INTRDUCTION

BACKGROUND:
Merger and Acquisition have become a routine feature than an exception in the present day
business scenario. In a merger companies join up with each other sharing their resources to
reach a common goal. Shareholders of both the entities continue as join owners of the merged
entity. In an acquisition , as the denotes, one firm out rightly purchases the assets or shares or
both of another company whose shareholders lose their claim on the acquired outfit once the
deal is over. As businesses expanding with diversification becoming the order of day, merger
and acquisition are being adopted as strategic tools for growth. Restricting to core area makes
no business sense any longer, as one can see the way both the houses of reliance are foging
ahead with entry into virtually ever field. Tatas are rewriting their corporate history with
acquisition galore. No different is the case with the other major industrial houses. All the
augurs well for our country which is poised to become an economic force to reckon with, very
soon.
.
Winning the race to future and the rest world requires a strong sense of purpose and speed.
Yet, few companies, if any, have what it takes to run the race on their own. The idea of racing as
a team is somehow uplifting to the human spirit. The logic of bringing many heads together to
achieve what was previously considered difficult or impossible on an individual basis is
somehow compelling.

The trends towards globalization of all national and regional economies has increased the
intensity of mergers , in a bid to create more focused, competitive, viable, larger players, in each
industry. The recent liberalization has made mergers more necessary and acceptable. The
globalization may entail redundancies and closures of inefficient units as a consequence of
technological upgradation and modernization . As it open the flood gates of competition
between unequal partners. The working units below average efficiency are more favourable to
mergers and takeover.

WHAT IS 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.

WHAT IS 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

a) Agreement with the persons holding majority interest in the company management like
members of the board or major shareholders commanding majority of voting power;
b) Purchase of shares in open market;
c) To make takeover offer to the general body of shareholders;
d) Purchase of new shares by private treaty;
 e) Acquisition of share capital through the following forms of considerations viz. Means of
cash, issuance of loan capital, or insurance of share capital.

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.

Types of Mergers

Types of Mergers
Mergers are of many types. Mergers may be differentiated on the basis of activities, which
are added in the process of the existing product or service lines. Mergers can be a
distinguished into the following four types:-

1. Horizontal Merger
2. Vertical Merger
3. Conglomerate Merger
4. Concentric Merger

Horizontal merger
Horizontal merger is a combination of two or more corporate firms dealing in same lines
of business activity. Horizontal merger is a co centric merger, which involves
combination of two or more business units related to technology, production process,
marketing research and development and management.
Vertical Merger
Vertical merger is the joining of two or more firms in different stages of production or
distribution that are usually separate. The vertical Mergers chief gains are identified as the
lower buying cost of material. Minimization of distribution costs, assured supplies and
market increasing or creating barriers to entry for potential competition or placing them
at a cost disadvantage.

Conglomerate Merger
Conglomerate merger is the combination of two or more unrelated business units in
respect of technology, production process or market and management. In other words,
firms engaged in the different or unrelated activities are combined together.
Diversification of risk constitutes the rational for such merger moves.

Concentric Merger
Concentric merger are based on specific management functions where as the conglomerate
mergers are based on general management functions. If the activities of the segments brought
together are so related that there is carry over on specific management functions such as
marketing research, Marketing, financing, manufacturing and personnel

Purpose of Mergers & Acquisitions

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: -

(1) Procurement of supplies: To safeguard the source of supplies of raw materials or
intermediary product and to obtain economies of purchase in the form of discount, savings in
transportation costs, overhead costs in buying department, etc.;

(2) Revamping production facilities: To achieve economies of scale by amalgamating

production facilities through more intensive utilization of plant and resources and to
standardize product specifications, improvement of quality of product, expanding market and
aiming at consumers satisfaction through strengthening after sale

(3) Market expansion and strategy:To eliminate competition and protect existing market;To
obtain a new market outlets in possession of the offeree;and to obtain new product for
diversification or substitution of existing products and to enhance the product range;

(4) 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 and to
improve EPS (Earning Per Share).

(5) General gains:

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

(7) 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.

