The expression mergers and acquisitions or M&A indicates the corporate policy of handling the purchasing and selling and merging of different entities that can financially support the developing entity to expand rapidly without forming another industrial entity.
Definition of Merger
Merger is a fiscal instrument that is used by a business entity for improving the long-standing productivity by escalating their operations. Mergers generally take place when the merging entities mutually agree. This mutual consent is unlike acquisition and can result in a hostile subjugation.
Generally, the business rules and regulations differ across the states providing restrained alternatives to the companies to safeguard themselves from hostile subjugation. A business entity can safeguard itself from such takeovers by allotting privileges for the shareholders.
It is commonly seen that very few mergers have been successful in appending to the share worth of the acquiring firm. Instead, they endorse monopolistic attitude by trimming down the prices, taxes, etc. which can work against the public interests. This is the reason why mergers are controlled and managed by the government.
Definition of Acquisition
Acquisition refers to purchasing of one business entity by another. It is also known as a “merger” or a takeover and can be either mutual or hostile subjugation.
In a merger the business entities collectively bargain to arrive at a final cost, but in an acquisition either the buyout target is unaware of the offer or is against being purchased.
Generally, acquisition refers to the buyout of a smaller business identity by a bigger one, but sometimes even a smaller business identity can takeover the administration control of a bigger and well established firm, usually referred to as a reverse takeover.
Reverse merger is another kind of acquisition. It is an agreement which allows a private firm to get listed in a short duration and generally takes place when the firm is willing to elevate its monetary strength by purchasing a firm which has restrained assets.
The acquisition process is very complicated and attaining success in acquisition is a rather tough. According to different studies more than 50% of acquisitions were considered as ineffective.
Foremost Mergers and Acquisitions in India
- Hindalco obtained Canadian company Novelis through a deal amounting to $5,982 million.
- Corus Group plc was obtained by Tata Steel acquire through an agreement worth $12,000 million.
- Dr. Reddy's Labs acquired Betapharm through an agreement amounting $597 million.
- Ranbaxy Labs obtained Terapia SA and the transaction involved $324 million.
- Suzlon Energy merged with Hansen Group through an agreement worth $565 million.
- Videocon acquired Daewoo Electronics Corp. through a transaction involving $729 million.
- HPCL obtained Kenya Petroleum Refinery Ltd. through a deal worth $500 million.
- VSNL obtained Teleglobe through an agreement of $239 million.