2. MERGER
When two or more companies
combine to become one company
In India, Merger is called
Amalgamation
May form a new company
May merge into an existingone
3. MERGER
THROUGH ABSORPTION:
Combine into an existing company
where one loses its identity
EXAMPLE : TATA Fertilizers Ltd. By
TATA Chemicals Ltd. , TATA Oil Mills
Ltd. By Hindustan Lever Ltd.
THROUGH CONSOLIDATION:
Two companies dissolved to
form a new company.
EXAMPLE: Hindustan
Computers Ltd.
5. Merging of two companies who are direct competitors of each
other.
Serve the same market and sell the same product.
VERTICAL MERGER
Merging of two companies producing different goods and services
Supplier mergingwith the produceris the essenceof Vertical Mergers.
6. Merging companies do not possess any common business ties.
BENEFITS OF MERGER REASONS OF FAILURE
Larger marketshare
Increasein plant capacity
Diversification of product and service
offerings
Reduction of financial risk
Utilization of operational expertise
and researchanddevelopment (R&D)
Lack of human integration
Mismanagement of cultural issues
Lack of communication
7. ACQUISITION
The act of acquiring effective control over the assets or
management of a company without any combination of companies.
Companies may remain independent, separate but there is
changein control of the companies.
8. Rank Year Purchaser Purchased
Transaction value
(in mil. USD)
1 2000
America Online Inc.
(AOL)
Time Warner 164,747
2 2000 Glaxo- Welcome Plc.
SmithKline Beecham
Plc.
75,961
3 2004
Royal Dutch
Petroleum Co.
Shell Transport &
Trading Co
74,559
4 2006 AT&T Inc. BellSouth Corporation 72,671
5 2001 Comcast Corporation
AT&T Broadband &
Internet Services
72,041
6 2004 Sanofi-Synthelabo SA Aventis SA 60,243
7 2000
Spin-off: Nortel
Networks Corporation
59,974
8 2002 Pfizer Inc.
Pharmacia
Corporation
59,515
9 2004
JP Morgan Chase &
Co
Bank One Corp 58,761
TOP ACQUISITIONS
9. TAKE OVERS
Purchase of a TARGET company by another ACQUIRER or
BIDDER.
Acquiring company becomes responsible for all holdings,
operations and debt.
In case of a Publicly-traded company, an offer is made for all its
outstanding shares.
10. TYPES OF TAKEOVERS
FRIENDLY TAKEOVERS : Acquisition of the target company
through negotiations between existing promoters and
prospective promoters. Resortment of common objectives of
both theparties.
11. HOSTILE TAKEOVERS : Thesecantakeplaceunderthree
conditions – the Board rejects the offer, the bidder continues to pursue it
or the bidder makes the offer without informing the Board beforehand.