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Understanding Indian Mergers

Release On Monday, June 09, 2008   Download Pdf

 

 Understanding Indian Mergers.                           Manoj K Singh

Mergers and acquisitions have become popular forms of restructuring business firms expansion can be through mergers, acquisitions, tender offers and joint ventures. There are various other forms of various corporate restructuring which can be summarized as follows:

(i) Tender offers are offers to purchase some or all of shareholders’ share in a corporation. The price offered is usually at a premium to market price.

(ii) Joint ventures are partnership or conglomerates, often formed to share risk or expertise.

(iii) Sell-offs can be in the form of spin-offs or divestitures. A spin-off creates a separate new legal entity; its shares are distributed on a pro-rata basis. Existing stockholders have the same proportion of ownership in the new entity as in the original firm but the new entity is a separate decision making unit and may have policies different from the original firm.

(iv) Premium buy backs represent the repurchase of a substantial stockholder’s ownership interest at a premium above the market price.

(v) A standstill agreement is usually an instrument used in a hostile takeover defense, in which an unfriendly bidder agrees to limit his holding of a target firm.

(vi) Anti-takeover amendments are changes in the corporate bylaws to  make an acquisition of the company more difficult or more expensive.

(vii) Proxy contests occur when an outside group seeks to gain representation on the company’s board of directors.

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