Advantages of Mergers
 Diversification: - Companies that desire rapid growth in size or market share or
diversification in the range of their products may find that a merger can be used to
fulfill the objective instead of going through the tome consuming process of internal
growth or diversification. The firm may achieve the same objective in a short period
of time by merging with an existing firm. In addition such a strategy is often less
costly than the alternative of developing the necessary production capability and
capacity. If a firm that wants to expand operations in existing or new product area
can find a suitable going concern. It may avoid many of risks associated with a design;
manufacture the sale of addition or new products. Moreover when a firm expands or
extends its product line by acquiring another firm, it also removes a potential
competitor.
 Synergism: - The nature of synergism is very simple. Synergism exists when ever the
value of the combination is greater than the sum of the values of its parts. As broadly
defined to include any incremental value resulting from business combination,
synergism in the basic economic justification of merger. The incremental value may
derive from increase in either operational or financial efficiency.
 Increased market share
 Lower cost of operation and/or production
 Higher competitiveness
 Industry know how and positioning
 Financial leverage
 Improved profitability and EPS
  The Income Tax Advantages -In some cases, income tax consideration may provide the
financial synergy motivating a merger, e.g. assume that a firm A has earnings before
taxes of about rupees ten crores per year and firm B now break even, has a loss carry
forward of rupees twenty crores accumulated from profitable operations of
previous years. The merger of A and B will allow the surviving corporation to utility
the loss carries forward, thereby eliminating income taxes in future periods.

Other motives for Merger

Merger may be motivated by two other factors that should not be classified under
synergism. These are the opportunities for acquiring firm to obtain assets at bargain price
and the desire of shareholders of the acquired firm to increase the liquidity of their
holdings.
1. Purchase of Assets at Bargain Prices - Mergers may be explained by opportunity to
acquire assets, particularly land mineral rights, plant and equipment, at lower cost
than would be incurred if they were purchased or constructed at the current market
prices. Many of the mergers can be financed by cash tender offers to the acquired
firm’s shareholders at price substantially above the current market. Even so, the
assets can be acquired for less than their current casts of construction. The basic
factor underlying this apparently is that inflation in construction costs not fully
rejected in stock prices because of high interest rates and limited optimism by stock
investors regarding future economic conditions.

2. Increased Managerial Skills or Technology - Occasionally a firm will have good

potential that is finds it unable to develop fully because of deficiencies in certain areas
of management or an absence of needed product or production technology. If the
firm cannot hire the management or the technology it needs, it might combine with
a compatible firm that has needed managerial, personnel or technical expertise. Of
 course, any merger, regardless of specific motive for it, should contribute to the
maximization of owner’s wealth.

3. Acquiring new technology -To stay competitive, companies need to stay on top of
technological developments and their business applications. By buying a smaller
company with unique technologies, a large company can maintain or develop a
competitive edge.

Costs of mergers and acquisitions

Mergers and acquisitions can be costly due to the high legal expenses, and the cost of
acquiring a new company that may not be profitable in the short run. This is why a merger
or acquisition may be more of strategic corporate decision than a tactical maneuver.
Moreover, if a poison pill unknowingly emerges after a sudden acquisition of another
company's shares, this could render the acquisition approach very expensive and/or
redundant.

 Legal expenses
 Short-term opportunity cost
 Cost of takeover
 Potential devaluation of equity
 Intangible costs
M&A activity can also be exacerbated by the short-term cost of opportunity or
opportunity cost. This is the cost incurred when the same amount of investment could be
placed elsewhere for a higher financial return. Sometimes this cost does not prevent or
deter the merger or acquisition because projected long- term financial benefits outweigh
that of the short-term cost.

REVIEW OF LITERATURE: LATEST TRENDS IN CORPORATE:

Mergers and Acquisitions Some Paramount Concerns for the Human Resource
Development Practitioner
Mergers and acquisitions are areas that may provide a bevy of opportunities for the human resource development
practitioner. Prior to any discussion regarding these seemingly elusive constructs, one must examine them from several
perspectives. Some organizational leaders may view a specific endeavor as a merger; others may view the same endeavor as
an acquisition, which is largely dependent upon some specific particulars associated with the business.

