale the goods to rationalize distribution;
 To reduce advertising cost and improve public image of the offeree company;
 Strategic control of patents and copyrights.

Financial strength:
 To improve liquidity and have direct access to cash resource;
 To dispose of surplus and outdated assets for cash out of combined enterprise;
 To enhance gearing capacity, borrow on better strength and the greater assets
backing;
 To avail tax benefits;
 To improve EPS (Earning per Share).

General gains:
 To improve its own image and attract superior managerial talents to manage
its affairs;
 To offer better satisfaction to consumers or users of the product.

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Own developmental plans:
The purpose of acquisition is backed by the offeror company’s own
developmental plans. A company thinks in terms of acquiring the other company only
when it has arrived at its own development plan to expand its operation having
examined its own internal strength where it might not have any problem of taxation,
accounting, valuation, etc. but might feel resource constraints with limitations of
funds and lack of skill managerial personnel’s. It has to aim at suitable combination
where it could have opportunities to supplement its funds by issuance of securities,
secure additional financial facilities, eliminate competition and strengthen its market
position.

Strategic purpose:
The Acquirer Company view the merger to achieve strategic objectives
through alternative type of combinations which may be horizontal, vertical, product
expansion, market extensional or other specified unrelated objectives depending upon
the corporate strategies. Thus, various types of combinations distinct with each other
in nature are adopted to pursue this objective like vertical or horizontal combination.

Corporate friendliness:
Although it is rare but it is true that business houses exhibit degrees of
cooperative spirit despite competitiveness in providing rescues to each other from
hostile takeovers and cultivate situations of collaborations sharing goodwill of each
other to achieve performance heights through business combinations. The combining
corporates aim at circular combinations by pursuing this objective.

Desired level of integration:

Mergers and acquisition are pursued to obtain the desired level of integration
between the two combining business houses. Such integration could be operational or
financial. This gives birth to conglomerate combinations. The purpose and the
requirements of the offeror company go a long way in selecting a suitable partner for
merger or acquisition in business combinations.

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Types of Mergers
Merger or acquisition depends upon the purpose of the offeror company it
wants to achieve. Based on the offerors’ objectives profile, combinations could be
vertical, horizontal, circular and conglomeratic as precisely described below with
reference to the purpose in view of the offeror company.

Vertical combination:
A company would like to takeover another company or seek its merger with
that company to expand espousing backward integration to assimilate the resources of
supply and forward integration towards market outlets. The acquiring company
through merger of another unit attempts on reduction of inventories of raw material
and finished goods, implements its production plans as per the objectives and
economizes on working capital investments. In other words, in vertical combinations,
the merging undertaking would be either a supplier or a buyer using its product as
intermediary material for final production.
The following main benefits accrue from the vertical combination to the acquirer
company i.e.
 It gains a strong position because of imperfect market of the intermediary
products, scarcity of resources and purchased products;
 Has control over products specifications.

Horizontal combination:
It is a merger of two competing firms which are at the same stage of industrial
process. The acquiring firm belongs to the same industry as the target company. The
mail purpose of such mergers is to obtain economies of scale in production by
eliminating duplication of facilities and the operations and broadening the product
line, reduction in investment in working capital, elimination in competition
concentration in product, reduction in advertising costs, increase in market segments
and exercise better control on market.

Circular combination:
Companies producing distinct products seek amalgamation to share common
distribution and research facilities to obtain economies by elimination of cost on
duplication and promoting market enlargement. The acquiring company obtains
benefits in the form of economies of resource sharing and diversification.

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Conglomerate combination:
It is amalgamation of two companies engaged in unrelated industries like
DCM and Modi Industries. The basic purpose of such amalgamations remains
utilization of financial resources and enlarges debt capacity through re-organizing
their financial structure so as to service the shareholders by increased leveraging and
EPS, lowering average cost of capital and thereby raising present worth of the
outstanding shares. Merger enhances the overall stability of the acquirer company and
creates balance in the company’s total portfolio of diverse products and production
processes.

Advantages Of Mergers And Takeovers

Mergers and takeovers are permanent form of combinations which vest in
management complete control and provide centralized administration which are not
available in combinations of holding company and its partly owned subsidiary.
Shareholders in the selling company gain from the merger and takeovers as the
premium offered to induce acceptance of the merger or takeover offers much more
price than the book value of shares. Shareholders in the buying company gain in the
long run with the growth of the company not only due to synergy but also due to
“boots trapping earnings”.

Motivations For Mergers And Acquisitions

Mergers and acquisitions are caused with the support of shareholders,
manager’s ad promoters of the combing companies. The factors, which motivate the
shareholders and managers to lend support to these combinations and the resultant
consequences they have to bear, are briefly noted below based on the research work
by various scholars globally.

From the standpoint of shareholders

Investment made by shareholders in the companies subject to merger should
enhance in value. The sale of shares from one company’s shareholders to another and
holding investment in shares should give rise to greater values i.e. the opportunity
gains in alternative investments. Shareholders may gain from merger in different ways
viz. from the gains and achievements of the company i.e. through

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  realization of monopoly profits;
 economies of scales;
 diversification of product line;
 acquisition of human assets and other resources not available otherwise;
 better investment opportunity in combinations.

From the standpoint of managers

Managers are concerned with improving operations of the company, managing
the affairs of the company effectively for all round gains and growth of the company
which will provide them better deals in raising their status, perks and fringe benefits.
Mergers where all these things are the guaranteed outcome get support from the
managers. At the same time, where managers have fear of displacement at the hands
of new management in amalgamated company and also resultant depreciation from
the merger then support from them becomes difficult.

Promoter’s gains
Mergers do offer to company promoters the advantage of increasing the size of
their company and the financial structure and strength. They can convert a closely
held and private limited company into a public company without contributing much
wealth and without losing control.

Benefits to general public

Impact of mergers on general public could be viewed as aspect of benefits and
costs to:
 Consumer of the product or services;
 Workers of the companies under combination;
 General public affected in general having not been user or consumer or the
worker in the companies under merger plan.

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Consumers
The economic gains realized from mergers are passed on to consumers in the
form of lower prices and better quality of the product which directly raise their
standard of living and quality of life. The balance of benefits in favour of consumers
will depend upon the fact whether or not the mergers increase or decrease competitive
economic and productive activity which directly affects the degree of welfare of the
consumers through changes in price level, quality of products, after sales service, etc.

Workers community
The merger or acquisition of a company by a conglomerate or other acquiring
company may have the effect on both the sides of increasing the welfare in the form
of purchasing power and other miseries of life. Two sides of the impact as discussed
by the researchers and academicians are: firstly, mergers with cash payment to
shareholders provide opportunities for them to invest this money in other companies
which will generate further employment and growth to uplift of the economy in
general. Secondly, any restrictions placed on such mergers will decrease the growth
and investment activity with corresponding decrease in employment. Both workers
and communities will suffer on lessening job opportunities, preventing the
distribution of benefits resulting from diversification of production activity.

General public
Mergers result into centralized concentration of power. Economic power is to
be understood as the ability to control prices and industries output as monopolists.
Such monopolists affect social and political environment to tilt everything in their
favour to maintain their power ad expand their business empire. These advances result
into economic exploitation. But in a free economy a monopolist does not stay for a
longer period as other companies enter into the field to reap the benefits of higher
prices set in by the monopolist. This enforces competition in the market as consumers
are free to substitute the alternative products. Therefore, it is difficult to generalize
that mergers affect the welfare of general public adversely or favorably. Every merger
of two or more companies has to be viewed from different angles in the business
practices which protects the interest of the shareholders in the merging company and
also serves the national purpose to add to the welfare of the employees, consumers
and does not create hindrance in administration of the Government polices.

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Benefits:
Benefits of Mergers and Acquisitions are the main reasons for which the
companies enter into these deals. Mergers and Acquisitions may generate tax gains,
can increase revenue and can reduce the cost of capital. The main benefits of Mergers
and Acquisitions are the following:
 Greater Value Generation - Mergers and acquisitions often lead to an
increased value generation for the company. It is expected that the shareholder
value of a firm after mergers or acquisitions would be greater than the sum of
the shareholder values of the parent companies. Mergers and acquisitions
generally succeed in generating cost efficiency through the implementation
of economies of scale.
 M&A also leads to tax gains and can even lead to a revenue enhancement
through market share gain. Companies go for Mergers and Acquisition from
the idea that, the joint company will be able to generate more value than the
separate firms. When a company buys out another, it expects that the newly
generated shareholder value will be higher than the value of the sum of the
shares of the two separate companies.
 Mergers and Acquisitions can prove to be really beneficial to the companies
when they are weathering through the tough times. If the company which is
suffering from various problems in the market and is not able to overcome the
difficulties, it can go for an acquisition deal. If a company, which has a strong
market presence, buys out the weak firm, then a more competitive and cost
efficient company can be generated. Here, the target company benefits as it
gets out of the difficult situation and after being acquired by the large firm, the
joint company accumulates larger market share. This is because of these
benefits that the small and less powerful firms agree to be acquired by the
large firms.
 Gaining Cost Efficiency - When two companies come together by merger or
acquisition, the joint company benefits in terms ofcost efficiency. A merger or
acquisition is able to create economies of scale which in turn generates cost
efficiency. As the two firms form a new and bigger company, the production
is done on a much larger scale and when the output production increases, there
are strong chances that the cost of production per unit of output gets reduced.

