Difference between Mergers, Acquisitions and Takeovers, Management Buyouts

Difference between Mergers, Acquisitions, Takeover, Management Buyouts  

Now days very often we all heard these terms and we all are aware that these terms are used interchangeably, but do us know that there is minuscule difference between all these terms.  here I am explaining the difference. 

Mergers

Merger is “The combining of two or more entities into one, through a purchase acquisition or a pooling of interests”

As per "ICAI" “Merger means unification of two entities into one, acquisition involves one entity buying out another and absorbing the same. In India, in legal sense merger is known as ‘Amalgamation”

A merger results in the legal dissolution of one of the companies, and a consolidation dissolves both of the parties and creates a new one, into which the previous entities are merged.

And the Encyclopedia Britannica explains it in broad terms it says that merger, corporate combination of two or more independent business corporations into a single enterprise, A merger may be accomplished by one firm purchasing the other’s assets with cash or its securities or by purchasing the other’s shares or stock or by issuing its stock to the other firm’s stockholders in exchange for their shares in the acquired firm (thus acquiring the other company’s assets and liabilities)

Mergers are of two different types: Horizontal and Vertical 

Horizontal

 If both firms produce the same commodity or service for the same market; market-extensional, if the merged firms produce the same commodity or service for different markets;

Vertical

 If a firm acquires either a supplier or a customer. If the merged business is not related to that of the acquiring firm, the new corporation is called a conglomerate.

And there is a new type of merger is known “Reverse merger” where, in order to avail benefit of carry forward of losses which are available according to tax law only to the company which had incurred them, the profit making company is merged with companies

having accumulated losses. This type of merger seen in to the merger of kingfisher airlines and air Deccan.

Acquisition and Takeover

Acquiring control of a corporation, called a target, by stock purchase or exchange, either hostile or friendly also called takeover.

As per ICAI “An Acquisition is when both the acquiring and acquired companies are still left standing as separate entities at the end of the transaction.

Management Buyout

A management buy-out (MBO) is an acquisition in which the acquiring group is led by the company's own management and executives in other words we can say that going private through management’s purchase of all outstanding shares.




The amalgamations can be by merger of companies within the provisions of the Companies Act, and acquisition through takeovers. While takeovers are regulated by SEBI.M & A deals fall under the Companies Act. In cross border transactions, international tax considerations also arise. Management buyouts are also taken care by SEBI.

Merger Takeover’s 

Finalised bids

The Vedanta – Cairn acquisition

The Reliance – BP deal

Essar group exit from Vodafone

Fortis Healthcare merger with its international subsidiary

I gate with patni computers ( Now  known as i gate patni)

GVK Power acquires Hancock coal Australia

Essar Energy’s Stanlow Refinery Deal with Royal Dutch Shell

Aditya Birla Group to acquire Columbian Chemicals

Mahindra & Mahindra acquires Ssangyong

Adani Enterprises takes over Abbot Point Coal

In pipeline Bids

Aditya Birla group plans to acquire fertiliser plant in US:

BookMyShow.com acquires Chennai based Ticketgreen.com

In India management buyout was first reported in year 2004 and then so on. But in current there is no reported buyout as such.

Courtesy:

ICAI material

Encyclopedia Britannica

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