Creating new synergies

M&As are an alluring way for companies to cut costs and achieve synergistiv financial gains in a growing global market.
While profits are the measure of success in M&As, the driving force behind the success of failure rests on the human resources
of the companies, The recent reports suggest that 50 to 80% of mergers fail because of an inability to intergrate people into a
bohesive new entity. It is well recognized that merging organizations cultural integration is one of the most crucial ad arduous
tasks i a merger. When the collective identity of the organization is challenged, the post merger trauma can be significant to
employees asn managers. As a result, the organizations suffers from employees with poor morale, lack from employees with
poor morale, lack of trust, decreased commitiment and attitudinal problems.

This article presents guidelines to assist organizations in managing the crucial process of merging organizational
cultures. In review of successful M&As, a common characteristic is a proactive approach for crearing a new culture that is
salient to the people from both organizations. This is accomplished byi recognizing toe role of both the leader and the
employees in the meaning at various levels within toe new organization and using every day events to influence change.

Preparing for the change

Successful mergers require a leader Who unequivocally understands and utilizes the Cultural differences in
every aspect of the merger process Before movthg forward, it is vital to have employee buyin, This is accomplished
in several ways. One way is for leaders to make an effort to understand the histories and distinctiveness of the groups
of employees involved at both organizations. For example, managers may want to arrange meetings between
employees at each organizations. Before the merger event During these meetings, it is important to share common
ideas, beliefs, values and the mission of the organizations. Finding common values creates Unity.

Margers and Acquisitions Operationally Defined

 M&As have been discussed thus far from an extremel;y pragmatic perspective-these constructs are essentially
elusive but they appear to be easily defined. Same areas of concern for the leaders of any organization (whether going
through a merger or acquisition or not) are related to the people who comprise the organization. In essence, when one
speaks about mergers and acquisitions one must consider the people who comprise the organization from the outset.
It may appear to be elementary that any organization is comprised of people but it must be reiterated during a highly
volatile environment such as a merger or acquisition. It is the people who are the citizens of the organizations who
have cognized goals and aspirations that are both personal and professional—these goals and aspirations must be
addressed in a safe and harmonious environment prior to the merger or acquisition as well as during the process. If
one considers the people of an organization prior to the merger or acquisition; the endeavor may result in a positive
venture for all concerned.

The Success of Mergers and Acquisitions Depends on People

Indian Companies incresingly use M&As to realize their strategic goals. Last year, they had beer fitivolved in
almost 1,400 transactions with a value of $59 bn. Cross-border deals are very important and make up half of all deals
While acquisitions by the Indian companies abroad make up only 17%, foreign companies are much more acquisitive
in India with 32% of all deals. It is an important fact that Indian companies increasingly use M&As transactions to
grow international or even globally. The most popular destination for acquisitions abroad byIndian companies in 2007
was the US. In total, most M&As deals with Indian parties involved were done in the financial sector followed by
high technology and industrial sectors. However, about 75% of 41 mergers and acquisitions do not meet the
expectations. Inmost tãäes so-called “people issues” are blamed for, failure or results below expectation.

Thorough Human Capital Due Diligence

A thorough human capital due diligence, is an important cornerstone for laying the foundation of a successful deal.
The due diligence, when the target company or merger partner is analyzed for risks and opportunities, offers a chance
to learn in detail about the other party and to prepare for the integration phase ahead. If this due diligence is done the
right way, it greatly increases the chances of success. The human capital due diligence is only a part of the overall due
diligence which also includes a financial, commercial/operational and legal due diligence. Components to be analyzed
as part of the human capital due diligence are talent, organizational design, workforce remuneration and industrial
relations.

Mastering the Biggest Challenges During Integration Phase

Arranging and closing an acquisition or a merger causes a lot of work. The essential and hardest work load,
however, comes with the integration phase. During integration, four of the six biggest challenges are people related.
Managers see the greatest challenge in combining the implementation of integration and change with continuing daily
business operations. In order to master that challenge, additional staff resources are needed. The next hurdle is that
targets in M&As deals are quite ambitious.

Acquisitions and Mergers as A Business Policy : A Study

The Trend towards globalization of all I national and regional economfes has increased intensity of mergers in in a
bid to create more focused competitive, viable and larger players in each in deustry. Merger and Acquisitions have
become increasingly important channel of cross border industrial restructuring and foreign direct investment all over
the world in the India the policy liberalization in the 1990s has facilitated M&A including cross-border M&As.

