Steps in mergers and acquisitions of a company

1. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Steps in Mergers and
Acquisitions of a
Company
Lakshminarayanan Alaguraja
Advocate
Altacit Global

2. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Merger
A ‘merger’ is a combination of two or more entities
into one; the desired effect being not just the
accumulation of assets and liabilities of the distinct
entities, but organization of such entity into one
business. The possible objectives of mergers are
manifold - economies of scale, acquisition of
technologies, access to sectors / markets etc.
Generally, in a merger, the merging entities would
cease to be in existence and would merge into a
single surviving entity. Merger is also defined as
amalgamation.
Example: Company A+ Company B= Company C.

3. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Acquisitions
An ‘acquisition’ or ‘takeover’ is the purchase by one
person, of controlling interest in the share capital,
or all or substantially all of the assets and/or
liabilities, of the target. A takeover may be friendly
or hostile, and may be effected through agreements
between the offeror and the majority shareholders,
purchase of shares from the open market, or by
making an offer for acquisition of the target’s shares
to the entire body of shareholders.
Example: Company A+ Company B= Company A.

4. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Way of Acquisition
Acquisitions may be by way of acquisition of shares of
the target, or acquisition of assets and liabilities of the
target. In the latter case the business of the target is
usually acquired on a going concern basis. Such a
transfer is referred to as a ‘slump sale’ under the ITA and
benefits from favourable taxing provisions vis- à-vis
other transfers of assets/liabilities (discussed in greater
detail in Part VI of this Paper). Section 2(42C) of the ITA
defines slump sale as a “transfer of one or more
undertakings as a result of the sale for a lump sum
consideration without values being assigned to the
individual assets and liabilities in such sales”.

5. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Consideration
All assets, liabilities and the stock of one company
stand transferred to Transferee Company in
consideration of payment in the form of:
(i) Equity shares in the transferee company,
(ii) Debentures in the transferee company,
(iii) Cash, or
(iv) A mix of the above mode

6. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Types of Mergers
i. Horizontal Mergers
ii. Vertical Mergers
iii. Congeneric Mergers
iv. Conglomerate Mergers
v. Cash Merger
vi. Triangular Merger

7. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Difference between Merger
and Acquisition
Merger Acquisition
Merging of two organization in to one. Buying one organization by another.
It is the mutual decision. It can be friendly takeover or hostile takeover.
Merger is expensive than acquisition (higher legal cost). Acquisition is less expensive than merger.
Through merger shareholders can increase their net
worth.
Buyers cannot raise their enough capital.
It is time consuming and the company has to maintain so
much legal issues.
It is faster and easier transaction.
Dilution of ownership occurs in merger. The acquirer does not experience the dilution of
ownership.

8. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Merger - Company Law
Section 230 to 234 of Companies Act 2013 govern
mergers and schemes of arrangements between a
company, its shareholders and creditors.
1. Section 230-231 deals with compromise or
arrangements.
2. Section 232 deals with mergers and amalgamation
including demergers.
3. Section 233 deals with amalgamation of small
companies (also called fast track mergers)
4. Section 234 deals with amalgamation with foreign
company (also called cross border mergers)

9. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
NCLT to perform erstwhile functions of High
Courts
Under the Old Companies Act, the High Courts were
endowed with the power to sanction a scheme of
merger/amalgamation. However, as per the
provisions of the New Companies Act the power
given to the High Courts would be invested with the
National Company Law Tribunal (NCLT). This change
should help in shortening the time taken in
obtaining sanctions in cases of mergers and
amalgamations.

10. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Objections to mergers/amalgamations
Sub-clause (4) of Section 230 of the Companies Act
2013 provides that only persons holding not less
than 10% of the shareholding; or having not less
than 5% of the total outstanding debt can object to
a merger/amalgamation. In stark contrast, the Old
Act specifies no minimum-ownership-condition to
object to a merger/amalgamation.

11. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Fast Track Mergers
Under the Companies Act 2013, Section 233 allows
mergers between two small companies and holding
companies and their wholly owned subsidiaries may
not have to go through the normal procedure.
Mergers/amalgamations may be completed, if the
official liquidator and the members approve, and if
sanctioned by the Central Government, without
having to wait for the order of the NCLT confirming
the merger/amalgamation. This way helps cut costs
involved in complying with the procedures, saves
time and simplifies the procedure of mergers
between two small companies or wholly owned
subsidiaries and their parent companies.

12. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Cross Border Merger
The Companies Act allows foreign companies to
merge into Indian companies and vice-versa,
meaning Indian companies wanting to merge into
foreign companies may press ahead with their
intention. The approval of the RBI is a pre-requisite
in the both the cases. However, by virtue of Section
234 of the Companies Act, the license to merge into
foreign companies comes with a rider that Indian
companies can only merge into foreign companies
domiciled in any of the jurisdictions notified by the
Central Government.

13. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Acquisition – Companies Act 2013
Under the Companies Act 2013, if a person or group
of persons acquire 90% or more of the shares of a
company, then such person(s) have a right to make
an offer to buy out the minority shareholders at a
price determined by a registered valuer in
accordance with prescribed rules. The provisions in
the Companies Act 2013 aim to provide a fair exit to
the minority shareholders, as the price offered must
be based on a valuation conducted by a registered
valuer. However, it is not clear whether the minority
shareholders can choose to retain their
shareholding.

14. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Competition Law
1. Anti - Competitive Agreements (Section 3)
2. Abuse of Dominant Position (Section 4)
3. Regulation of Combinations (Section 5, 6, 20,
29,30 and 31)

15. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Income Tax Act, 1961
The Income Tax Act contemplates and
recognizes the mergers and
acquisitions including activities
amalgamation, slump sale, Transfer of
Shares, etc.

16. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com
Thank You for your Patience