MergersMerger is a financial tool that is used for enhancing long-term profitability byexpanding their operations. Mergers occur when the merging companies have theirmutual consent as different from acquisitions, which can take the form of ahostile takeover.The business laws in US vary across states and hence the companies have limitedoptions to protect themselves from hostile takeovers. One way a company canprotect itself from hostile takeovers is by planning shareholders rights, which isalternatively known as poison pill. If we trace back to history, it is �observedthat very few mergers have actually added to the share value of the acquiringcompany. Corporate mergers may promote monopolistic practices by reducing costs,taxes etc.Such activities may go against public welfare. Hence mergers are regulated dsupervised by the government, for instance, in US any merger required\s the priorapproval of the Federal Trade Commission and the Department of Justice. In USregulations on mergers began with the Sherman Act in 1890.Mergers may be horizontal, vertical, conglomerate or congeneric, depending or thenature of the merging companies.AcquisitionsAcquisitions or takeovers occur between the bidding and the target company. Theremay be either hostile or friendly takeovers. Reverse takeover occurs when thetarget firm is larger than the bidding firm. In the course of acquisitions thebidder may purchase the share or the assets of the target company.History of Mergers and AcquisitionsTracing back to history, merger and acquisitions have evolved in five stages and

each of these are discussed here. As seen from past experience mergers andacquisitions are triggered by economic factors. The macroeconomic environment,which includes the growth in GDP, interest rates and monetary policies play a keyrole in designing the process of mergers or acquisitions between companies ororganizations.First Wave MergersThe first wave mergers commenced from 1897 to 1904. During this phase mergeroccurred between companies, which enjoyed monopoly over their lines of productionlike railroads, electricity etc. the first wave mergers that occurred during theaforesaid time period were mostly horizontal mergers that took place between heavymanufacturing industries.End Of 1st Wave MergerMajority of the mergers that were conceived during the 1st phase ended in failuresince they could not achieve the desired efficiency. The failure was fuelled bythe slowdown of the economy in 1903 followed by the stock market crash of 1904.The legal framework was not supportive either. The Supreme Court passed themandate that the anticompetitive mergers could be halted using the Sherman Act.Second Wave MergersThe second wave mergers that took place from 1916 to 1929 focused on the mergersbetween oligopolies, rather than monopolies as in the previous phase. The economicboom that followed the post world war I gave rise to these mergers. Technologicaldevelopments like the development of railroads and transportation by motorvehicles provided the necessary infrastructure for such mergers or acquisitions to

take place. The government policy encouraged firms to work in unison. This policywas implemented in the 1920s.The 2nd wave mergers that took place were mainly horizontal or conglomerate innature. Te industries that went for merger during this phase were producers ofprimary metals, food products, petroleum products, transportation equipments andchemicals. The investments banks played a pivotal role in facilitating the mergersand acquisitions.End Of 2nd Wave MergersThe 2nd wave mergers ended with the stock market crash in 1929 and the greatdepression. The tax relief that was provided inspired mergers in the 1940s.Third Wave MergersThe mergers that took place during this period (1965-69) were mainly conglomeratemergers. Mergers were inspired by high stock prices, interest rates and strictenforcement of antitrust laws. The bidder firms in the 3rd wave merger weresmaller than the Target Firm. Mergers were financed from equities; the investmentbanks no longer played an important role.End Of The 3rd Wave MergerThe 3rd wave merger ended with the plan of the Attorney General to splitconglomerates in 1968. It was also due to the poor performance of theconglomerates. Some mergers in the 1970s have set precedence. The most prominentones were the INCO-ESB merger; United Technologies and OTIS Elevator Merger arethe merger between Colt Industries and Garlock Industries.Fourth Wave MergerThe 4th wave merger that started from 1981 and ended by 1989 was characterized byacquisition targets that wren much larger in size as compared to the 3rd wave

mergers. Mergers took place between the oil and gas industries, pharmaceuticalindustries, banking and airline industries. Foreign takeovers became common withmost of them being hostile takeovers. The 4th Wave mergers ended with antitakeover laws, Financial Institutions Reform and the Gulf War.Fifth Wave MergerThe 5th Wave Merger (1992-2000) was inspired by globalization, stock market boomand deregulation. The 5th Wave Merger took place mainly in the banking andtelecommunications industries. They were mostly equity financed rather than debtfinanced. The mergers were driven long term rather than short term profit motives.The 5th Wave Merger ended with the burst in the stock market bubble.Hence we may conclude that the evolution of mergers and acquisitions has been longdrawn. Many economic factors have contributed its development. There are severalother factors that have impeded their growth. As long as economic units ofproduction exist mergers and acquisitions would continue for an ever-expandingeconomy.Merger and Acquisition TrendsTrend essentially refers to the observed long-term movement in a time series data.Trend estimates are seasonally adjusted through an averaging process. Merger andacquisition trends provide an idea about the market movements.Merger and acquisition trends are seen to affect an economy's product market,money market, and labor market. Global markets are also considerably influenced bythe merger and acquisition trends.Global Merger and Acquisition Trends for 2006 and 20072007 and 2006 were marked by a spate of mergers and acquisitions all over the