In post-globalization scenario industrial units which want to survive, have to excel and compete successful both with
domestic and multinational Competitors in internal as well as international market. As a result the business increase
competitive, viability an confident its position.

Merger and Acquisition have emerged as a natural process of business restructuring throughout the world. The process
of M&A spans geographical boundaries, cross-border M&A, mostly by multinational corpora MNCs. For the Indian
industry market driven M&As are essentially a phenomenon of the late 1990s.

Merger and Acquisition as a Strategic choice :

A merger is popularly understood to be a fusion of two companies. Generally, acquisition is the purchase by one
company of a substantial part of the assets of security of another, normally for the purpose of the acquired entity. The
most poupular types of mergers are horizontal, vertical, conglomerate and consolidation. They are not the only means
of corporate growth but are an alternative to organic growth. From time to time companies have preferred external
growth through M&A than organic growth due to some stratedic objectives.

These strategic objectives may be growth and expansion of the firm, reduction of cost throudgh economies of scale,
gaining competitive advantage in existing product markets, market of product extension, of risk reduction. Futther,
like all other strategic decisions, acquisitions should also satisfy the criterion of value addition.
Mergers and Acquisitons need to be placed in the context of the firm's broader corporate and business strategy framework.
Different types of acquisition are dictated by the firm strategic imperatives and choices. The choice for opting to M&A strategy
may be critical to the healthy expansion of business firms, as they evolve through successive stages of growth and development.

Trends and Patterns of Overseas Acquistions by Indian Frims:

The Indian drugs and pharmacetticals industry is one of the largest and most advanced among the developing
countries. The domestic drugs and phamaceuticals market in anticipated to grow at an annual rate of 15.66 percent
and export are excepted to grow at an average annual rate of 29 percent for formulations and bulk drugs.

Some of the companies in this category have developed in the Indian Market and most to htem into exports. Companies
like Ranbaxy. cipla, Dr. Reedys, Cipla, and Cadila Healthe Care Have all got US-FDA approvals which are a
prerequistie for access to the US market.

Number of overseas acquisitions by Indian firms was 33 in 2000 which come down to 21 in 2002, but again increased
to 38 in 2003 and reached to a high of 177 in 2006 and witin eight months of 2007, Indian MNCs have made 122
acquisitions worth nearly $ 32.9 billion. For the fist time in 2006 the value of overseas acquistitions done by Indian
Multinational exceeded foreign fim acquisitons made in India. Higher economies growth, rising foreign exchange
reserve, continuing liberralization of OFDI policy, increasing bilarteral trade are the main reasons as to why tis has
taken place.

Mergers and Acquistions Trends : Mergers and Acquisitions (M&A) interest in India is currenty very high in the pharmaceutical
industlization. Size and end-to-end connectivity are malor dotnmersts in five global markets. To achieve them, Westem MNC's
have to look to Indian’ companies. India’s changing therapeutic requirements arid patent laws will provide new opportunities
for big pharnta for launching their patented molecules. While, India is strong manufacturing base will stand global generic
companies in good stead as a tow-coal development and menutacturng destinationnesides consolidation in the domestic
industry and investments by the US and European tirnia, the spate of mergers and acquisitions by Indian companies has
ushered an era of the-Indian Pharrnaceutiod MNO’. After traversing the teaming curve through partnerships asd alliances with
intema’ iional pha’maceulical firms, Indian pharnnacsul’cal companies have now moved up a step in the value chain and are
looking at inorganic route to growth through acquisitions. Many top end middle her Indian ccrnpanies have gone on a global
shopping spree to build up critical maca in International markets. In addition, given the easy acoesa to global finance the Indian
companies are finding It baaier to lurid their acquisitions.

Indian pharmaceutical companies reign supreme compared to their multinational counterparts in India- Profit mergina nI
Indian companies are on the rise and the recant trend of mergers and acquisitions by Indian pharmaceutical are likely to provide
an up’ side to the growth numbers.
Given the increasing spate of merger and acquisitions in the global pharmaceutical sector, the valuations are at an all
time peak, there is toe couch money chasing too lee targets- Going forward in this trend would slow down as valuations
are cyclical in nature. The consolidation trend will continue with Indian pharmaceutical players playing a major role.
With access to capital higher staying power. because of low costs, and management willing to globalize this trend will
continue.

