Chapter 2: Unfolding the M&A Core
Topics Covered
- M&A Phraseology and Types of Mergers
- Acquisitions
- Purpose of any Acquisitions
- Legal Due Diligence
- Indian Jurisprudence on Critical M&A Components
The corporate and investment world invariably cheers the medial announcement of any mega M&A deal with great enthusiasm! The
news has an immediate impact on the stock prices. What also follows is a litany of loaded questions from all quarters, including valuation experts, analysts of equity swap ratios, regulators, industry veterans, and commentators. In my experience, big is not always beautiful when it comes to M&A transactions because of several inherent complexities.
Having said that, size continues to attract maximum attention, and rightly so to a large extent. In India it is still a herculean challenge to structure large M&As within the permitted regulatory frame of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 applied to listed companies. Also, large takeovers including hostile ones are still a distant dream due to the foreign exchange control regulations applicable to foreign investment in India.
Mergers and Acquisitions is a robust, sophisticated, and well-legislated business tool in the hands of companies, which allow them to not only survive but grow and create value for all stakeholders, including founders, public shareholders, institutional investors, joint venture partners and business associates, employees, lenders and creditors, customers and suppliers, government, and communities. Fortunately, global legislative framework or the legal process for M&As allows companies to seamlessly
- merge into one or more companies,
- split into multiple independent companies (also known as demergers in India),
- close down any non-core or unprofitable division while retaining focus on more profitable activity.
- offer exit to any strategic partner or investor, including private equity, or
- implement succession planning of family businesses across sectors (refer to the section Indian Jurisprudence’ of the next chapter).
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