globe in both developing and developed countries. The general trend was that,there was a decline in the number of public sector undertakings along with a hikein the number of private sector enterprises. This was due to the fact that manypublic sector organizations worldwide were either acquired by large private sectorenterprises or merged with them.The explanation to this merger and acquisition trend as observed in 2006 and 2007lay in the robust growth recorded by the Private Equity Funds. The other factorspropelling this trend were the emphasis on short term earnings growth and thestrict regulatory structure of public sector enterprises.This merger and acquisition trend towards increased privatization of public sectorholdings was observed in Europe, Brazil, North America, and China. Europe in thatperiod hosted a strong investment market, which catered to the public to privatesector transition of companies.For China mergers and acquisitions from public to private business enterprises gotgovernment approval in 2006.More on Private Equity Driven International Merger and Acquisition TrendsPrivate equity transactions had been the buzzword for the world economy in 2007and 2006. The real estate sector and the energy sector witnessed much of this typeof activity. Private equity firms were working overnight for augmentingproprietary deal flows.China was an unique case in point. There the powerful trend towards mergers andacquisitions involving private equity dealings comprised a lot of policy andregional diversity. A great amount of equity capital flowed into China from US,Japan, Israel, and Europe as retail sector investments. This was primarily aimed

at tapping China's heightened domestic consumer demand. Focus shifted to thenorthern and western regions of China as costs escalated for the commercial hubsalongside the eastern seacoast.In the US, private equity funds succeeded in raising more than $200 billion inthis period for international merger and acquisition dealings.As these types of funds usually possessed a time frame of 3 to 5 years for puttingthe new invested capital to work, they were expected by the analysts to powerheightened merger and acquisition activities across major global markets for thecoming decade.For Europe the general prediction was that of a high transactional demand relatedto private equity. Analysts observed that certain European markets werecharacterized by different financial advantages and tax structures. WesternEuropean nations possessed well oiled legal machinery and conducive investmentclimates. In particular Britain exhibited a strong market for public to privateinvestments.After the accession of nations like Poland, Czech Republic and Hungary into theEU, a section of European funds for private equity were seen to be abstaining fromapplying the 'emerging market discount' for investment in those nations.Equity investment in Brazil turned attractive with the program called NovoMercado. Brazilian pension funds turned out to be a prime investment force. Theirbankruptcy code got a revision. The elected government was supportive of a freemarket structure.In North America domestic dealings in M&A executed by private equity investors ofUSA displayed a robust international component. The observed trend was that amajority of the funds wanted to secure offshore partners for distribution,contract manufacturing or joint ventures.

This kind of cross-border transactions entailed a careful planning for taxobligations arising out of fund repatriation.

More on Merger and Acquisition TrendsGlobal leveraged buyouts figures for 2006 were above US$ 800 billion. This wasmore than twice the comparable figure for 2005. It constituted around 20 % of USinternational mergers and acquisitions. However, even then it was not asignificant component of the world equity and debt market.In 2006 North America saw vigorous leveraged buyout activities, which amounted tohalf of the world activity in that field. Europe witnessed a fairly heightenedactivity in the arena of leveraged buyouts; while Asia had a relatively slowincrease. France, Netherlands, and Germany were the biggest European buyoutmarkets in 2006.No doubt that private equity has indeed become a major component of twenty-firstcentury's capital market.

Benefits of Mergers and AcquisitionsMerger refers to the process of combination of two companies, whereby a newcompany is formed. An acquisition refers to the process whereby a company simplypurchases another company. In this case there is no new company being formed.Benefits of mergers and acquisitions are quite a handful.Mergers and acquisitions generally succeed in generating cost efficiency throughthe implementation of economies of scale. It may also lead to tax gains and caneven lead to a revenue enhancement through market share gain.Birds Eye View of the Benefits Accruing from Mergers and AcquisitionsThe principal benefits from mergers and acquisitions can be listed as increasedvalue generation, increase in cost efficiency and increase in market share.Mergers and acquisitions often lead to an increased value generation for the

company. It is expected that the shareholder value of a firm after mergers oracquisitions would be greater than the sum of the shareholder values of the parentcompanies.An increase in cost efficiency is effected through the procedure of mergers andacquisitions. This is because mergers and acquisitions lead to economies of scale.This in turn promotes cost efficiency. As the parent firms amalgamate to form abigger new firm the scale of operations of the new firm increases. As outputproduction rises there are chances that the cost per unit of production will comedown.An increase in market share is one of the plausible benefits of mergers andacquisitions. In case a financially strong company acquires a relativelydistressed one, the resultant organization can experience a substantial increasein market share. The new firm is usually more cost-efficient and competitive ascompared to its financially weak parent organization.It can be noted that mergers and acquisitions prove to be useful in the following situations:Firstly, when a business firm wishes to make its presence felt in a new market.Secondly, when a business organization wants to avail some administrativebenefits. Thirdly, when a business firm is in the process of introduction of newproducts. New products are developed by the R&D wing of a company.Employee Benefits under Mergers and Acquisitions in USThe 'Employee Retirement Income Security Act' was enacted in 1974. It is alsoknown as ERISA. Since then programs for employee benefit have been a majorcomponent of the balance and income statements of US business organizations.Current law promulgations have attached supreme importance to the presence of post

retirement pension schemes and welfare benefit schemes as a part of corporateobligation. As a result employee benefit programs are affecting the viability ofmergers and acquisitions in the USA.Expenses accruing due to employee benefit programs may not be fully reflected in acompany's balance sheet. Some employee benefit obligations may arise out of achange in the corporate structure of a firm. Retirement income schemes and benefitplans may vary from company to company. Companies going for mergers andacquisitions strive to iron out the internal differences to maintain a specifiedlevel of employee satisfaction.

