Steps in Merger Transactions (38.

8)

Generally, the merger transactions includes the following steps: . Screening and Investigation of Merger Proposal When there is an intention of
acquisition or merger of other business unit, the primary step is that of screening of
motives and needs to be judged against three strategic criteria i.e., business fit,
management and financial strength. Once the proposal fit into the strategic motive of
the acquirer, then the proposed acquirer will collect all relevant information relating
to the target company about share price movements, earnings, dividends, market
share, management, shareholding pattern, gearing, financial position, benefits from
proposed acquisition ,etc. This form of investigation will bring out the strengths and
weaknesses of both one's own company and the prospective merger candidate. The
acquirer company should not only consider the benefits to be obtained but also be
careful about the attendant risks. If the proposal is viable after thorough analysis from

all angles, then the matter will be carried further. . Negotiation Stage The negotiation is an important stage, in which the bargain is made
in order to secure the highest price by the seller and the acquirer keen to limit the price
of the bid. Before the negotiations start, the seller needs to decide the minimum price
acceptable and the buyer needs to decide the maximum he is prepared to pay. After the
consideration is decided then the payment terms and exchange ratio of shares between
the companies will be decided. The exchange ratio is an important factor in the process
of amalgamation. This has to be worked out by valuing the shares of both, transferor
and transferee company as per norms and methods of valuation of shares. Approved
valuer or a firm of Chartered Accountants will evaluate the shares on the basis of

audited accounts as on the transfer date. .Approval of Proposal by Board of Directors Deciding upon the consideration of the
deal and terms of payment, then the proposal will be put for the Board of Director's

approvaL . 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 TribUI1a1(here in after called 'Tribunal') and consider
the scheme of amalgamation. A separate meeting for both preference and eqUity

shareholder is convened for this pUJ;Pose. . 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
Chapter38 Mergers and Takeovers 1145
respective agreement/ arrangement with each of them and their interest is considered

in drawing up the scheme of merger. . Tribunal's Approval Approval of the Tribunal, confirming the scheme of amalgamation
are required. The Tribunal shall issue orders for winding up of the amalgamating
company without dissolution on receipt ofthe 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 interests of its members or to public interest. . Approval of Central Government It is required to
obtain declaration of the Central
Government on the recommendation made by the Specified Authority under section

72A of the Income-tax Act, if applicable. . Integration Stage The structural and cultural aspects of the two organisations, if
carefully integrated in the new organisation, will lead to successful merger and ensure
that expected benefits of the merger are realised

Corporate restructuring is the process of redesigning one or more aspects of a company. The
process of reorganizing a company may be implemented due to a number of different factors,
such as positioning the company to be more competitive, survive a currently adverse economic
climate, or poise the corporation to move in an entirely new direction. Here are some examples
of why corporate restructuring may take place and what it can mean for the company.
Restructuring a corporate entity is often a necessity when the company has grown to the point
that the original structure can no longer efficiently manage the output and general interests of
the company. For example, a corporate restructuring may call forspinning off some departments
into subsidiaries as a means of creating a more effective management model as well as taking
advantage of tax breaks that would allow the corporation to divert more revenue to the
production process. In this scenario, the restructuring is seen as a positive sign of growth of the
company and is often welcome by those who wish to see the corporation gain a larger market
share.

However, financial restructuring may take place in response to a drop in sales, due to a sluggish
economy or temporary concerns about the economy in general. When this happens, the
corporation may need to reorder finances as a means of keeping the company operational
through this rough time. Costs may be cut by combining divisions or departments, reassigning
responsibilities and eliminating personnel, or scaling back production at various facilities owned
by the company. With this type of corporate restructuring, the focus is on survival in a difficult
market rather than on expanding the company to meet growing consumer demand.

Corporate restructuring may take place as a result of the acquisition of the company by new
owners. The acquisition may be in the form of a leveraged buyout, a hostile takeover, or
a merger of some type that keeps the company intact as a subsidiary of the controlling
corporation. When the restructuring is due to a hostile takeover, corporate raiders often
implement a dismantling of the company, selling off properties and other assets in order
to make a profit from the buyout. What remains after this restructuring may be a smaller entity
that can continue to function, albeit not at the level possible before the takeover took place.

In general, the idea of corporate restructuring is to allow the company to continue functioning in
some manner. Even when corporate raiders break up the company and leave behind a shell of
the original structure, there is still usually the hope that what remains can function well enough
for a new buyer to purchase the diminished corporation and return it to profitability.

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restructuring should not be seen as purely fire fighting. effective managers create the big picture
and move towards it even before the fire starts. one can restructure the big picture and the
pieces to it. by bonard m.

- anon106975

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Sunshine31-I know a lot of times when companies are struggling, they look at corporate debt
restructuring consulting services in order to determine the best ways to financially scale back.

The company here needs direction in terms of which positions are no longer necessary and
critical that need to be eliminated.
A very funny movie touching on this exact subject is Office Space. In Office Space, the
corporate restructuring firms that comes in starts to interview employees in order to determine
what exactly do they do at the company, and how necessary their position is.

You really see the employees discomfort because they know that their job might be eliminated.
Although corporate restructuring services are used with struggling companies, this movie pokes
fun at the process. It makes light of a distressing issue that many of us face in the corporate
world.

- latte31

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SauteePan-Sometimes corporate restructuring examples include selling off parts of the
business in order to remain profitable. GM, General Motors sold off its Saturn line of cars in
order to gain capital to continue to fund the company.

When I think of a merger and acquisition, I always think of Bank of America and Countrywide.
Bank of America bought Countrywide which was heavily laden with debt.

Some large companies like Bank of America choose to purchase other companies to gain even
more market share and become a more powerful company.

But along with the market share also comes the debt. They were lucky and were able to receive
government bail out money which they paid back with interest.

- sunshine31

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Mergers and acquisitions offer many benefits to the buying firm. When buying undervalued
assets the benefits are greatest to the purchasing firm.

Because the book value of current assets have to be reevaluated at the new market rate, this
creates a downgrade of the assets which also lowers the taxable income for the firm. This
creates a nice tax shelter for the purchasing company.