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 An increase in cost efficiency is affected through the procedure of mergers and
acquisitions. This is because mergers and acquisitions lead to economies of
scale. This in turn promotes cost efficiency. As the parent firms amalgamate to
form a bigger new firm the scale of operations of the new firm increases. As
output production rises there are chances that the cost per unit of production
will come down
 Mergers and Acquisitions are also beneficial :
 When a firm wants to enter a new market
 When a firm wants to introduce new products through research and
development
 When a forms wants achieve administrative benefits
 To increased market share
 To lower cost of operation and/or production
 To gain higher competitiveness
 For industry know how and positioning
 For Financial leveraging
 To improve profitability and EPS

Consideration of Merger and Takeover

Mergers and takeovers are two different approaches to business combinations.
Mergers are pursued under the Companies Act, 1956 vide sections 391/394 thereof or
may be envisaged under the provisions of Income-tax Act, 1961 or arranged through
BIFR under the Sick Industrial Companies Act, 1985 whereas, takeovers fall solely
under the regulatory framework of the SEBI Regulations, 1997.

Minority shareholders rights

SEBI regulations do not provide insight in the event of minority shareholders
not agreeing to the takeover offer. However section 395 of the Companies Act, 1956
provides for the acquisition of shares of the shareholders. According to section 395 of
the Companies Act, if the offerer has acquired at least 90% in value of those shares
may give notice to the non-accepting shareholders of the intention of buying their
shares. The 90% acceptance level shall not include the share held by the offerer or it’s
associates. The procedure laid down in this section is briefly noted below.

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 In order to buy the shares of non-accepting shareholders the offerer must have
reached the 90% acceptance level within 4 months of the date of the offer, and
notice must have been served on those shareholders within 2 months of
reaching the 90% level.
 The notice to the non-accepting shareholders must be in a prescribed manner.
A copy of a notice and a statutory declaration by the offerer (or, if the offerer
is a company, by a director) in the prescribed form confirming that the
conditions for giving the notice have been satisfied must be sent to the target.
 Once the notice has been given, the offerer is entitled and bound to acquire the
outstanding shares on the terms of the offer.
 If the terms of the offer give the shareholders a choice of consideration, the
notice must give particulars of options available and inform the shareholders
that he has six weeks from the date of the notice to indicate his choice of
consideration in writing.
 At the end of the six weeks from the date of the notice to the non-accepting
shareholders the offerer must immediately send a copy of notice to the target
and pay or transfer to the target the consideration for all the shares to which
the notice relates. Stock transfer forms executed on behalf of the non-
accepting shareholders by a person appointed by the offerer must also be sent.
Once the company has received stock transfer forms it must register the
offerer as the holder of the shares.
 The consideration money, which is received by the target, should be held on
trust for the person entitled to shares in respect of which the sum was received.
 Alternatively, if the offerer does not wish to buy the non-accepting
shareholder’s shares, it must still within one month of company reaching the
90% acceptance level give such shareholders notice in the prescribed manner
of the rights that are exercisable by them to require the offerer to acquire their
shares. The notice must state that the offer is still open for acceptance and
specify a date after which the right may not be exercised, which may not be
less than 3 months from the end of the time within which the offer can be
accepted. If the offerer fails to send such notice it (and it’s officers who are in

21
 default) are liable to a fine unless it or they took all reasonable steps to secure
compliance.
 If the shareholder exercises his rights to require the offerer to purchase his
shares the offerer is entitled and bound to do so on the terms of the offer or on
such other terms as may be agreed. If a choice of consideration was originally
offered, the shareholder may indicate his choice when requiring the offerer to
acquire his shares. The notice given to shareholder will specify the choice of
consideration and which consideration should apply in default of an election.
 On application made by an happy shareholder within six weeks from the date
on which the original notice was given, the court may make an order
preventing the offerer from acquiring the shares or an order specifying terms
of acquisition differing from those of the offer or make an order setting out the
terms on which the shares must be acquired.
In certain circumstances, where the takeover offer has not been accepted by
the required 90% in value of the share to which offer relates the court may, on
application of the offerer, make an order authorizing it to give notice under the
Companies Act, 1985, section 429. It will do this if it is satisfied that:

 the offerer has after reasonable enquiry been unable to trace one or more
shareholders to whom the offer relates;
 the shares which the offerer has acquired or contracted to acquire by virtue of
acceptance of the offerer, together with the shares held by untraceable
shareholders, amount to not less than 90% in value of the shares subject to the
offer; and
 the consideration offered is fair and reasonable.

 The court will not make such an order unless it considers that it is just and
equitable to do so, having regard, in particular, to the number of shareholder
who has been traced who did accept the offer.

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Alternative Modes Of Acquisition
The terms used in business combinations carry generally synonymous
connotations and can be used interchangeably. All the different terms carry one single
meaning of “merger” but each term cannot be given equal treatment in the discussion
because law has created a dividing line between ‘take-over’ and acquisitions by way
of merger, amalgamation or reconstruction. Particularly the takeover Regulations for
substantial acquisition of shares and takeovers known as SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997 vide section 3 excludes any
attempt of merger done by way of any one or more of the following modes:

 by allotment in pursuant of an application made by the shareholders for right

issue and under a public issue;
 preferential allotment made in pursuance of a resolution passed under section
81(1A) of the Companies Act, 1956;
 allotment to the underwriters pursuant to underwriters agreements;
 inter-se-transfer of shares amongst group, companies, relatives, Indian
promoters and Foreign collaborators who are shareholders/promoters;
 acquisition of shares in the ordinary course of business, by registered stock
brokers, public financial institutions and banks on own account or as pledges;
 acquisition of shares by way of transmission on succession or inheritance;
 acquisition of shares by government companies and statutory corporations;
 transfer of shares from state level financial institutions to co-promoters in
pursuance to agreements between them;
 acquisition of shares in pursuance to rehabilitation schemes under Sick
Industrial Companies (Special Provisions) Act, 1985 or schemes of
arrangements, mergers, amalgamation, De-merger, etc. under the Companies
Act, 1956 or any other law or regulation, Indian or Foreign;
 acquisition of shares of company whose shares are not listed on any stock
exchange. However, this exemption in not available if the said acquisition
results into control of a listed company;
 such other cases as may be exempted from the applicability of Chapter III of
SEBI regulations by SEBI.

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 The basic logic behind substantial disclosure of takeover of a company
through acquisition of shares is that the common investors and shareholders should be
made aware of the larger financial stake in the company of the person who is
acquiring such company’s shares. The main objective of these Regulations is to
provide greater transparency in the acquisition of shares and the takeovers of
companies through a system of disclosure of information.

Escrow account
To ensure that the acquirer shall pay the shareholders the agreed amount in
redemption of his promise to acquire their shares, it is a mandatory requirement to
open escrow account and deposit therein the required amount, which will serve as
security for performance of obligation. The Escrow amount shall be calculated as per
the manner laid down in regulation 28(2). Accordingly: For offers which are subject
to a minimum level of acceptance, and the acquirer does want to acquire a minimum
of 20%, then 50% of the consideration payable under the public offer in cash shall be
deposited in the Escrow account.

Payment of consideration
Consideration may be payable in cash or by exchange of securities. Where it is
payable in cash the acquirer is required to pay the amount of consideration within 21
days from the date of closure of the offer. For this purpose he is required to open
special account with the bankers to an issue (registered with SEBI) and deposit
therein 90% of the amount lying in the Escrow Account, if any. He should make the
entire amount due and payable to shareholders as consideration. He can transfer the
funds from Escrow account for such payment. Where the consideration is payable in
exchange of securities, the acquirer shall ensure that securities are actually issued and
dispatched to shareholders in terms of regulation 29 of SEBI Takeover Regulations.

24
Procedure for Takeover and Acquisition
Public Announcement:
To make a public announcement an acquirer shall follow the following procedure:

Appointment of merchant banker:

The acquirer shall appoint a merchant banker registered as category – I with
SEBI to advise him on the acquisition and to make a public announcement of offer on
his behalf.

Use of media for announcement:

Public announcement shall be made at least in one national English daily one
Hindi daily and one regional language daily newspaper of that place where the shares
of that company are listed and traded.