Mergers and Acquisitions in IndiaThe process of mergers and acquisitions has gained substantial importance intoday's corporate world. This process is extensively used for restructuring thebusiness organizations. In India, the concept of mergers and acquisitions wasinitiated by the government bodies. Some well known financial organizations alsotook the necessary initiatives to restructure the corporate sector of India byadopting the mergers and acquisitions policies. The Indian economic reform since1991 has opened up a whole lot of challenges both in the domestic andinternational spheres. The increased competition in the global market has promptedthe Indian companies to go for mergers and acquisitions as an important strategicchoice. The trends of mergers and acquisitions in India have changed over theyears. The immediate effects of the mergers and acquisitions have also beendiverse across the various sectors of the Indian economy.Mergers and Acquisitions Across Indian Sectors

Among the different Indian sectors that have resorted to mergers and acquisitionsin recent times, telecom, finance, FMCG, construction materials, automobileindustry and steel industry are worth mentioning. With the increasing number ofIndian companies opting for mergers and acquisitions, India is now one of theleading nations in the world in terms of mergers and acquisitions.The merger and acquisition business deals in India amounted to $40 billion duringthe initial 2 months in the year 2007. The total estimated value of mergers andacquisitions in India for 2007 was greater than $100 billion. It is twice theamount of mergers and acquisitions in 2006.

Mergers and Acquisitions in India: the Latest TrendsTill recent past, the incidence of Indian entrepreneurs acquiring foreignenterprises was not so common. The situation has undergone a sea change in thelast couple of years. Acquisition of foreign companies by the Indian businesseshas been the latest trend in the Indian corporate sector.There are different factors that played their parts in facilitating the mergersand acquisitions in India. Favorable government policies, buoyancy in economy,additional liquidity in the corporate sector, and dynamic attitudes of the Indianentrepreneurs are the key factors behind the changing trends of mergers andacquisitions in India.The Indian IT and ITES sectors have already proved their potential in the globalmarket. The other Indian sectors are also following the same trend. The increasedparticipation of the Indian companies in the global corporate sector has furtherfacilitated the merger and acquisition activities in India.

Major Mergers and Acquisitions in India

Recently the Indian companies have undertaken some important acquisitions. Some ofthose are as follows:Hindalco acquired Canada based Novelis. The deal involved transaction of $5,982million. Tata Steel acquired Corus Group plc. The acquisition deal amounted to$12,000 million. Dr. Reddy's Labs acquired Betapharm through a deal worth of $597million. Ranbaxy Labs acquired Terapia SA. The deal amounted to $324 million.Suzlon Energy acquired Hansen Group through a deal of $565 million. Theacquisition of Daewoo Electronics Corp. by Videocon involved transaction of $729million. HPCL acquired Kenya Petroleum Refinery Ltd.. The deal amounted to $500million. VSNL acquired Teleglobe through a deal of $239 million.When it comes to mergers and acquisitions deals in India , the total number was287 from the month of January to May in 2007. It has involved monetary transactionof US $47.37 billion. Out of these 287 merger and acquisition deals, there havebeen 102 cross country deals with a total valuation of US $28.19 billion.

Certified Mergers and AcquisitionsThere are a number of certified mergers and acquisitions advisory programsavailable at the present time. With the help of these programs, a lot ofcommercial entities are getting involved in merger and acquisition activities.These programs are offered by numerous merger and acquisition consultants andagencies. Some of them are also conducting educational programs and seminars forthe purpose of educating financial professionals about the nuances of certifiedmergers and acquisitions and growing the knowledge base of the merger andacquisition professionals.

One of the most important certified merger and acquisition advisory programs isthe Certified Valuation Manager Program offered by the American Academy ofFinancial Management (AAFM). The American Academy of Financial Management is alsohosting a number of Certified Valuation Manager Training Conferences throughoutthe year.The certified mergers and acquisitions agencies help commercial enterprises orbusiness corporations in acquiring or taking over other companies and also insignificant issues related to mergers and acquisitions. These agencies also helpbusiness entities regarding management buyouts (MBOs), finding acquisition lookup,sources of equity and debt financing, as well as valuation of businesses.In this modern-day world, the power of globalization, market liberalization andtechnological advancement has contributed towards the formation of a increasinglycompetitive and active commercial world, where mergers and acquisitions are moreand more utilized for achieving optimization of firm value and competitivebenefits.In the United States, the Alliance of Merger & Acquisition Advisors (AM&AA) is aprincipal global institution, which offers specialized services related to theacademic and resource requirements in the profession of merger and acquisitionadvisory services. It has more than 500 members and has attained the position of amarket leader in the educational domain of mergers and acquisitions. The membersare merger and acquisition professionals offering transactional support andmediator services. The majority of the members have qualifications like MBA, CPA,or JD. The merger and acquisition training program offered by the Alliance of

