Fundamental of M&A

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Concept of Merger: Merger is a combination of two or more business into one business. Laws in India use the term amalgamation for merger. The Income Tax Act, 1961 defines amalgamation as the merger of one or more companies with another of the merger of two or more companies to form a new form company, in such a way that all the assets and liabilities of the amalgamating companies become assets and liabilities of the amalgamated company or companies become shareholders of the amalgamated company.

Strategies for Acquisition: Acquisition is not an event but a process. Companies are like human beings. When trained in a given discipline, they have not done before, the probability of a successful outcomes is fleetingly small. To avoid that pitfall in M&A, companies have to make a long-term commitment in many acquisitions. That way, the entire organization can learn and adapt to the strains of the process and eventually make it a core competence.

Value Drives in M&A

The main objective of a buyer in M&A transaction is to maximize the returns in the investment. The elements of return include

• Price paid to seller
• Cash flow generated over the course of investment
• Exit Value- Price received when the investment is sold