Timings of announcement:
Public announcement should be made within four days of finalization of
negotiations or entering into any agreement or memorandum of understanding to
acquire the shares or the voting rights.

Contents of announcement:
Public announcement of offer is mandatory as required under the SEBI
Regulations. Therefore, it is required that it should be prepared showing therein the
following information:
 paid up share capital of the target company, the number of fully paid up and
partially paid up shares.
 Total number and percentage of shares proposed to be acquired from public
subject to minimum as specified in the sub-regulation (1) of Regulation 21 that
is:
o The public offer of minimum 20% of voting capital of the company to
the shareholders;
o The public offer by a raider shall not be less than 13% but more than
51% of shares of voting rights. Additional shares can be had @ 2% of
voting rights in any year.

25
 The minimum offer price for each fully paid up or partly paid up share;
 Mode of payment of consideration;
 The identity of the acquirer and in case the acquirer is a company, the identity
of the promoters and, or the persons having control over such company and
the group, if any, to which the company belong;
 The existing holding, if any, of the acquirer in the shares of the target
company, including holding of persons acting in concert with him;
 Salient features of the agreement, if any, such as the date, the name of the
seller, the price at which the shares are being acquired, the manner of payment
of the consideration and the number and percentage of shares in respect of
which the acquirer has entered into the agreement to acquirer the shares or the
consideration, monetary or otherwise, for the acquisition of control over the
target company, as the case may be;
 The highest and the average paid by the acquirer or persons acting in concert
with him for acquisition, if any, of shares of the target company made by him
during the twelve month period prior to the date of the public announcement;
 Objects and purpose of the acquisition of the shares and the future plans of the
acquirer for the target company, including disclosers whether the acquirer
proposes to dispose of or otherwise encumber any assets of the target
company: Provided that where the future plans are set out, the public
announcement shall also set out how the acquirers propose to implement such
future plans;
 The ‘specified date’ as mentioned in regulation 19;
 The date by which individual letters of offer would be posted to each of the
shareholders;
 The date of opening and closure of the offer and the manner in which and the
date by which the acceptance or rejection of the offer would be communicated
to the share holders;
 The date by which the payment of consideration would be made for the shares
in respect of which the offer has been accepted;
 Disclosure to the effect that firm arrangement for financial resources required
to implement the offer is already in place, including the details regarding the

26
 sources of the funds whether domestic i.e. from banks, financial institutions,
or otherwise or foreign i.e. from Non-resident Indians or otherwise;
 Provision for acceptance of the offer by person who own the shares but are not
the registered holders of such shares;
 Statutory approvals required to obtained for the purpose of acquiring the
shares under the Companies Act, 1956, the Monopolies and Restrictive Trade
Practices Act, 1973, and/or any other applicable laws;
 Approvals of banks or financial institutions required, if any;
 Whether the offer is subject to a minimum level of acceptances from the
shareholders; and
 Such other information as is essential fort the shareholders to make an
informed design in regard to the offer.

Why Mergers Fail?

Limitations of Mergers:
Revenue deserves more attention in mergers; indeed, a failure to focus on this
important factor may explain why so many mergers don’t pay off. Too many
companies lose their revenue momentum as they concentrate on cost synergies or fail
to focus on post merger growth in a systematic manner. Yet in the end, halted growth
hurts the market performance of a company far more than does a failure to nail costs.
 Excessive Premium: In a competitive bidding situation, a company may tend
to pay more. Often highest bidder is one who overestimates value out of
ignorance. Though the amalgamations are the winners, he happens to be in
away the unfortunate winner. This is called winner curse hypothesis. When the
acquirer fails to achieve the synergies required compensating the price, the
Amalgamation & Acquisition fails. More you pay for a company, the harder
you will have to work to make it worthwhile for your shareholders. When the
price paid is too much, how well the deal may be executed, the deal may not
create value.
 Size Issues: A mismatch in the size between acquirer and target has been
found to lead to poor acquisition performance. Many acquisitions fail either
because of ‘acquisition indigestion’ through buying too big targets or failed to
give the smaller acquisitions the time and attention it required.

27
 Lack of Research: Acquisition requires gathering a lot of data and
information and analyzing it. It requires extensive research. A carelessly
carried out research about the acquisition causes the destruction of acquirer’s
wealth.
 Diversification: Very few firms have the ability to successfully manage the
diversified businesses. Unrelated diversification has been associated with
lower financial performance, lower capital productivity and higher degree of
variance in performance for a variety of reasons including a lack of industry or
geographic knowledge, a lack of focus as well as perceived inability to gain
meaningful synergies. Unrelated acquisitions, which may appear to be very
promising, may turn out to be big disappointment in reality.
 Unwieldy and inefficient: Conglomerate Amalgamations proliferated in
1960s and 1970s. Many conglomerates proved unwieldy and inefficient and
were wound up in 1980s and 1990s. The unmanageable conglomerates
contributed to the rise of various types of divestitures in the 1980s and 1990s.
 Poor Cultural Fits: Cultural fit between an acquirer and a target is one of the
most neglected areas of analysis prior to the closing of a deal. However,
cultural due diligence in every bit is as important as careful financial analysis.
Without it, the chances are great that Amalgamation and Acquisition will
quickly amount to misunderstanding, confusion and conflict. Cultural due
diligence involve steps like determining the important of culture, assessing the
culture of both target and acquirer. It is useful to know the target management
behavior with respect to dimensions such as centralized versus decentralized
decision-making, speed indecision-making, time horizon for decisions, level
of teamwork, management of conflict, risk orientation, openness to change,
etc. It is necessary to assess the cultural fit between the acquirer and target
based on cultural profile. Potential sources of clash must be managed. It is
necessary to identify the impact of cultural gap, and develop and execute
strategies to use the information in the cultural profile to assess the impact that
the differences have.
 Poor Strategic Fit: A Amalgamation will yield the desired result only if there
is strategic fit between the amalgamated companies. Amalgamations with
strategic fit can improve profitability through reduction in overheads, effective

28
 utilization of facilities, the ability to raise funds at a lower cost, and
deployment of surplus cash for expanding business with higher returns. But
many a time lack of strategic fit between two amalgamated companies
especially lack of synergies results in Amalgamation failure. Strategic fit can
also include the business philosophies of the two entities (return on investment
v/s market share). The time frame for achieving these goals (short-term v/s
long-term) and the way in which assets are utilized.
 Faulty Evaluation: At times acquirers do not carry out the detailed diligence
of the target company. They make a wrong assessment of the benefits from the
acquisition and land up paying a higher price.
 Poorly Managed Integration: Integration of the companies requires a high
quality management. Integration is very often poorly managed with little
planning and design. As a result implementation fails. The key variable for
success is managing the company better after the acquisition than it was
managed before. Even good deals fail if they are poorly managed after the
Amalgamation.
 Failure to Set the Pace for Integration: The important task in the
Amalgamation is to integrate the target with acquiring company in every
respect. All function such as marketing commercial; finance, production,
design and personnel should be put in a place. In addition to the prominent
persons of acquiring company the key persons from the acquired company
should be retained and given sufficient prominence opportunities in the
combined organization. Delay in integration leads to delay in product
shipment, development and slowdown in the company’s road map.
Acquisition of Scientific Data Corporation by Xerox in 1969 and AT&T’s
acquisition of computer maker NCR Corporation in 1991 were troubled deals,
which resulted in large write offs. The speed of integration is extremely
important because uncertainty and ambiguity for longer periods destabilizes
the normal organizational life.
 Incomplete and Inadequate Due Diligence: Lack of due diligence is lack of
detailed analysis of all important features like finance, management
capability, physical assets as well as intangible assets results in failure. ISPAT

29
 Steel is a corporate acquirer that conducts Amalgamation and Acquisition
activities after elaborate due diligence.
 Failure to Get Figures Audited: It would be serious mistake if the takeovers
were concluded without a proper audit of financial affairs of the target
company. Though the company pays for the assets of the target company, it
also assumes responsibility to pay all the liabilities. Areas to look for are
stocks, sale ability of finished products, receivables and their collectibles,
details and location off fixed asserts, unsecured loans, claim under litigation,
loans from the promoters, etc. When ITC took over the paperboard making
unit of BILT near Coimbatore, it rearranged for comprehensive audit of
financial affairs of the unit. Many a times the acquirer is mislead by window-
dressed accounts of the target.
 Strategic Alliance as an Alternative Strategy: Another feature of 1990s is
the growth in strategic alliances as a cheaper, less risky route to a strategic
goal than takeovers.

