A merger is an agreement that unites two existing
companies into one new company. There are several types of mergers and also
several reasons why companies complete mergers. Merger and Acquisition (M&A) are
commonly done to expand a company’s reach, expand into new segments, or
gain market share. All of these are done to increase shareholder
value Often, during a merger, companies have to prevent purchases or
mergers by additional companies.
Mergers and acquisitions (M&A) can be a sell
or buy-side deal. Depending on which type of deal it is, determines what type
of institutions are involved.
Examples of Sell-Side Firms
Investment Bank (primary
Examples of Buy-Side Firms
A list of Successful Mergers
and Acquisitions ( M&A ) in India
Examples Successful Mergers and Acquisitions ( M&A ) in India
India and Idea Cellular, two of India top wireless carriers, are merging
operations in the country to create an entity that will be equally owned by
UK’s Vodafone Group and India’s diversified Aditya Birla Group. The USD 23
billion deal has received the CCI's approval and is likely to be completed in
2018. This deal may well create India’s largest telecom operator.
Snapdeal and Freecharge:-
E-commerce startup Snapdeal acquired mobile recharge
service Freecharge in April 2015. The cash plus stock deal was pegged at USD
400 million, making it the biggest acquisition in the history of India's
internet industry. When the deal took place, Snapdeal raised around USD 1.1
billion in funding, while Freecharge had total funding of USD 120 million.
Freecharge continued to operate as a separate entity following the acquisition,
which allowed Snapdeal to expand its digital commerce ecosystem. After a
turbulent last few months, Snapdeal finally sold Freecharge to Axis Bank for
USD 60 million.
Flipkart and Myntra:- After
months of speculations, India's premier e-commerce startup Flipkart acquired
its fashion-focused rival Myntra in May 2014, a move which was in light of
Amazon's expanding presence in India. Neither party confirmed the exact value
of the acquisition, but reports placed the cash and stock deal between USD 300
million and USD 330 million. Myntra remained a separate entity following the
acquisition and continued to expand its presence in the country, as did
Flipkart. Myntra founder and CEO Mukesh Bansal was appointed on Flipkart's
Board and was made head of the fashion division of the e-commerce conglomerate.
Ola and TaxiForSure:-Ola,
one of India's largest ride-hailing service, acquired the
smaller-but-value-centric TaxiForSure for USD 200 million in a cash and equity
deal in March 2015. The deal saw Ola expand its presence considerably in the
country by adding TaxiForSure's 15,000-plus fleet across 47 cities onto its own
platform. TFS COO Arvind Singhal was appointed the company's new CEO, while its
founders Aprameya Radhakrishna and Raghunandan G served in advisory roles for a
month before quitting. Even as both companies initially operated as separate entities,
Ola shut down TFS in August 2016 and laid off 1,000 of its employees.
Types of Mergers
Merger:- The merger is said to
be horizontal when the companies that are combined operate in the same
industry or deal in similar lines of business. The market share of the newly
formed company is greater than the individual entities. It is aimed at reducing
competition, increasing market share, economies of scale and research and
Merger:- Vertical merger takes
place when companies are having ‘buyer-seller relationship’, join to create a
new company. It is an integration of two companies that are working in the
same industry, though at a different stage of production and distribution. It
can be upstream or downstream, i.e. where the business takes over its
suppliers, then it is an upstream merger while if the company extend to its
distribution entities, the merger is termed as downstream.
Merger:- A type of business
integration, in which the merging companies are not related to each other,
i.e. neither horizontally nor vertically. In a conglomerate merger, two or more
companies operating in different business lines combine under one flagship
company. This is further divided into, managerial conglomerate, financial
conglomerate and concentric conglomerate.
Merger:- In the congeneric merger,
the firm of the same industry are merged but they do not have anything in
common like buyer, customer or supplier like a merger between man salon and
female salon. For example, Prudential's acquisition of Bache & Company.
Merger:- In the reverse merger, a profit-earning the company merges into the loss bearing company and the identity of profit
earning company is lost. It is the opposite of an ordinary merger in which the profit-earning company takes over the loss earning company. The reverse merger
are the easy method of going public without any expenditure and less time is
required as in case of raising the IPO and it also helps in making use of the
provision of Income Tax Act, 1961 which lets the company carry forward the
losses to set off against the profit.
Other Kinds of Merger:-
The various other types of mergers are as follow.
Cash Merger:In this type of merger the firm acquires the share of the company in exchange for cash in place of exchanging their own shares. It is done when the shareholder of the target firm wants to be related to the new firm made due to the merger. In this, some shareholders want cash for their shares while the
other wants shares in the surviving company.
In this merger, the parent company acquires the total voting rights in thesubsidiary company. It does not follow any provision of statutory compliance
and is also economical. It is done without the approval of shareholders under
the following conditions when:
shares of the company are given to the small group of shareholders which approves
various legal provisions of states allow the short-form of the merger.
If these conditions are
satisfied then the majority of shareholders and board of directors will support
the merger without the concern of minority shareholders. In various legal
provisions, there is a method of merging in which approval is not required.