Many of the MNCS patented drugs wilt come of patent by 2012-2014 Ibis again can be seen as a opportunity to Indian
Pharma firms to enter the global market in a significant say due to their coat efficiency and competitive edge more so
in the generic drug sector.

OBJECTIVES OF THE STUDY

1)To conduct in depth analysis of the trend of the mergers and acquisitions
sector in india:-

This project aim to conduct an in depth analysis of pre and post merger
situation by taking a very popular example of Merger & Acquisition .Under
this we find out the Situation of the company before merger due to which it
has to go into the merger & the result thereon.

2)To measure the post merger impact on shareholders wealth:-

Under this we conduct an analysis of Dividend paid to the Shareholders, Market

Value of the Company, Earning Per Share, Share price Fluctuation of both pre-
merger & post-merger to find out the impact of changes on the shareholders and
their expected response regarding this.

3)To evaluate the approach of corporate towards the mergers & acquisitions
events:-
 To find out that how the corporate think about engaging/entering in a
merger. It enables to understand the expectations and requirement of the
company thinking to enter into merger.

Research Methodology

The lifeblood of business and commerce in the modern world is information. The ability to
gather,analyze, evaluate, present and utilize information is therefore is a vital skill for the
manager of today.

In order to accomplish this project successfully I have taken the following steps:-

1) Sampling- The study is limited to a sample of top 5 merging or merged Indian companies
of various sectors of Indian economy.

2) Data Collection:
 The research will be done with the help Secondary data (from internet site
andJournals).
 The data is collected mainly from websites, company reports, existing journal reports,
database available etc.

3) Type of survey
It is basically a descriptive survey which describes various aspects of mergers & acquisitions
with Indian context.

4) Analysis:
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.

Limitations of the Study:-

1.) The time constraint was a hurdle, as such Primary data Collection could not be done.
2.) The topic was contemporary and had limited data available. But an attempt to present
the best has been done.

CHAPTER PLANNING
CHAPTER-2

CONCEPTUAL
FRAMEWORK

2.1) NATIONAL & INTERNATIONAL SCENERIO OF MERGER:-

 National scenario:
Merger and acquisition as we know imply alliance of two or more companies
. Where a merger leads to formation of a new company acquisition leads to
purchase of a company by other and no of new company is formed .The
volume of M&A deals has been trending upwards particularly in the fields of
pharmaceuticals, FMCG , finance , telecom , automobiles and metals. Various
factors which lead to this robust growth of mergers and acquisitions in India
were liberalization, favourable, Govt. policies, economic refers needs for
investment and dynamic attitude of Indian corporation. Almost all sectors
have been opened up for the foreign investors in different degrees which has
attracted this market. It hit a three years low down by almost 61%. The key
factor contributing to few companies involved in merger is the regulatory
and prohibitory provisions of MRTP Act 1969. 1st wave mergers enjoyed
monopoly over the production like railroads and electricity. The 2nd wave
merger took place between heavy manufacturing industries like oligopolies
rather than monopolies like transportation equipment and chemicals. The
3rd wave merger took place in technologies and 4th wave meger inspired by
globalisation and stock market. Most importantly 5th wave merger took place
in banking and tele communication industries.

 International scenario:

In USA , M&A started in 20th century. Te most significant mergers of USA took
place quite strong is USA in stock market supported the high incidents. The
economic reforms in developing countries provided major boost to
international M&As since 1990. Foreign investment get major inputs from
international M&A. There are various advantages of international M&A
certain impediments in the form of regulatory restrictions also exist. The
European economy also opened up to foreign M&As which resulted a large
volumes taking place across Europe. While USA has always been the pioneer
in M&A activities, UK too has registered high level of M&As. Cross border
M&As are effective in boosting Foreign Direct Investment (FDI). For
international investors, it is easier to invest through a merger or an
acquisition. International M&A provide access to infrastructure and
customer base in a country which is quite difficult to build from the scratch.