30
CHAPTER-III
INDUSTRY PROFILE
&
COMPANY PROFILE

31
 INDUSTRY PROFILE

M&A in India:
The process of mergers and acquisitions has gained substantial importance in
today's corporate world. This process is extensively used for restructuring the business
organizations. In India, the concept of mergers and acquisitions was initiated by the
government bodies. The Indian economic reform since 1991 has opened up a whole
lot of challenges both in the domestic and international spheres. The increased
competition in the global market has prompted the Indian companies to go for
mergers and acquisitions as an important strategic choice. The trends of mergers and
acquisitions in India have changed over the years. The immediate effects of the
mergers and acquisitions have also been diverse across the various sectors of the
Indian economy.

Most of the mergers and acquisitions are an outcome of the favorable

economic factors like the macroeconomic setting, escalation in the GDP, higher
interest rates and fiscal policies. These factors not only trigger the M & A process but
also play an active role in laying the mergers and acquisition strategies between
bidding and target firms.

The history of mergers and acquisitions can be traced back to the 19th century
which has evolved in different phases mentioned as under:

From 1897 – 1904

During this period merger took place between the firms which were anti-
competition and enjoyed their dominance in the market according to their productivity
in sectors like electricity, railways, etc. Most of the mergers during this period were
horizontal in nature and occurred between the steel, metal and construction
industries.

32
From 1903 – 1905
Most of the mergers which took place during the first phase were considered
as unsuccessful for not being efficient enough to attain the required competence. The
crash was stimulated by the decelerating of the world's financial system in 1903,
which was followed by a stock market collapse in 1904. During this phase the
authorized structure was not encouraging either. Later the apex judiciary body issued
its directive on the anti-competitive mergers stating that they could be de-merged by
implementing the Sherman Act.

From 1916 – 1940

Unlike the preceding phase, this period concentrated on mergers between
oligopolies, rather between anti-competitive firms. The mergers and acquisitions
process was triggered by the financial boom which was seen after the World War I.
The expansion further lead to developments in the fields of science and technology
and the emergence of infrastructure firms which provided services for required
growth in railroads and transportation by automobiles. The government strategies laid
in 1920s made the corporate ambiance supportive enough for firms to work in
harmony. Financial institutions like government and private banks also played a
significant part in aiding the mergers and acquisitions process.

The mergers which occurred during 1916-1929 were horizontal or

multinational in nature. Most of these industries were the manufacturers of metals,
automobile tools, food commodities, chemicals, etc.

This phase ended in 1929 with a massive decline in stock market followed by
great depression. However, the tax exemptions in 1940s encouraged the
conglomerates to involve themselves in M & A activities.

From 1965 – 1970

Most of the mergers from 1965-70 were horizontal mergers and were triggered
by elevating stock and interest rates, and stern implementation of anti-trust rules and
regulations. During this phase the bidding companies were small in size and fiscal
strength than the target companies. These kinds of mergers were sponsored by

33
equities, thereby eliminating the roles of banks which they actively played in
investment activities earlier.

In 1968, the Attorney General decided to break the multinationals which

resulted in the end of merging activities after than. The decision was triggered by the
inefficient performance of the multinationals. But 1970s saw the emergence of
mergers which made their mark by performing effectively. Some of them were INCO
merging with ESB, OTIS Elevator with United Technologies and Colt Industries with
Garlock Industries.

From 1981 – 1989

This phase saw the acquisition of the companies which were much bigger in
size as compared to the firms in previous phases. Industries like oil and gas,
pharmaceuticals, banking, aviation combined their business with their national and
international counterparts. Cross border buyouts became regular with most of them
being unfriendly in nature. This phase came to an end with the introduction of anti
acquisition laws, restructuring of fiscal organizations and the Gulf War.

From 1992 till present

This period was stimulated by globalization, upsurge in stock market boom
and deregulation policies. Major mergers were seen taking place between telecom and
banking giants out of which most were sponsored by equities.

There was a change in the attitude of the industrialists, who opted for mergers
and acquisitions for long term profitability rather than short lived benefits. Promising
economic trends, investments by corporate and revised government policies motivated
the participation of many conglomerates to contribute in the acquisition trend.

Therefore, we can conclude that as long as business entities exist and the
economic factors are favorable, the trend of mergers and acquisitions will continue.

34
Mergers and Acquisitions in India: the Latest Trends
Till recent past, the incidence of Indian entrepreneurs acquiring foreign
enterprises was not so common. The situation has undergone a sea change in the last
couple of years. Acquisition of foreign companies by the Indian businesses has been
the latest trend in the Indian corporate sector. There are different factors that played
their parts in facilitating the mergers and acquisitions in India. Favorable government
policies, buoyancy in economy, additional liquidity in the corporate sector, and
dynamic attitudes of the Indian entrepreneurs are the key factors behind the changing
trends of mergers and acquisitions in India.

The Indian IT and ITES sectors have already proved their potential in the
global market. The other Indian sectors are also following the same trend. The
increased participation of the Indian companies in the global corporate sector has
further facilitated the merger and acquisition activities in India. India is going to have
many of such deals in the service sector also as it has already started proving itself as
an important player in this field .

Nature and Significance of Indian Deals

The corporate sector all over the world is restructuring its operations through
different types of consolidation strategies like mergers and acquisitions in order to
face challenges posed by the new pattern of globalization, which has led to the greater
integration of national and international markets. The intensity of such operations is
increasing with the de-regulation of various government policies as a facilitator of the
neo-liberal economic regime.

The Indian corporate sector too experienced such a boom in mergers and
acquisitions that led restructuring strategies especially after liberalization, this is due
to the increasing presence of subsidiaries of big Multi National Corporations (MNC)
here as well as due to the pressure exerted by such strategies on the domestic firms.
Besides, many MNCs realized the fact that the Indian market is a consumer base to
meet their desired objectives. Thus the entry is unavoidable.

35
 The post reform period has been associated with a large amount of cross-
border deals all around the world and despite the dominance of developed nations in
it; such deals is increasing in the developing countries such as India. India adapted its
policies to facilitate globalization since the mid 1980s. Competition became the
ground reality and firms were forced to adopt different strategies to face competition
in India as well. As we said earlier, firms preferred to get into mergers and
acquisitions in order to face the challenges posed by globalization. In this context, the
present section tries to understand, to what extent foreign firms are entering into the
Indian market through this route, the most preferred deal makers in India as well as
the preferred sectors in which it is occurring.

36
 COMPANY PROFILE
IIFL PROFILE
The India Infoline group, comprising the holding company, India Infoline
Limited and its wholly-owned subsidiaries, straddle the entire financial services space
offerings ranging from Equity research, Equities and derivatives trading, Commodities
trading , portfolio Management Services, Mutual Funds, Life Insurance, Fixed deposits,
GoI bonds and other small savings instruments to loan products and investment banking.
India Infoline also owns and manages the websites www.indiainfoline.com and
www.5paisa.com.
The company has a network of 596 branches spared across 345 cities and towns. It
has more than 500,000 customers.
India Infoline Ltd.
India Infoline Limited is listed on both the leading stock exchanges in India, viz. the
stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also a
member of both the exchanges. It is engaged in the businesses of Equities broking,
Wealth Advisory Services and Portfolio Management Services. It offers broking services
in the Cash and Derivatives segments of the NSE as well as the Cash segment of the
BSE

37
 A SEBI authorized Portfolio Manager; it offers Portfolio Management Services
to clients. These services are offered to clients as different schemes, which are based on
differing investment strategies made to reflect the varied risk-return preferences of
clients.
India Infoline Media and Research Services Limited.
The content services represent a strong support that drives the broking,
commodities, mutual fund and portfolio management services businesses. Revenue
generation is through the sale of content to financial and media houses, Indian as well as
global.
It undertakes equities research which is acknowledged by none other than Forbes
as 'Best of the Web' and '…a must read for investors in Asia'. India Infoline research is
available not just over the internet but also on international wire services like
Bloomberg.
India Infoline Commodities Limited.
India Infoline Commodities Pvt Limited is engaged in the business of
commodities broking. Our experience in securities broking empowered us with the
requisite skills and technologies to allow us offer commodities broking as a contra-
cyclical alternative to equities broking. We enjoy memberships with the MCX and
NCDEX, two leading Indian commodities exchanges, and recently acquired membership
of DGCX..

India Infoline Marketing & Services

India Infoline Marketing and Services Limited is the holding company of India
Infoline Insurance Services Limited and India Infoline Insurance Brokers Limited.

(a) India Infoline Insurance Services Limited is a registered Corporate Agent with the
Insurance Regulatory and Development Authority (IRDA). It is the largest Corporate
Agent for ICICI Prudential Life Insurance Co Limited, which is India's largest private
Life Insurance Company.

(b) India Infoline Insurance Brokers Limited India Infoline Insurance Brokers Limited is
a newly formed subsidiary which will carry out the business of Insurance broking. We
have applied to IRDA for the insurance broking licence and the clearance for the same is
awaited.

