Mergers and Acquisitions in India

Taking over another company is more common than you may imagine. Acquisitions are the term used to describe these types of takeovers. In the business world, mergers are defined as situations in which two or more firms join forces to establish a single entity. These types of mergers are referred to as ‘Amalgamation’ in Indian law. Such a merger and acquisition aims to help a firm achieve its growth objectives. The merger and acquisition may occur as part of the company’s attempts to expand market share and geographic reach, eliminate competition, benefit from patents, or even enter new industries or product lines. 

Difference between Merger and Acquisition 

Companies worldwide are using mergers and acquisitions strategies to succeed in today’s highly competitive business climate. Mergers and acquisitions are abbreviated as M&A in the business world. Generally speaking, a merger is described as two or more firms collaborating to build a new company in a more developed form. In this case, one firm will go out of business, and the other company will take over the former. Suppose firm A combines with company B to establish a larger company A, and company B is no longer in existence due to the merger.

On the other hand, the acquisition is defined as transferring the ownership of a firm from one owner to another. As an illustration, company A purchases another company B. The fact that both of these businesses exist does not change the fact that firm A controls the management of both of them.

Combinations result in the dissolution of one corporation while forming another new entity (whose name would be announced). Companies A and B merge to produce a new entity C, and both companies cease to exist separately.

Reasons for Mergers and Acquisitions 

Mergers and acquisitions are carried out for many reasons. Mergers and acquisitions are crucial instruments that organisations use when looking to expand their operations throughout the world and, more importantly, when looking to provide long-term growth for their businesses. Following that, the cause for the widespread practice of mergers and acquisitions are:

• Eliminate competition 
• Establish a bigger market share
• Create a strong brand
• Reduce tax liabilities 

Mergers and Acquisitions in India

One factor that has a considerable impact on the M&A climate is the country’s political situation. This is because, regrettably, for India, the capital needs do not correspond to the untapped potential of the domestic market. The presence of foreign enterprises bridges this.

The presence of unfavourable legislation and the creation of new laws against a foreign country have a negative influence on their investment prospects in an economy like India. Initiatives by the government to expedite the mergers and acquisitions process are instances of the help provided by the government. Due to such measures, India has risen to the 63rd position in the World Bank’s evaluation of the ease with which businesses may conduct their operations.

• Zee Entertainment – Sony India Merger

ZEE and Sony Pictures Networks India, two of India’s major media conglomerates, have started the process of combining. Zee’s board of directors gave their approval for this move. According to the agreement, the newly created company has the potential to grow to be one of the biggest media companies in India.

• Indus Tower – Bharti Infratel Merger

Bharti Infratel, Vodafone Group Plc, and Vodafone Idea formed the joint venture Indus Towers. Indus was 42 per cent owned by Bharti Infratel and the Vodafone Group. Providence, a private equity group, owned the remaining 4.85 per cent of the company. Airtel owns Bharti Infratel.

• Vodafone Idea Merger

The Vodafone-Idea transaction is worth an estimated $23 billion. Even though the merger resulted in creating a telecom titan, it is plausible to believe that the two firms were obliged to combine due to the advent of Reliance Jio and the subsequent pricing war that followed. Both companies were struggling to stay competitive in the telecommunications business, which grew increasingly cutthroat as time went on.

Both Idea and Vodafone benefited from the transaction as Vodaphone went on to own a 45.1 per cent ownership in the merged firm, with a 26 per cent stake held by the Aditya Birla group and the remainder by Idea. ‘Vi’ was the name Vodafone Idea chose to represent the company’s fresh new identity.

Conclusion 

Mergers and acquisitions (M&A) is a broad phrase that refers to the consolidation of firms or assets through various financial transactions such as mergers, takeovers, restructurings, tender offers, asset purchases and management acquisitions. When one firm buys another and becomes the new owner, the transaction is referred to as an acquisition.