Merger & Acquisition Advisors is known as CM&AA certification.With the help of certified merger and acquisition advisory services, the clientscan enjoy instant accessibility to:# A large number of certified business purchasers, which include multinational ortransnational corporations who are seeking to buy profitable companies# A platform of the merger and acquisition professionals, sources of funding,transaction makers, intermediaries and tax professionals# Knowledgeable principals# Advices on pricing and valuation# Forward-looking transaction formation, which will lead to value additionThe certified mergers and acquisition advisory services can be broadly categorizedinto the following types:# Business Valuation Services# Funding Services (Acquisition financing, recapitalizations, financialreconstruction)# Asset Disposal Services# Acquisition Lookup# Management Buyouts (MBOs)# Certified Equipment and Machinery EstimationThe Sarbanes-Oxley Act plays a major role in the mergers and acquisitions thattake place in the United States. It was introduced in the year 2002 and is alsocalled as the Public Company Accounting Reform and Investor Protection Act of2002. One of the principal objectives behind the promulgation of this act is tomaintain transparency in the mergers and acquisitions transactions and protect theinvestors.

Course Content of a Certified Merger and Acquisition Advisory ProgramThe course content of a Certified Merger and Acquisition Advisory Program deals

with various regulatory and legal features of mergers and acquisitions and usuallyincludes the following:# Forms of transactions/deals# The procedure of merger and acquisition# Principal matters that should be taken into account# Negotiation of contract# Warranties and representations# Consideration or compensations# Regulatory matters- acquisition performed by a public company# Enquiries and searches# Due diligence# Due diligence- post acquisition# Title to international properties# Cross-border deals# Coordinating/organizing cross-border transactions# Taking over distressed firms# Analyzing the parties to merger or acquisition# Valuation of the probable acquisition# Designing the funding for acquisition# Regulatory and legal matters associated with acquisition of a public company# Code for mergers and acquisitions# Comprehending the ideas of merger and acquisition code# Formation of a takeover deal# Blueprinting the documentation# The areas of difficulty that should be on the lookout# Workshops on mergers and acquisitions and case studies

Types of mergers:-

Horizontal MergersAbout Horizontal MergersHorizontal mergers are those mergers where the companies manufacturing similarkinds of commodities or running similar type of businesses merge with each other.The principal objective behind this type of mergers is to achieve economies ofscale in the production procedure through carrying off duplication of

installations, services and functions, widening the line of products, decrease inworking capital and fixed assets investment, getting rid of competition,minimizing the advertising expenses, enhancing the market capability and to getmore dominance on the market.Nevertheless, the horizontal mergers do not have the capacity to ensure the marketabout the product and steady or uninterrupted raw material supply. Horizontalmergers can sometimes result in monopoly and absorption of economic power in thehands of a small number of commercial entities.According to strategic management and microeconomics, the expression horizontalmerger delineates a form of proprietorship and control. It is a plan, which isutilized by a corporation or commercial enterprise for marketing a form ofcommodity or service in a large number of markets. In the context of marketing,horizontal merger is more prevalent in comparison to horizontal merger in thecontext of production or manufacturing.

Horizontal IntegrationSometimes, horizontal merger is also called as horizontal integration. It istotally opposite in nature to vertical merger or vertical integration.Horizontal MonopolyA monopoly formed by horizontal merger is known as a horizontal monopoly.Normally, a monopoly is formed by both vertical and horizontal mergers. Horizontalmerger is that condition where a company is involved in taking over or acquiringanother company in similar form of trade. In this way, a competitor is done awaywith and a wider market and higher economies of scale are accomplished.In the process of horizontal merger, the downstream purchasers and upstreamsuppliers are also controlled and as a result of this, production expenses can be

decreased.

Horizontal ExpansionAn expression which is intimately connected to horizontal merger is horizontalexpansion. This refers to the expansion or growth of a company in a sector that ispresently functioning. The aim behind a horizontal expansion is to grow its marketshare for a specific commodity or service.

Examples of Horizontal MergersFollowing are the important examples of horizontal mergers:# The formation of Brook Bond Lipton India Ltd. through the merger of Lipton Indiaand Brook Bond# The merger of Bank of Mathura with ICICI (Industrial Credit and InvestmentCorporation of India) Bank# The merger of BSES (Bombay Suburban Electric Supply) Ltd. with Orissa PowerSupply Company# The merger of ACC (erstwhile Associated Cement Companies Ltd.) with DamodarCementAdvantages of Horizontal Merger:Horizontal merger provides the following advantages to the companies which aremerged:1) Economies of scopeThe notion of economies of scope resembles that of economies of scale. Economiesof scale principally denote effectiveness related to alterations in the supplyside, for example, growing or reducing production scale of an individual form ofcommodity. On the other hand, economies of scope denote effectiveness principallyrelated to alterations in the demand side, for example growing or reducing the

range of marketing and supply of various forms of products. Economies of scope areone of the principal causes for marketing plans like product lining, productbundling, as well as family branding.2) Economies of scaleEconomies of scale refer to the cost benefits received by a company as the resultof a horizontal merger. The merged company is able to have bigger productionvolume in comparison to the companies operating separately. Therefore, the mergedcompany can derive the benefits of economies of scale. The maximum use of plantfacilities can be done by the merged company, which will lead to a decrease in theaverage expenses of the production.The important benefits of economies of scale are the following:# Synergy# Growth or expansion# Risk diversification# Diminution in tax liability# Greater market capability and lesser competition# Financial synergy (Improved creditworthiness, enhancement of borrowing power,decrease in the cost of capital, growth of value per share and price earningratio, capital raising, smaller flotation expenses)# Motivation for the managersFor attaining economies of scale, there are two methods and they are thefollowing:# Increased fixed cost and static marginal cost# No or small fixed cost and decreasing marginal costOne example of economies of scale is that if a company increases its productiontwofold, then the entire expense of inputs goes up less than twofold.3) Dominant existence in a particular market