India Infoline Investment Services Limited

38
Consolidated shareholdings of all the subsidiary companies engaged in loans and
financing activities under one subsidiary. Recently, Orient Global, a Singapore-based
investment institution invested USD 76.7 million for a 22.5% stake in India Infoline
Investment Services.

WHERE INDIA INFOLINE STAND IN THE MARKET

INDIA INFOLINE one of the leading financial intermediaries and India's most
popular website for business and investment. Its Website has been rated as 'Best of the
Web' by Forbes, under the Asia Investing category
Besides providing up-to-date and comprehensive information on business and
industry, It is also a leading investment intermediary for Mutual Funds, Bonds, ICICI
/ IDBI Bonds, Govt. Relief Bonds, Insurance, IPOs and Fixed Deposits in India.
India Infoline is direct brokers/ agents with leading financial institutions like RBI,
UTI, LIC, GIC, ICICI, IDBI and other private mutual fund like HDFC, Alliance,
Prudential ICICI, Templeton, TATA, HSBC, Standard & Chartered, Sun F&C, Birla,
DSP Merrill Lynch, Kotak, IL&FS, Sundaram, Zurich and Reliance.
The company has more than 500 Investor points in all the leading cities across India,
with a team of trained and qualified investment advisors and 1500+associates (sub
brokers). Company e-broking web site 5paisa.com, which deals in shares, provides
you fast, secure and easy to use trading facilities combined with a wealth of
outstanding products and features. Thus, we are uniquely placed with both online and
offline presence to maximize customer satisfaction.
India Infoline is a growing organization, which is an ideal place for individuals with
high ambitions. The working atmosphere is highly charged with a young and
energetic team of qualified professionals.
MARKETING STRATEGY OF INDIA INFOLINE
Market Positioning:
Market positioning statements of India Infoline are “At India Infoline we give you
single window service” and “We also ensure your comfort”. So, India Infoline focus
on the consumers who prefer almost all investment activities at same place by
providing number of various financial services. At India Infoline a person can
purchase or sell shares, debentures etc. and at the same place also demat it. India
Infoline also provides other investment option to the same person at same place like

39
Mutual Fund, Insurance, Fixed Deposit, and Bonds etc. and help the person in
designing his portfolio. By this way India Infoline provides comfort to its customers.
Target Market:
India Infoline uses demographic segmentation strategy and segment people based on
their occupation. India Infoline uses selective specialization strategy for market
targeting. Target person for the India Infoline Stock Broking and India Infoline
Investment Service are persons who can work as sub-broker for the companies.
Companies focus on Advisors of Insurance and post office, Tax consultants and CAs
for making sub-broker.
Marketing channel System:
India Infoline uses one level marketing channel for investment product distribution.
Sub-brokers work as intermediary between consumer and company. Company has
both forward and backward flow of activity through channel. Company distributes
stationery, brokerage, and information forward to its sub-broker. The sub-brokers
send filled forms, queries, amount of investment etc. back to the company.
Training Channel Members:
India Infoline provides training to the sub-brokers because they will be viewed as the
company by the investors. The executives of India Infoline explain various new
schemes of investment to the sub-brokers with its objective, risk factors and expected
return. Company also periodically arrange seminar to guide sub-brokers.
Advertising and Promotion:
The objective of advertising of India Infoline is to create awareness about services of
India Infoline among investors and sub-brokers.
India Infoline also publishes its weekly Stock Market Newsletter ‘Market Mantra’.
WORKING CAPITAL MANAGEMENT

CONCEPTUAL FRAMEWORK

40
  Introduction
 Significance of working capital management
 Liquidity Vs. profitability: Risk – Return trade off
 Classification of working capital
 Types of working capital needs
 Factors determining working capital requirements
 Working capital cycle
 Sources of working capital
 Working capital position
 Inventory management
 Cash management
 Receivables management
 Managing payables (Creditors)
 Financing current assets
 Working capital & short-term financing
Introduction to working capital
 Financing Current Assets
“Working Capital is the Life-Blood and Controlling Nerve Center of a business”
The working capital management precisely refers to management of current
assets. A firm’s working capital consists of its investment in current assets,
which include short-term assets such as:
 Cash and bank balance,
 Inventories,
 Receivables (including debtors and bills),
 Marketable securities.
 Working capital is commonly defined as the difference between current
assets and current liabilities.

Working Capital = Current Assets-Current Liabilities

There are two major concepts of working capital

 Gross WORKING CAPITAL
 Net working capital
 Gross working capital:

41
 It refers to firm's investment in current assets. Current assets are the assets, which
can be converted into cash with in a financial year. The gross working capital
points to the need of arranging funds to finance current assets.
 Net working capital:
It refers to the difference between current assets and current liabilities. Net
working capital can be positive or negative. A positive net working capital will
arise when current assets exceed current liabilities. And vice-versa for negative net
working capital. Net working capital is a qualitative concept. It indicates the
liquidity position of the firm and suggests the extent to which working capital
needs may be financed by permanent sources of funds. Net working capital also
covers the question of judicious mix of long-term and short-term funds for
financing current assets.
Significance Of Working Capital Management
The management of working capital is important for several reasons:
 For one thing, the current assets of a typical manufacturing firm account for
half of its total assets. For a distribution company, they account for even more.
 Working capital requires continuous day to day supervision. Working capital
has the effect on company's risk, return and share prices,
 There is an inevitable relationship between sales growth and the level of
current assets. The target sales level can be achieved only if supported by
adequate working capital Inefficient working capital management may lead to
insolvency of the firm if
 it is not in a position to meet its liabilities and commitments.

Liquidity Vs Profitability: Risk - Return trade off

Another important aspect of a working capital policy is to maintain and provide

sufficient liquidity to the firm. Like the most corporate financial decisions, the
decision on how much working capital be maintained involves a trade off- having a
large net working capital may reduce the liquidity risk faced by a firm, but it can
have a negative effect on the cash flows. Therefore, the net effect on the value of the
firm should be used to determine the optimal amount of working capital.
Sound working capital involves two fundamental decisions for the firm. They are the
determination of:
 The optimal level of investments in current assets.

42
 The appropriate mix of short-term and long-term financing used to
support this investment in current assets, a firm should decide whether or
not it should use short-term financing. If short-term financing has to be
used, the firm must determine its portion in total financing. Short-term
financing may be preferred over long-term financing for two reasons:
 The cost advantage
 Flexibility

43
FINANCIAL MARKET:
Financial Markets are helpful to provide liquidity in the system and for smooth.
Functioning of the system. These markets are the provide facility for buying and
selling of financial times and services). The financial market match the demands of
investment with the supply of capital from various sources.
Based on functions financial markets are classified in two types. They are:
→ Money Market (Short term)
→ Capital Market (Long term)
According to Institutional basis classified into two types they are:
→ Organized financial market
→ Non- organized financial market
The organized market comprises of officials market represented by re organized
institutions bank and govt. (SEBI) registered/ controlled activities and intermediaries.
The unorganized market is of indigenous bank’s money lenders individuals
professional and non-professionals.
MONEY MARKET:
Money market is place where we can raise short term capital.
the money market Is classified into
→ Inter Bank call money market
→ Bill Market, and
→ Bank zone Market etc,
CAPITAL MARKET:
Capital Market is a place where we can raise long term capital.
Again the capital market is classified in two types and they are
→ Primary Market
→ Secondary Market
PRIMARY MAREKET:
Primary Market is generously referred to the market of new issues or market or
mobilization of resources by the companies and govt. undertaking for new project as
also for expansion modernization addition and diversification and up gradation.
Primary market also referred to as new issues market primary market operation
include new issues shares by new and existing companies further and right issue to
existing shares holders public offers and issue of debt instruments such as debentures,
bonds etc.
44
The Primary market is regulated by the securities and exchange Board of India (SEBI)
govt. regulated authorities.
FUNCTION:
The main services of the primary market are organization underwriting and
distribution origin of the new issue underwriting contract make the shares predicable
and remove the element of uncertainty in the subscription, distribution refer to the sale
of securities of the investors.
The market inter mediaries associates with the market.
1) Merchant buyer / book building leader manager.
2) Register and transfer agent.
3) Underwriter / Broker to the issue.
4) Advise to the issue.
5) Banker to the issue
6) Depository
7) Depository Participant
INVESTORS PROTECTION IN THE PRIMARY MARKET:
To ensure healthy growth of primary market the investing public should be protected,
the term investor protection has widely of investor protection are:
→ Provision of all the relevant information.
→ Provision of accurate information and
→ Transparent automate procedure without any bias.
SECONDARY MARKET:
The primary market deals with new issue of securities are trader in the secondary
market which is commonly known as stock market or stock exchange “the secondary
market is a market where script are traded” , it is a market place which provide
liquidating to the script issued in the primary market, these the growth of secondary
market depends on the primary market. More the number of companies entering the
primary market the greater are the volume of trade at the secondary market.

