Académique Documents
Professionnel Documents
Culture Documents
Why?
Gain market share Economies of scale Enter new markets Acquire technologies Strategic Benefit Complementary resource Tax shields Utilisation of surplus funds Managerial Effectiveness Integrate vertically
Why not?
Grasping for a company simply because its on the market, or because a competitor wants to buy it . Overpayment or misguided purchase Reduce cost of debt. Diverse Business; Unmanageable Leaping without looking at the value; WinWin or no deal Inability to integrate well.
Mechanics of a Merger
Legal Procedure
The MOA to be scrutinised Intimation to Stock Exchanges Approval of draft amalgamation proposal Application to the Court Notice to shareholders and creditors Filing the order Transfer of assets and liabilities Issue of shares and debentures
Tax Aspects
Section 2(a) of the Income Tax Act defines amalgamation Depreciation for tax purposes Accumulated losses Unabsorbed Depreciation Capital Gains Tax Accounting for Amalgamation is done according to Accounting Standard 14 (AS-14) issued by the Institute of Chartered Accountants of India
Never stop looking Constantly scanning marketplace Be diligent and disciplined Do not simply react whenever IBanks contact you Look at various potentials in the market, not just the deal at hand Dont cast strategy aside in the face of an exciting opportunity
Cant make a good stew unless you have good ingredients shop around to find the best ingredients
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Due Diligence
Industry / Markets Customers / Partners Competition People Suppliers Customer & Vendor Contracts Operations & Support Pricing and discounts Finance, Accounting & Taxes
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Valuation
No magic formula Future cash flow Earnings estimates Assumption modeling Due diligence findings Synergy Set limits and stick to financial discipline Maintain reasonable and realistic expectations
This deal is strategic dont worry, its all going to work out in the end no matter what price we pay.
X Rationalization:
Wisdom: If you stumble across too many red flags while evaluating
a business, walk away!
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Use early negotiations to foster a sense of trust with the targets top executives
Know who have influence on the deal target company and your company Dont focus on the price yet Keeping a foot on the brakes
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Talent
Culture
Structure Technology
Discovering
Jargons to understand
Net Present Value Exchange Ratio Price per share Price Earning multiple Earnings Number of Shares/ Debentures Free Cash Flow Market price to Book Value ratio
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SEBI Guidelines
Notification Trigger point for public offer Offer price Contents of Public announcement
To ensure transparency, greater disclosures and protect the interests of small shareholders.
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HOT DEALS
Mittal- Arcelor SBI- GE ICICI- Sangli Bank United Breweries- Shaw Wallace Tata- Corus Jet- Sahara LIC may buy UTI Bank ( FE, 13.04.2007)
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