In China, for instance law regarding international M&As are quite stringent.
IN 1987 an Australian company names Stephen Jaques Tone James, which
was a partnership company with 79 partners, merged with the company
named Mallesons. After merger the new joint company was known as
Mallisons Stephen Jaques. Then 1991 the Standard Federal Bank
strengthened their position by acquiring a financial institutionsof Toleds.
This two acquisitionhadgreat impact on financial and banking sector ofUSA.
 2.2)MERGER & ACQUISITION TREND IN INDIA:-

Economic reforms and deregulation of the Indian company as brought in more

domestic as well as international players in Indian industry. As long as
economic units of production exist merger and acquisitions would continue
for an ever – expanding economy. The general election would have a huge
impact on the merger and acquisition in India. Though the investments have
improved the foreign companies are awaiting the effect of elections before
putting in money in India.The country is enough strong which will derive it’s
business and economic growth. Large number of M&As occurred in industries
like jute , cotton , textiles , sugar , banking & insurance , electricity & tree
plantation. However after independence initial years very few corporations
come together , and when they did it friendly negotiated deal. Reason behind
less number of company indulged in M&A due to provisions MRTP Act in
1969. The concept of M&A was clear to the Indian companies after the year
1988..
 ACCOUNTING STANDARD& GUIDELINES GOVERNING MERGER:-
Basically AS 14 deals with accounting for amalgamation and merger and the
treatment of any resultant goodwill or reserves and is directed principally to
companies although some of its requirements also apply to financial statements
of other enterprise. If your company hopes one day to issue stock or participate
in mergers and acquisitions, GAAP is critically important.

 Companies Act 1956 :-

According to the Companies Act 1956 U/S 390-395 deal with
arrangements, amalgamation, mergers and the procedure to be
followed for getting the companies or the scheme of amalgamation
and merger & acquisition position approved. Though Sec 391 deals
with the issue of compromise or arrangement which is different
from the issue of amalgamation u/s 394.Any company , creditors of
the company, members or the class of members can file and
application u/s 391 seeking sanction of any scheme of merger or
arrangements. As per sec 394 the applicant is supposed to disclose
all materials particulars in the provision of the act and the scheme
must get approved by the majority of the stakeholders.

 Competition Act 2002:-

According to Competition Act 2002 U/S 5 deals with
‘Combinations’ which defines combination through assets and
turnover. Sec 6 of the Competition Act 2002 states that no person
or enterprise shall enter into a combination which causes or is
likely to cause and appreciable adverse effect on competition
within the relevant market in India and such a combination shall be
void.
 Foreign Exchange Management Act 1999:-
The FEMA laws relating to issuance and allotment of shares to
foreign entity and contained in the Foreign Exchange
Management(Transfer or Issue of Security by a person residing out
of India)regulations 2000 issued by RBI vide GSR no 406© dated
3rd may 2000.

 SEBI Take Over Code 1994:-

SEBI takeover regulations permit consolidation of shares or voting
rights beyond 15% up to 55%, provided the acquirer does not
acquire more than 5% of the shares or voting rights of the target
companies in any financial years. Acquisition of shares or voting
rights beyond 26% would apparently attract the notification
procedure under this act.

 The Indian Income Tax Act(ITA) 1961:-

Merger has not been define under the ITA but has been covered
under the term ‘Amalgamation’ has defined in sec 2(1B) of the act.
To encourage restructuring merger and de merger has been given
a special treatment in this act. As per the Finance Minister this has
been done to accelerate internal liberalisation. u/s 2(1B) merger
means

i. All the properties and liabilities of the Transferor company

or companies become properties and the liabilities of
Transferee company.
ii. Shareholders are not holding less than 75% of the value of
shares in the transferor company become shareholders of
the transferee company.
iii. In case of merger, cost of acquisition of shares of the
 transferee company and the cost incurred for acquiring the
shares of the transferor company discuss u/s 49(2).

 Mandatory permission by the courts:-

Any scheme for mergers has to be sanction by the courts of the country.
The company act provides that the high court of the respective
states where the transferor and the transferee companies have their
respective register offices. To regulate the merger of the companies
registered in or outside India. The courts will not allow the merger to
come through the intervention of the courts, if the same can be affected
through some other provisions of the companies act. The MOA os both
the companies should be examine to check the power to amalgamate is
available. The merge of the merger proposals should be approved by
BOD’s. The process of M&A in India is court driven long term and hence
problematic. The process may be initiated through a common
agreement but that is not sufficient to provide a legal cover to it. The
sanction of the high court is required for bringing it into effect.