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What is Merger
A merger refers to a combination of two or more companies, usually of not greatly disparate size, into one
A merger involves the mutual decision of two companies to combine and become one entity; it can be seen
as a decision made by two "equals".
Merger refers to a situation when two or more existing firms combine together and form a new entity.
Merger is a marriage between two companies of roughly same size. It is thus a combination of two or more
companies in which one company survives and its own name and the other ceases to exist as a legal entity
Hindustan Computers Ltd + Hindustan Instruments Ltd + Indian Software Co. Ltd + Indian Reprographic Ltd =
Hindustan Computers Ltd(HCL)
It refers to the merger of two companies who are direct competitors of one another.
They serve the same market and sell the same product.
The formation of Brook Bond Lipton India Ltd. through the merger of Lipton India and
The merger of Bank of Mathura with ICICI (Industrial Credit and Investment
Corporation of India) Bank
The merger of BSES (Bombay Suburban Electric Supply) Ltd. with Orissa Power Supply
The merger of ACC (erstwhile Associated Cement Companies Ltd.) with Damodar
This type of merger involves a customer and a company or a supplier and a company
Imagine a bat company merging with a wood production company.
This would be an example of the supplier merging with the producer and is the
essence of vertical mergers.
Example :- Pixar & Disney
It refers to the merger of companies, which do not either sell any related products or
cater to any related markets. Here the two companies entering the merger process do not
possess any common business ties.
L&T and Voltas Ltd.
Product extension merger takes place between two business organizations that deal in
products that are related to each other and operate in the same market. The product
extension merger allows the merging companies to group together their products and
get access to a bigger set of consumers. This ensures that they earn higher profits.
Product extension merger is concerned the two merging companies are operating in
Example :- Mobilink Telecom Inc. by Broadcom
Market-extension Merger:- Market extension merger takes place between two
companies that deal in the same products but in separate markets. The main purpose of the
market extension merger is to make sure that the merging companies can get access to a bigger
market and that ensures a bigger client base.
Market extension merger the two merging companies are operating in the separate market
Example:- Eagle Bancshares Inc by the RBC Centura.
With the help of this acquisition RBC has got a chance to deal in the financial market of Atlanta ,
which is among the leading upcoming financial markets in the USA. This move would allow RBC
to diversify its base of operations.
WHY & WHY NOT WHY IS IMPORTANT PROBLEM WITH MERGER
Increase Market Share
Economies of scale
Clash of corporate
Profit for Research and cultures development.
Employees may be forward losses or resistant to change unclaimed
Reduction of competition.
Acquisition:- It may be defined as an act of acquiring effective control over
assest or management of a company by another company without any combination
of businesses or companies.
A substantial acquisition occurs when an acquiring firm acquires substantial quantity
of shares or voting rights of the target company.
It also known as a takeover or a buyout It is the buying of one company by another.
In acquisition two companies are combine together to form a new company
Example—-Godrej Consumer Care bought Keyline Brands- Dabur acquired Balsara.
TAKEOVERS :- A corporate action where an acquiring company makes a bid for an
acquire. If the target company is publically traded, the acquiring company will make an
offer for the outstanding shares.
Types Of Takeovers
Friendly Takeover:- Also commonly referred to as ‘negotiated takeover’, a friendly
takeover involves an acquisition of the target company through negotiations between the
existing promoters and prospective investors. This kind of takeover is resorted to further
some common objectives of both the parties.
Hostile Takeover :- A hostile takeover can happen by way of any of the following actions:
if the board rejects the offer, but the bidder continues to pursue it or the bidder makes
the offer without informing the board before hand.
Example- HP taking over COMPAQ.
January 30, 2007
Largest Indian take-over
After the deal TATA’S became the 5th largest STEEL
100 % stake in CORUS paying Rs 428/- per share
Tata Steel-Corus: $12.2 billion
11th February 2007
2nd largest takeover deal
67 % stake holding in
Vodafone-Hutchison Essar: $11.1 billion
largest-ever deal in the Indian
Daiichi Sankyo acquired the
majority stake of more than 50 %
in Ranbaxy for Rs 15,000 crore
15th biggest drugmaker
Ranbaxy-Daiichi Sankyo: $4.5 b
March 2008 (just a year after acquiring
Gave tuff competition to M&M after
signing the deal with ford
Tata Motors-Jaguar Land Rover: $2.3 billion
Amalgamation of its subsidiary
Reliance Petroleum with the parent
company Reliance industries ltd.
Rs 8,500 crore
RIL-RPL merger swap ratio was at 16:1
RIL-RPL merger: $1.68 billion
In India Largest Merger and Acquisition
Hindalco-Novelis ( $6 billion )
ONGC-Imperial Energy ( $2.8 billion )
NTT DoCoMo-Tata Tele ( $2.7 billion )
HDFC Bank-Centurion Bank of Punjab ( $2.4 billion )
Suzlon-RePower ( $1.7 billion )