Vertical MergersVertical mergers refer to a situation where a product manufacturer merges with the

supplier of inputs or raw materials. In can also be a merger between a productmanufacturer and the product's distributor.Vertical mergers may violate the competitive spirit of markets. It can be used toblock competitors from accessing the raw material source or the distributionchannel. Hence, it is also known as "vertical foreclosure". It may create a sortof bottleneck problem.As per research, vertical integration can affect the pricing incentive of adownstream producer. It may also affect a competitors incentive for selectinginput suppliers. Research studies single out several factors, which point to thefact that vertical integration facilitates collusion. Vertical mergers may promotecollusion through an outlets effect. A corollary of vertical integration is thatintegrated business structures are able to perform better in crisis phases.There are multiple reasons, which promote the vertical integration by firms. Someof them are discussed below.# The prime reason being the reduction of uncertainty regarding the availabilityof quality inputs as also the uncertainty regarding the demand for its products.# Firms may also enter vertical mergers to avail the plus points of economies ofintegration.# Vertical merger may make the firms cost-efficient by streamlining itsdistribution and production costs. It is also meant for the reduction oftransactions costs like marketing expenses and sales taxes. It ensures that afirm's resources are used optimally.

Bird's Eye View of US Laws Pertaining to Vertical MergersIn USA the vertical mergers abide by the 'Clayton Act (15 U.S.C.A. 12 et� seq.)'.The transactions conducted here fall under the purview of antitrust acts.It is interesting to note that vertical mergers do not lead to a fall in the

number of operating economic agents at a particular market level. However, it mayresult in a change of industry behavior pattern.At its worst suppliers might be faced with a loss of product market. The retailchains may run out of stock. Competitors may also face blockages for supplies aswell as outlets.Vertical mergers by virtue of their market power may effectively block new firmsfrom entering the market thereby violating the competitive flavor of the market.The Supreme Court of USA has given a ruling on just 3 cases pertaining to verticalmerger under the Clayton Act ( section 7 ) as per the latest available� �information.In the first case the Court contradicted the general assumption that section 7 wasnot applicable for vertical mergers.In the following vertical merger case the US Supreme Court observed that theprimary disadvantage of vertical merger lies in the throttling of the spirit andessence of competition. Business rivals may be denied a fair chance atcompetition.The Court observed that regarding vertical mergers two areas need close scrutinyand regulation.One concerns the purpose and nature of the vertical merger arrangement. The otherparameter concerns the industry concentration trend in that specific sector.In the third judgment passed on vertical merger US Supreme Court quashed Ford'sclaim that its acquisition of Autolite had made the latter a better competitor.Thus a vertical merger is a situation where a firm acquires a product supplier ora customer. Vertical mergers may at times violate the US federal antitrust laws.Gist of European Commission Guidelines on Vertical MergersIn 2007 the European Commission released a new set of guidelines for non horizontal

mergers. It can be noted that vertical merger is a type of non horizontalmerger. The Commission is the regulatory body overseeing the complianceaspect of firms going for vertical mergers.The guidelines cited instances where conglomerate and vertical mergerssignificantly affected the competitive nature of the market.The European Commission normally is not bothered about 'competition concerns' inwhat is commonly known as 'safe harbors'. The guidelines sets benchmarks formarket share levels and concentration levels below which comes the 'safe harbors'.Market analysts consider this 'safe harbor' aspect of the new guidelines to be aninnovative one.Seen in overall terms the new guidelines from the European Commission aims atproviding a transparent regulatory guideline framework for the business communityas well as the legal fraternity.

Conglomerate MergersAs per definition, a conglomerate merger is a type of merger whereby the twocompanies that merge with each other are involved in different sorts ofbusinesses. The importance of the conglomerate mergers lies in the fact that theyhelp the merging companies to be better than before.Types of Conglomerate MergersThere are two main types of conglomerate mergers the pure �conglomerate mergerand the mixed conglomerate merger. The pure conglomerate merger is one where themerging companies are doing businesses that are totally unrelated to each other.The mixed conglomerate mergers are ones where the companies that are merging witheach other are doing so with the main purpose of gaining access to a wider marketand client base or for expanding the range of products and services that are being

provided by themThere are also some other subdivisions of conglomerate mergers like the financialconglomerates, the concentric companies, and the managerial conglomerates.

Reasons of Conglomerate MergersThere are several reasons as to why a company may go for a conglomerate merger.Among the more common reasons are adding to the share of the market that is ownedby the company and indulging in cross selling. The companies also look to add totheir overall synergy and productivity by adopting the method of conglomeratemergers.