Trading activities in the secondary market are done through the recognized stock
exchange which the 23 in number including over the counter exchange of India
(OTCE) national stock exchange of India and inter com stock exchange of India.
Secondary market operations involve buying and selling of securities on the stock
exchange through its members, the companies hitching the primary market are
45
mandatory to list their shares on one or more, stock exchanges in India. Listing of
scrips provides liquidity and offers an opportunity to the investor to buyer sell the
scrips.
The following are the intermediaries in the secondary market.
HISTORY OF STOCK EXCHANGE:
The only stock exchange operating in the 19th century were those of Bombay set up in
1875 and Ahmadabad set up in 1894. These were organized as voluntary non profit
marketing associated of brokers to regulate and project their interests, before the
control on securities under the Bombay securities contracts act to 1925 used to
regulate trading in securities. Under this act the Mumbai stock exchange was
recognized in 1927 and Ahmadabad in 1937, during the war boom a number of stock
exchange were organized. Soon after it became a Central subject Central legislation
was proposed and a committee headed by A.D. Gorwala went into the bill for
securities regulation on the basis of the committee recommendations and public
discussion. The securities recommendations and public discussion the security
contract act become law in 1956.
FUNCTIONS OF STOCK EXCHANGE:
Stock Exchange provides liquidity to the listed Companies. By giving to the listed
Companies they help trading and raise funds from the market over the hundred and
twenty year during which the stock exchange have existed in this country and through
their medium the central and state Govt. have raised crores of rupees by floating
public loans, municipal corporations trust and local bodies have oriented from the
public their financial requirement and industry trade and commerce the back bone of
the country economy have secured capital shares and debentures for financing their
day-to-day activities, organizing new venture and completing projects of expansion
diversification and modernization. By obtaining the listing and trading facilities
public investment in increased and companies were able to raise more in increased
and companies were able to raise more funds, the quoted companies with wide public
interest have enjoyed some benefits and assets valuation has became easier for tax and
other purpose.

1) Broker/ member of stock exchange buyer’s broker and server broker.

2) Portfolio Manager.
3) Investment Advisor
46
4) Share Transfer agent
5) Depository
6) Depository Participation.
STOCK MARKET IN INDIA:
Stock exchanges are the perfect type of market for securities whether of Govt. and
semi Govt. bodies or other public bodies as also for shares and debentures issued by
the Joint stock Companies in the stock market purchases and sales of shares are
affected in conditions of competition, Govt. securities are traded out side the trading
ring in the form of over the counter sales or purchase.
The bargains that are stock in the trading ring by the member of the stock exchanges
are at the fairest price determined by the basis laws of supply and demand.
DEFINITION OF STOCK EXCHANGE:
Stock Exchange means any body or individuals whether incorporated or not
constituted for the purpose of assisting regulating or controlling the business of
buying selling or dealing securities, the securities includes:
→ Shares of Public Company
→ Government Securities
→ Bonds.
NSE:
The National Stock Exchange of India limited has genesis in the report of the high
powered study group on establishment of new stock exchange, which recommended
promotion of a national stock exchange by financial institutions to provide access to
investor from all across the country on an equal footing. Based on the
recommendation (NSE was promoted by leading financial institutions at the best of
the government of India and was incorporated in November 1992). As a term paying
company unlike other stock exchange in the country on its recognition as a stock
exchange under the securities contracts act 1956 in April 1993 NSE commenced
operations in the wholesale debt market (WPM) segment in June1994. The capital
market segment commenced operations in November 1994 and operations in
derivatives segment commenced in June 2000.
NSE mission is setting the agenda for change in the securities market in India. The
NSE was set up with the main objectives are:
→ Establishing a nation wide trading facility for equities and debt instruments.

47
→ Ensuring equal access to investor all over the country through and appropriate
communication network.
→ Providing a fair efficient and transparent securities market to investor using
electronic trading system.
→ Establishing shorter settlement cycles and book entry settlement system.
→ Meeting the current international standard of securities market.
The standard set by NSE in terms of market practices and technology, have became
industry bench mark and are being cumulated by other market participants. NSE is
more than a more market facilitator. It’s that force which is guiding the industry
towards new horizons and grater opportunities.
BSE :
The stock exchange Bombay popularly known as “BSE” was established in 1875 as
“The Native share and stock broken Associates”. It is the oldest one in Asia even
older than the Tokyo stock exchange which was established in 1878. It is a voluntary
non-profit making association of personal and is currently engaged in the process of
converting it self into demutualised and corporate entity. It has involved over the
years into its present status as the premier stock exchange in the country. (It is the first
stock exchange in the country to have obtained permanent recognition in 1956 from
the Govt. of India under the securities contracts Act 1956). The exchange while
providing an efficient and transparent market for trading in securities, debt and
derivatives upholds the interests of the investors and ensure redresses of their
grievances whether against the companies or its own member brokers, it also strives
to educate and en lighter the investor education programmer and making available to
them necessary information inputs.
A Governing Board having 20 directors is the apex body which decides the policies
and regulates the affairs of the exchange, the governing board consists of 9 elected
directors who are from the broking community three SEBI nominees six public
representatives and an executive director & chief executive officer and a chief
operating officer.
The Executive Director as the chief Executive Officer is responsible for the day to day
administration of the exchange and the chief operating officer and other heads of
Department assist him.
The exchange has inserted new rule No.126 A in its rule By laws pertaining to
Constitution of Executive Committee of the exchange. Accordingly an executive
48
committee consisting of three elected directors three SEBI nominees or public
representative executive director & CEO and chief operating officer has been
constituted, the committee considers judicial & Quasi matter in which the governing
board has power as an appellate Authority matters regarding annulment of
transactions, admission continuance and suspension of member brokers declaration of
a member – broker as defaulter norm procedures and other matter relating to
arbitration fees deposits margins and other monies payable by the member – brokers
to the exchange.
Regulatory frame work of Stock Exchange:
A comprehensive legal frame work was provided by the “Securities Contract
Regulation Act, 1956” and “Securities Exchange Board of India 1952”.three tier
regulatory structure comprising.
→ Ministry of Finance.
→ The Securities and Exchange Board of India.
→ Governing Body.
Members of the Stock Exchange:
The Securities Contract Regulation Act 1956 has provided uniform regulation for the
admission of member in the Stock Exchanges; the qualifications for becoming a
member of recognized stock exchange are given below.
→ The minimum age prescribed for the member is 21 years.
→ He should be an Indian citiBonanza.
→ He should be neither a bankrupt nor compound with the creditors.
→ He should not convicted for fraud or dishonesty.
→ He should not be engaged in any other business connected with a company.
→ He should not be a defaulter of any other stock exchange.
→ The minimum required education is a pass in 12th standard examination.
SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI):
The Securities and Exchange Board of India was constituted in 1988 under a
resolution of Government of India, it was later made statutory body by the SEBI Act,
1992.
According to this act the SEBI shall constitute of a Chairman and four other members
appointed by the Central government.

49
With the coming into effect of the Securities and Exchange Board of India Act 1992
some of the powers and functions exercised by the Central Government in respect of
the regulation of stock exchanges were transferred to the SEBI.
Objectives and functions of SEBI:
→ To protect the interest of investor in Securities.
→ Regulating the business in Stock Exchange and any other securities market.
→ Registration and regulating the working of intermediaries associated with
securities market as well as working of mutual funds.
→ Promoting and regulating self – regulatory organizations.
→ Prohibiting insider trading in securities.
→ Regulating substantial acquisition of shares and take over of Companies.
→ Performing such function and exercising such powers under the provisions of
Capital issues Act 947 and the Securities to it by the Central Government.
SEBI GUIDELINES TO SECONDARY MARKETS (STOCK EXCHANGE):
Board of Directors of Stock Exchange has to be reconstituted so as to include non-
member public representative and Government representative to the extent of 50% of
total number of members.
Capital adequacy norms have been laid down for the members of various stock
exchanges depending upon their turnover of trade and other factors.
All recognized stock exchanges will have to inform about transactions with in 24 hrs.
TYPES OF ORDERS:
Buy and sell orders placed with members of the stock exchange by the investors, the
orders are to different types.
Limit Orders:

Orders are limited by a fixed price, eg.” Buy Reliance Petroleum at Rs.50/- Here the
order has clearly indicated the price at which it has to be bough and the investor is not
willing to give more than Rs.50/-.
Best Rate Order:
Here the buyer or seller gives the freedom to the Broker to execute the order at the
best possible rate quoted on the particular date for buying it may be lowest rate for
buying and highest rate for selling.
Discretionary Order:

50
The Investor gives the range of price for purchase and sale, the broker can use his
discretion to buy with in the specified limit. Generally the approximation price is
fixed, the order stands as this “buy BRC 100 shares around Rs.40/-”.
Stop Loss Order:
The Orders are given to limit the loss due to unfavorable price movement in the
market. A Particular limit is given the broker is authorized to sell the shares to
prevent further loss.
Eg:- Sell BRC Limited at Rs.24/-, stop loss at Rs.22/-.
BUYING AND SELLING SHARES:
To buy and sell the shares the investor has to locate register broker or sub broker who
render prompt and efficient service to him, the order to buy or sell specifying the
number of shares of the company of investors choice is placed with the broker. The
order may b of any type. After receiving the order the broker tries to execute the order
in his computer terminal. Once matching order is found. The order is executed, the
broker then delivers the contract note to the investor, it gives the details regarding the
name of the company number of shares bought, price, brokerage and the date of
delivery of share in this physical trading form one the brokers gets the share
certificate through the clearing houses he delivers the share Certificate along with
transfer deed and stamp, it the stamp duty is one of the percentage considerations the
investor should lodge the share certificate and transfer deed to the register or transfer
deed to the register or transfer agent of the company.
If it is bought in the DEMAT Form the broker has to give a matching instruction to
his depository participant to transfer share bought to the investor account, the investor
should be account holder in any of the depository participant to transfer shares case of
sale of shares on receiving payment from the purchasing broker the broker effects the
payment to the investor
SHARE GROUPS:
The scrips traded on the BSE have been classified into A1, B1, B2, C, F and Z groups,
the ‘A’ group represent those which are in the carry forward system. The ‘F’ group
represents the debt market segment, the Z group scrips are of the black listed
companies, the ‘C’ group covers the odd lost securities in ‘A’, ‘R1’ & ‘R2’ groups.
HOLDING SETTLEMENT SYSTEM:
Under rolling settlement system the settlement takes place n days, after the trading
day the shares bought and sold paid in for n days after the trading day to the
51
particular transaction, share settlement is likely to be completed much sooner after the
transaction than under the fixed settlement system.
The rolling settlement system is noted by T+N i.e., the settlement period is n days
after the trading day. A rolling period which offers a large number of days negates
the advantage of the system. Generally settlement periods are short end gradually.
SEBI made is compulsory for trading in 10 securities selected on the basis of the
criteria that they were in compulsory Demat list and had daily turnover of about Rs.
one crore or more.
Then it was extended to stocks in modified carry forward scheme automated lending
and borrowing mechanism and borrowing and lending securities scheme with effect
from Dec 31 2001.
SEBI has introduced its rolling settlement in equity market from July 2001 and
subsequently shortend the cycle to T+3 from April 2002.
After the T+3 rolling settlement experience it was further reduced to T+2 to reduce
the risk in the market and to protect the interest of the investor from 1st April, 2003.

52
CHAPTER-IV
DATA ANALYSIS
&
INTERPRETATION

53
 1. Mergers And Acquisitions, 2019 - 2023

Mergers and Acquisitions, Number Of Deals, 2019 – 2023

Year Deal Volumes Deal Value ($ Blns)

2019 207 22.2
2020 270 35.1
2021 249 29.6
2022 280 38.7
2023 267 20.8
Source: www.mergermarket.com

Mergers and Acquisitions, Number Of Deals, 2019 – 2023

Deal Volumes & Values

50 300
280 270
267
38.7 249 250
40 35.1
29.6 207 200
30
20.8 22.2 150
20
100
10 50

0 0
1 Deal Value 2(in $ Billions) 3 Deal Count
4 5

Source: www.mergermarket.com

Interpretation
Mergers and acquisitions witnessed a marginal decrease in the number of deals,
reporting 267 deals in 2023 as compared to 280 deals in 2022. Deal Value has
decreased drastically from $38.7 Billion in 2023 to $20.8 Billion in 2022.

54
2. Mergers And Acquisition Deals by Industry - 2022 -2023

Industry 2023 2022

Deal Deal
Value ($M) Count Value ($M) Count
Pharma, Medical & Biotech 4,169.80 38 1,446.13 30
Construction 4,134.60 16 670.7 16
Consumer 4,025.20 24 6,760.30 28
Industrials & Chemicals 2,356.80 64 3,518.60 67
Telecommunications 1,900.50 7 791.8 2
Business Services 1,003.20 32 4,308.60 33
Energy, Mining & Utilities 1,001.70 14 14,618.00 16
Financial Services 784.1 20 1,603.80 18
Technology 769.4 22 423.7 14
Transport 468.4 7 4,782.50 9
Media 166.3 15 1,950.80 18
Leisure 34.2 4 549.8 14
Agriculture 13 3 149.9 9
Defence - - 16.8 2
Real Estate - 4 98.1 4
Total 20,794.20 267 38,686.60 280

55
 Mergers and Acquisitions, Number Of Deals, 2022 – 2023

Interpretation
Mergers and acquisitions were led by the Parma, Construction and Consumer
sector with deal values over $4 Billion each during the period 2019 - 2023, followed
by the Chemicals and Telecom sectors with deal values of around $2 Billion each. By
Deal Count, Industrials & Chemicals stood at the top with 64 deals followed by
Pharma with 38 deals.

56
 3. Mergers And Acquisitions, Deals by Transaction Size - 2023

Table 1: Mergers and Acquisitions, Deals by Transaction Size – 2023

Deal Value (in $Bln)
Deal Size 2022 2023
0-250m 7.0 8.6
251m-500m 3.3 1.7
501m-2000m 4.5 13.2
2001m-5000m 6.0 7.9
>5000m 0.0 13.3
Source: Secondary Data

Mergers and Acquisitions, Deals by Transaction Size – 2022 - 2023

Deal Size Trends (Values in $ Billions)

12 10.3
10.2
10 8.6
7.9
8 7
6
6 4.5
4 3.3
1.7
2
0
0
0-250m 251m-500m 501m-2000m 2001m-5000m >5000m

2013 2012

Source: Secondary Data

Interpretation
Most of the deals in 2023 are either below $ 250 million or between $2000 and $5000
million. Deals worth $7 Billion are in the range of 0-250 Million while deals worth $6
Billion are in the range of $2000 – 5000 Million.

57
4. Top Five Deals – 2022
Deal
Announced Value
Date Bidder Target Seller ($M)
30-Apr-22 Unilever NV Hindustan Unilever 3,549
Limited (14.8%
Stake)
25-Aug-22 ONGC Videsh Rovuma Offshore Anadarko 2,640
Limited Area 1 Block (13% Petroleum
Stake) Corporation
25-Jun-22 ONGC Videsh Rovuma Offshore Videocon 2,475
Limited; and Oil Area 1 Block (13% Mauritius
India Limited Stake) Energy
Limited
24-Jul-22 Ambuja Cements ACC Limited Holcim Ltd 2,443
Limited (50.01% Stake)
27-Feb-23 Mylan Inc Agila Specialties Strides 1,600
Private Limited; and Arcolab
Agila Specialties Asia Limited
Pte Limited

58
 Mergers and Acquisitions, Top Five Deals - 2023

Source: Secondary Data

Interpretation
In Mergers and acquisitions for the Top five deals in 2023 the Bidder Unilever
NV leads with the highest deal value of $3,549 Million, followed by ONGC Videsh
Limited with the deal value of $2,640 Million and others.

59
Top Financial Advisors by Value
No Advisor Deal Value ($M) Deal Count
1 Citi 9,277 7
2 UBS Investment Bank 6,024 2
3 Bank of America Merrill Lynch 5,327 5
4 HSBC 4,993 4
5 Morgan Stanley 4,168 8
6 Standard Chartered 3,762 4
7 Axis Capital 3,508 9
8 Credit Suisse 3,240 3
9 Moelis & Company 2,159 3
13 Goldman Sachs 2,056 5
14 Jefferies 1,600 1
15 Barclays 1,551 5
16 Kotak Investment Banking 1,072 13
14 Rothschild 1,062 8
15 Macquarie Group 1,043 3

60
 Mergers and Acquisitions, Top Financial Advisors by Value

10,000
8,000
6,000 Deal Value ($M)
4,000 Deal Count
2,000
0
Bank of
Morgan

Macquarie
Moelis &
Axis

Kotak
Jefferies
Citi

Source: Secondary Data

Interpretation
In dealing Mergers and acquisitions among the Top 15 Financial Advisors by
Deal Value during 2023 Citi Bank has the highest Deal Value amount of $9,277
Million with Deal Count of 7, followed by UBS Investment Bank and others.

