Mergers and Acquisitions: Indian Laws

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Mergers and Acquisitions (M&A) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity.

Merger means the combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock. Basically Merger is a process by which one or more corporation is totally absorbed by another. Thus Merger is the fusion of two or more companies. All assets, liabilities and the stock of one company stand transferred to Transferee Company in consideration of payment in the form of equity shares, debentures in the transferee company or in the cash or combination of all the above modes.

The acquisition is the buying of one company (Target Company) by another. A corporate action in which a company buys most, if not all, of the target company's ownership stakes in order to assume control of the target firm. Acquisition can be friendly or hostile. In friendly acquisition the companies comes on the terms through negotiations while in the hostile acquisition no negotiation made between companies and the acquiring company need to actively purchase the substantial stake to have majority stake in the target company. Sometimes a smaller company will acquire management control of a larger or longer established company and keep its name for the combined entity. This is known as a reverse takeover.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Devesh Pandey, Candidlex Advisors LLP (Legal and Management Consultants) | Attorney Advertising

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