Benefits of Conglomerate MergersThere are several advantages of the conglomerate mergers. One of the majorbenefits is that conglomerate mergers assist the companies to diversify. As aresult of conglomerate mergers the merging companies can also bring down thelevels of their exposure to risks.Implications of Conglomerate MergersThere are several implications of conglomerate mergers. It has often been seenthat companies are going for conglomerate mergers in order to increase theirsizes. However, this also, at times, has adverse effects on the functioning of thenew company. It has normally been observed that these companies are not able toperform like they used to before the merger took place.This was evident in the 1960s when the conglomerate mergers were the generaltrend. The term conglomerate mergers also implies that the two companies that are

merging do not even have the same customer base as they are in totally differentbusinesses.It has normally been seen that a lot of companies that go for conglomerate mergersare able to manage a wide variety of activities in a particular market. Forexample, these companies can carry out research activities and applied engineeringprocesses. They are also able to add to their production as well as strengthen themarketing area that ensures better profitability.It has been seen from case studies that conglomerate mergers do not affect thestructures of the industries. However, there might be significant impact if theacquiring company happens to be a leading company of its market that is notconcentrated and has a large number of entry barriers.

Recent Mergers and AcquisitionsMergers and Acquisitions have been very common incidents since the turn of the20th century. These are used as tools for business expansion and restructuring.Through mergers the acquiring company gets an expanded client base and theacquired company gets additional lifeline in the form of capital invested by thepurchasing company. The recent mergers and acquisitions authenticate such a view.The Long Success International (Holdings) Ltd merged with City Faith InvestmentsLtd on the 8th of April 2008. The value of the merger was US $3.2 million. Theagency in this instance was Bermuda Monetary Authority, Hong Kong Stock Exchangeand other regulatory authority that was unspecified.Novartis AG acquired 25% stake in Alcon Inc. This acquisition was worth 73,666

million common shares of the company. They bought this stake from Nestle SA for$10.547 billion by paying $143.18 for every share. It was a privately negotiatedtransaction that needed to have a regulatory approval. Simultaneously, Novartis AGalso received an offer of 52% interest that was equivalent of 153.225 millioncommon shares of Alcon Inc.Kinetic Concepts acquired each and every remaining common stock of LifeCell Corpfor $51 for each share. Their total offer was $1.743 billion. The deal was done inaccordance to regulatory approvals and the conventional closing conditions.Kapstone Paper & Packaging Corp acquired the kraft paper mill as well as otherassets of MeadWestVaco.Corp. They paid them $485 million. The deal was conductedas per the regulatory approvals, receipt of financing and conventional closingconditions. This deal included a lumber mill in Summerville, hundred percentinterest in Cogen South LLC. The Chip mills in Kinards, Elgin, Andrews and Hamptonin South Carolina are also parts of this deal.Petrofalcon Corp acquired the remaining shares of Anadarko Venezuela Co fromAnadarko Petroleum Corp. The deal was worth 428.46 million Venezuelan bolivar orUS $200 million. The deal was completed as per the regulatory approvals.Discover Financial Services, LLC acquired Diners Club International Ltd fromCitigroup Inc. The deal was worth US $165 million. The deal was subjected toregulatory approvals and normal closing conditions. Cobham PLC took over MMIResearch Ltd. The deal was worth ?16.6 million or $33.099 million. In this deal ?12.2 was paid in cash, ?1.4 million in loan notes and almost ?3 million in

payments related to profits.WNS (Holdings) Ltd from India, took over the total share capital of Chang Ltd. Thedeal was worth ?9.6 million. Of this amount ?8 million was to be paid in cash andthe rest was to be paid in payments related to profits.AptarGroup Inc acquired the Advanced Barrier System wing of the CCL IndustriesInc. The deal was worth almost 9.4 million Canadian dollars. The entire amount waspaid on cash. Varian Inc from USA took over 23% stakes of Oxford Diffraction Ltd.The deal was worth ? 4.6 million pounds. ? 3.5 million was paid in cash, and therest was to be paid from the profits made by the company.Spice PLC took over Melton Power Services Limited. The deal was worth ?4.5million. ?2.5 million was paid in cash and the rest was to be paid from theprofits made by the company. Spice PLC also got Utility Technology Ltd., GISDirect Ltd, and Line Design Solutions Ltd as part of the deal.Atlas Iron Ltd. Took over a 19.9% stake in the Warwick Resources Ltd. This wasequivalent of 15.124 million new common stock of the Warwick Resources Ltd. Theypaid A$ 3.781 million in a transaction that was privately negotiated. Thetransaction was executed as per the approval from the shareholders. The sellingprice of the shares was A$ 0.23 and it was based on the value of each share thatstood at A$ 0.25 on 4th of April 2008.Republic Gold Ltd of Australia took over the remaining stocks of Vista Gold(Antigua) from Vista Gold Corp. The deal was worth $3 million. Republic Gold alsogot the Amayapampa project in Bolivia as a part of the deal. Manpower Software PLCtook over Key IT Systems Ltd. The deal was worth ?0.83 million. ?0.375 million waspaid in cash and the rest is supposed to be paid from profits.