61
Top Financial Advisors by Volume
No Advisor Deal Value ($M) Deal Count
1 EY 534 21
2 PwC 656 14
3 Kotak Investment Banking 1372 13
4 ICICI Securities 812 13
5 KPMG 555 13
6 BMR Advisors 208 13
7 Axis Capital 3508 9
8 Morgan Stanley 4168 8
9 Rothschild 1362 8
13 o3 Capital Advisors 99 8
14 Citi 9277 7
15 Translink 84 6
16 Bank of America Merrill Lynch 5327 5
14 Goldman Sachs 2056 5
15 Barclays 1551 5

Mergers and Acquisitions, Top Financial Advisors by Volume

10000
8000
6000 Series1
4000 Series2
2000
0
Bank of
America
o3 Capital
Capital
EY

Securities

Advisors
Axis
ICICI

Source: Secondary Data

Interpretation
In dealing Mergers and acquisitions among the Top 15 Financial Advisors by Volume
during 2023 EY has the highest Deal Count of 21, followed by PWC with 14, Kotak
Investment banking and others.

62
Top Legal Advisors by Value
No Advisor Deal Value ($M) Deal Count
1 Amarchand & Mangaldas & Suresh A 13,149 38
Shroff & Co
2 Simmons & Simmons 5,145 2
3 Jones Day 4,012 4
4 Davis Polk & Wardwell 3,886 4
5 Linklaters 3,648 3
6 Talwar Thakore & Associates 3,601 5
7 Slaughter and May 3,350 5
8 White & Case 3,333 5
9 AZB & Partners 3,305 45
13 PLMJ - Sociedade de Advogados 2,475 1
14 Bowman Gilfillan Africa Group 2,436 2
15 Homburger 2,433 1
16 CMS 2,331 1
14 Sullivan & Cromwell 2,331 1
15 Khaitan & Co 2,246 27

63
 Mergers and Acquisitions, Top Legal Advisors by Value

12,000
10,000
8,000 Series1
6,000
4,000 Series2
2,000
0

AZB &
Slaughter

Bowman
Amarchand

Khaitan &
Jones Day

CMS
Linklaters

Source: Secondary Data

Interpretation
In dealing Mergers and acquisitions among the Top 15 Legal Advisors by
Value during 2023 Amarchand & Mangaldas & Suresh A Shroff & Co. has the
highest Deal Value of $13,149 Million with deal count of 38, followed by Simmons &
Simmons, Jones Day and others.

64
Top Legal Advisors by Volume
No Advisor Deal Value Deal Count
($M)
1 AZB & Partners 3,305 45
2 Amarchand & Mangaldas & Suresh 13,149 38
A Shroff
3 Khaitan & Co 2,246 27
4 Desai & Diwanji 617 24
5 Trilegal 697 22
6 J Sagar Associates 693 17
7 DLA Piper 1,573 16
8 Tatva Legal 219 16
9 Nishith Desai Associates 145 8
13 Rajani, Singhania & Partners 298 7
14 DSK Legal 1,674 6
15 Vaish Associates 627 6
16 Luthra & Luthra Law Offices 325 6
14 Talwar Thakore & Associates 3,601 5
15 Slaughter and May 3,350 5

65
 Mergers and Acquisitions, Top Legal Advisors by Volume

12,000
10,000
8,000 Series1
6,000
4,000 Series2
2,000
0

Luthra Law
Singhania
Desai &

DLA Piper
AZB &
Partners

Luthra &
Diwanji

Source: Secondary Data Rajani,

Interpretation
In dealing Mergers and acquisitions among the Top 15 Legal Advisors by
Volume during 2023, AZB & Partners has the highest Deal Count of 45, followed by
Amarchand & Mangaldas & Suresh A Shroff & Co. with Deal Count of 38 and
others.

66
CHAPTER-V
FINDINGS
SUGGESTIONS
CONCLUSION

67
 FINDINGS
 M&A targeting India totaled US$ 20.8bn in 2023, 46.3% off the 2022’s value
(US$ 38.7bn). Volumes too, witnessed a slight slump, with the 267 deals this
year, 16 fewer than in 2022
 The final quarter of 2023 saw an aggregate US$ 3.4bn-worth of deals, 40.4%
below the US$ 5.7bn posted in Q3 2023. A mere 50 deals were announced in
Q4 2023, the lowest number since Q1 2019 (39 deals)s
 Unilever’s US$ 3.5bn acquisition of a 14.8% stake in Hindustan Unilever in
April remains the largest deal in India this year and accounted for 16.8% of
aggregate M&A value in the country
 The Pharma, Medical & Biotech experienced transactions amounting to US$
4.2bn, making it the only sector to post a second successive increase in annual
M&A value or volume
 Inbound M&A slid for the second year to US$ 14.3bn, a 19.7% decline from
2022 (US$ 17.8bn). The number of deals involving overseas acquirers
however shot to a record high of 147. It appears that smaller targets are being
snapped up by foreign buyers while larger deals are being stymied by concerns
associated with the outcome of this year’s general elections
 Tighter access to credit is expected to result in several potential buying
opportunities. The Reserve Bank of India’s attempts to facilitate buyouts of
distressed companies may provide a fillip for private equity activity, although
onerous valuation restrictions announced this week will ensure persistent
uncertainty in this regard
 Outbound bids in 2023 totaled US$ 7.7bn, a 22.2% increase from 2022 (US$
6.3bn) largely due to two acquisitions worth US$ 5.1bn by state-run ONGC
and Oil India off the coast of Mozambique. The number of deals in contrast,
fell from 76 to 40 during the corresponding period.

68
SUGGESTIONS
 The companies going for mergers & acquisitions should ensure that they are
not paying excessive Premium in a desperate bid. More you pay for a
company, the harder you will have to work to make it worthwhile for your
shareholders. When the price paid is too much, how well the deal may be
executed, the deal may not create value.
 Companies going for mergers and acquisitions should take the size issues into
consideration: A mismatch in the size between acquirer and target has been
found to lead to poor acquisition performance.
 Companies going for a merger or acquisition should do a thorough research
and due diligence: A carelessly carried out research about the acquisition
causes the destruction of acquirer’s wealth. Lack of due diligence is lack of
detailed analysis of all important features like finance, management
capability, physical assets as well as intangible assets and results in failure.
 Companies going for M&A should ensure that they have the capability to
manage the diversification post merger: Unrelated diversification has been
associated with lower financial performance, lower capital productivity and
higher degree of variance in performance for a variety of reasons including a
lack of industry or geographic knowledge, a lack of focus as well as perceived
inability to gain meaningful synergies.
 Companies going M&A should make sure that the counter party is a perfect
cultural fit: Without it, the chances are great that Amalgamation and
Acquisition will quickly amount to misunderstanding, confusion and conflict.
 Companies going M&A should make sure that the counter party is a perfect
strategic fit. Many a time lack of strategic fit between two amalgamated
companies especially lack of synergies results in Amalgamation failure.
 Companies going for M&A should not do faulty evaluation: If companies
make a wrong assessment of the benefits from the acquisition, they land up
paying a higher price.
 Companies going for M&A should manage the integration with due care: The
key variable for success is managing the company better after the acquisition
than it was managed before. Even good deals fail if they are poorly managed
after the Amalgamation.

69
CONCLUSION
Mergers and Acquisition have become very popular over the years especially
during the last two decades owing to rapid changes that have taken place in the
business environment. Business firms are now facing increased competition not only
from firms within the country but also from international business giants thanks to
globalization, liberalization, technological changes, etc.

Generally the objective of Mergers and Acquisitions is wealth maximization

of shareholders by seeking gains in terms of synergy, economies of scale, better
financial and marketing advantages, diversification and reduced earnings volatility,
improved inventory management increase in domestic market share and also to
capture fast growing international markets abroad. But astonishingly, though the
number and value of Mergers and Acquisitions are growing rapidly, the results of the
studies on the impact of Mergers on the performance from the acquirers share holders
perspective have been highly disappointing. This is because making the M & A work
successfully is not that easy as here we are not only just putting the two organizations
together but also integrating people of two organizations with different cultures,
attitudes and mindsets.

Meticulous M & A planning including conducting proper due diligence,

effective communication during the integration, committed and competent leadership,
speed with which the integration plan is integrated all this pave for the success of
Mergers and Acquisitions. While making the Merger deals, it is necessary not only to
make analysis of the financial aspects of the acquiring firm but also the cultural and
people issues of both the concerns for proper post-acquisition integration.

70
BIBLIOGRAPHY

71
 BIBLIOGRAPHY
REFERENCE BOOKS
 Financial management : Philip Kotlar
 Research and Methodology : C.K. Kothari
 Direct Taxes : Dr. Vinod K. Singhania
&
: Dr. Kapil Singhania
NEWS PAPERS:
 Times of India
 Business Standard

JOURNALS
 JOURNAL ON INVESTMENT STRATEGY
 DALAL INVESTMENT JOURNAL
 AFFILIA
 AMERICAN JOURNAL

WEBSITES:
 www.iifl.com
 www.businessweek.com
 www.moneycontrol.com
 www.ril.com
 www.wikipedia.com
 www.icicidirect.com
 www.mergersindia.com
 www.mergerdigest.com

72