Merger Process
Merger Process
Merger Process
4. Approval of shareholders
• As per the provisions of the Companies Act 1956, the shareholders of
both seller and acquirer companies hold meeting under the directions
of the National Company Law Tribunal and they consider the scheme
of amalgamation. A separate meeting for both preference and equity
shareholders is convened for this purpose.
….contd
5. Approval of creditors/financial institutions/banks
• Approvals from the constituents for the scheme of merger and acquisition are
required to be sought for as per the respective agreement with each of them
and their interest is considered in drawing up the scheme of merger.
6. Tribunal’s approval
• The tribunal shall issue orders for winding up of the amalgamating company
without dissolution on receipt of the reports from the Official Liquidator and
the Regional Director that the affairs of the amalgamating company have not
been conducted in a manner prejudicial to the interest of its members or to
public interest.
….contd
7. Approval of central government
• It is required to obtain declaration of the Central Government on the
recommendation made by the Specified Authority under section 72 A
of the Income Tax Act, if applicable.
8. Integration stage
• The structural and cultural aspects of the two organization, will lead to
successful merger and ensure that expected benefits of the merger are
realized.
The Five Stage (5-S) Model
The M&A process can be divided into five stages:
1. Corporate Strategy Development
2. Organizing for acquisitions
3. Deal structuring and negotiation
4. Post-acquisition integration and
5. Post-acquisition Audit and organizational learning.
Stage 1
Corporate Strategy Development
• Corporate strategy is concerned with ways of optimizing the portfolios
of businesses that a firm currently owns and with how this portfolio can
be changed to serve the interests of the corporation’s stakeholders. M&A
is one such activity which achieves the objectives of both corporate and
business strategies.
• Corporate strategies are based on various models like industry structure
driven, competition among strategic groups, competence or resource
based competition, etc. firms make acquisitions to gain market power,
gain economies of scale and scope or internalize vertically linked
operations to save on cost of dealing with markets, this adding further
cost savings.
Stage 2