Spice PLC took over Utility Technology Ltd. The deal was worth ?0.2 million ?0.1�million was to be paid in cash and the rest was to be paid from the profits. Aspart of this deal Spice PLC also acquired Melton Power Services Ltd, GIS DirectLtd and Line Design Solutions Ltd.Spice PLC took over Line Design Solutions Ltd and GIS Direct Ltd. The total dealwas worth ?0.1 million and the entire amount was paid in cash. Spice PLC alsoacquired Utility Technology Ltd and Melton Power Services Ltd as part of the deal.Thomas Cook Group PLC acquired Elegant Resorts Ltd from Barbara Catchpole andGeoff Moss. Australian Social Infrastructure Fund merged with API Fund. The dealwas subjected to regulatory approvals and shareholder. Greenbier Cos Inc took overRoller Bearing Industries Inc., from AB SKF. Fijian Holdings Ltd has took over50.2% interest in RB Patel Group Ltd.Honeywell International Inc has acquired Norcross Safety Products LLC from OdysseyInvestment Partners LLC. The deal was worth $1.2 billion. It was subjected tovarious kinds of regular closing conventions and regulatory approvals.

Mergers and Acquisitions in Banking SectorAbout Mergers and Acquisitions in Banking SectorMergers and acquisitions in banking sector have become familiar in the majority ofall the countries in the world. A large number of international and domestic banksall over the world are engaged in merger and acquisition activities. One of theprincipal objectives behind the mergers and acquisitions in the banking sector isto reap the benefits of economies of scale.

With the help of mergers and acquisitions in the banking sector, the banks canachieve significant growth in their operations and minimize their expenses to aconsiderable extent. Another important advantage behind this kind of merger isthat in this process, competition is reduced because merger eliminates competitorsfrom the banking industry.Mergers and acquisitions in banking sector are forms of horizontal merger becausethe merging entities are involved in the same kind of business or commercialactivities. Sometimes, non-banking financial institutions are also merged withother banks if they provide similar type of services.Through mergers and acquisitions in the banking sector, the banks look forstrategic benefits in the banking sector. They also try to enhance their customerbase.In the context of mergers and acquisitions in the banking sector, it can bereckoned that size does matter and growth in size can be achieved through mergersand acquisitions quite easily. Growth achieved by taking assistance of the mergersand acquisitions in the banking sector may be described as inorganic growth. Bothgovernment banks and private sector banks are adopting policies for mergers andacquisitions.In many countries, global or multinational banks are extending their operationsthrough mergers and acquisitions with the regional banks in those countries. Thesemergers and acquisitions are named as cross-border mergers and acquisitions in thebanking sector or international mergers and acquisitions in the banking sector. Bydoing this, global banking corporations are able to place themselves into a

dominant position in the banking sector, achieve economies of scale, as well asgarner market share.Mergers and acquisitions in the banking sector have the capacity to ensureefficiency, profitability and synergy. They also help to form and grow shareholdervalue.In some cases, financially distressed banks are also subject to takeovers ormergers in the banking sector and this kind of merger may result in monopoly andjob cuts.Deregulation in the financial market, market liberalization, economic reforms, anda number of other factors have played an important function behind the growth ofmergers and acquisitions in the banking sector. Nevertheless, there are manychallenges that are still to be overcome through appropriate measures.Mergers and acquisitions in banking sector are controlled or regulated by the apexfinancial authority of a particular country. For example, the mergers andacquisitions in the banking sector of India are overseen by the Reserve Bank ofIndia (RBI).

Major Mergers and Acquisitions in the Banking Sector of the United StatesFollowing are some of the important mergers and acquisitions that took place inthe banking sector of the United States:* The merger of Chase Manhattan Corporation with J.P. Morgan & Company. Thename of the new company formed as a result of the merger is J.P. Morgan Chase &Company.* The merger of Firstar Corporation with U.S. Bancorp. The name of theresultant entity is U.S. Bancorp.* The merger of First Union Corporation with Wachovia Corporation. The name ofthe newly formed company is Wachovia Corporation.

* The merger of Fifth Third Bancorp with Old Kent Financial Corporation. Thename of the merged company is Fifth Third Bancorp.* The merger of Summit Bancorp with FleetBoston Financial Corporation. The newcompany is named FleetBoston Financial Corporation.* The merger of Golden State Bancorp, Inc. with Citigroup Inc. The name of thenewly formed company is Citigroup Inc.* The merger of Dime Bancorp, Inc. with Washington Mutual and the name of themerged entity is Washington Mutual.* The merger of FleetBoston Financial Corporation with Bank of AmericaCorporation. The newly formed entity is Bank of America Corporation.* The merger of Bank One with J.P. Morgan Chase & Company. Name of the newcompany is J.P. Morgan Chase & Company.* The merger of SunTrust with National Commerce Financial and the newly formedentity is also named SunTrust.* The merger of Hibernia National Bank with Capital One Financial Corporationand the merged entity is known as Capital One Financial Corporation.* The merger of MBNA Corporation with Bank of America and the resultant entityis known as Bank of America Card Services.* The merger of AmSouth Bancorporation with Regions Financial Corporation andthe name of the newly formed entity is Regions Financial Corporation.* The merger of LaSalle Bank with Bank of America and the new entity formed iscalled as Bank of America.* The merger of Mellon Financial Corporation with Bank of New York Company,Inc. and the newly merged entity is known as Bank of New York Mellon.

Mergers and Acquisitions in Telecom SectorThe number of mergers and acquisitions in Telecom Sector has been increasing

significantly. Telecommunications industry is one of the most profitable andrapidly developing industries in the world and it is regarded as an indispensablecomponent of the worldwide utility and services sector. Telecommunication industrydeals with various forms of communication mediums, for example mobile phones,fixed line phones, as well as Internet and broadband services.Currently, a slew of mergers and acquisitions in Telecom Sector are going onthroughout the world. The aim behind such mergers is to attain competitivebenefits in the telecommunications industry.The mergers and acquisitions in Telecom Sector are regarded as horizontal mergerssimply because of the reason that the entities going for merger or acquisition areoperating in the same industry, that is telecommunications industry.In the majority of the developed and developing countries around the world,mergers and acquisitions in the telecommunications sector have become a necessity.This kind of mergers also assists in creation of jobs.Both transnational and domestic telecommunications services providers are keen totry merger and acquisition options because this will help them in many ways. Theycan cut down on their expenses, achieve greater market share and accomplish marketcontrol.Mergers and acquisitions in the telecommunications sector have been showing aprosperous trend in the recent past and the economists are advocating that theywill continue to do so. The majority of telecommunication services providers haveunderstood that in order to grow globally, strategic alliances and mergers andacquisitions are the principal devices.Private sector investment and FDI (Foreign Direct Investment) have also boostedthe growth of mergers and acquisitions in the telecommunications sector.

Over the last few years, a phenomenal growth has been witnessed in the number ofmergers and acquisitions taking place in the telecommunications industry. Thereasons behind this development include the following:# Deregulation# Introduction of sophisticated technologies (Wireless land phone services)# Innovative products and services (Internet, broadband and cable services)Economic reforms have spurred the growth in the mergers and acquisitions industryof the telecommunications sector to a satisfactory level.Mergers and acquisitions in Telecom Sector can also have some negative effects,which include monopolization of the telecommunication products and services,unemployment and others. However, the governments of various countries takeappropriate steps to curb these problems.In countries like India, mergers and acquisitions have increased to a considerablelevel from the mid 1990s. In the United States, the mergers and acquisitions inthe telecommunications sector are going on in a full-fledged manner.The mergers and acquisitions in the telecommunications sector are governed orsupervised by the regulatory authority of the telecommunication industry of aparticular country, for instance the Telecom Regulatory Authority of India orTRAI. The regulatory authorities always keep a tab on the telecommunicationsindustry so that no monopoly is formed.

Significant Mergers and Acquisitions in Telecom SectorFollowing are the important mergers and acquisitions that took place in thetelecommunications sector:* The takeover of Mobilink Telecom by Broadcom. This can also be described asa suitable example of product extension merger* AT&T Inc. taking over BellSouth

* The acquisition of eScription Inc. by Nuance Communications Inc.* The taking over of Hutchison Essar by the Vodafone Group. Now it has becomeVodafone Essar Limited* China Communications Services Corporation Ltd. taking over ChinaInternational Telecommunication Construction Corporation* The acquisition of Ameritech Corporation by SBC (Southwestern BellCorporation) Communications* The merger of GTE (General Telephone and Electronics) with Bell Atlantic* The acquisition of US West by Qwest Communications* The merger of MCI Communications Corporation with WorldcomBenefits Provided by the Mergers and Acquisitions in the Telecommunications SectorFollowing are the benefits provided by the mergers and acquisitions in thetelecommunications industry:* Building of infrastructure in a more convenient way* Licensing options for mergers and acquisitions are often found to be easier* Mergers and acquisitions offer extensive networking advantages* Brand value* Bigger client base* Wide array of products and services

Terms Relating To Mergers And AcquisitionsIn this article we would elucidate in brief, some of the important terms that areused to explain the concepts of merger and acquisition.Asset StrippingWhen a company acquires another and sells it in parts expecting that the fundsgenerated would match the costs pf acquisition, it is known as asset stripping.Black KnightThe company that makes a hostile takeover is known as the Black Knight.Dawn RaidThis is a process of buying shares of the target company with the expectation thatthe market prices may fall till the acquisition is completed.Demerger or Spin off

During the process of corporate restructuring, a part of the company may beak upand set up as a new company and this is known as demerger. Zeneca and Argos aregood examples in this regard that split from ICI and American Tobaccorespectively.Carve out�This is a case of selling a small portion of the company as an Initial PublicOffering.

GreenmailGreenmail is a situation where the target company purchases back its own sharesfrom the bidding company at a higher price.

Grey KnightA grey knight is a company that takes over another company and its intentions arenot clear.

Hostile TakeoverHostile bids occur when acquisitions take place without the consent of thedirectors of the target company. This confrontation on the part of the directorsof the target company may be short lived and the hostile takeover may end up beingfriendly. Most American\n and British companies like the phenomenon of hostiletakeovers while there is some more which do not like such unfriendly takeovers.

Macaroni DefenseMacaroni Defense is a strategy that is taken up to prevent any hostile takeovers.The issue of bonds that can be redeemed at a higher price if the company is takenover does this.Management Buy InWhen a company is purchased and the investors bring in their managers to control

the company, it is known as management buyout.

Management Buy OutIn a management buy out, the managers of a company purchases it with support fromventure capitalists.Poison Pill Or Suicide Pill DefenseThis is a strategy that is taken by the target company to make itself lessappealing for a hostile takeover. The bondholders are given the right to redeemtheir bonds at a premium should a takeover occur.