SMU MBA ASSIGNMENTS

Answer  :  The defense against the acquisition by taking over the shares listed on any stock exchanges. It explains the concept and various forms of takeover device prevailing in the corporate world and the technique of corporate raid as well. You will also understand about the various defensive mechanisms that can be adopted to face the takeover raid, which in turn focuses on corporate strategies to avoid takeover raid and the legal measures against takeovers in India.

Takeover implies acquisition of controlling interest in a company by another company by taking over of the shares listed on any stock exchange. It does not lead to the dissolution of the company whose shares are being or have been acquired. It simply means a change of controlling interest in a company through the acquisition of its shares by another group. The acquisition transactions in such shares are subject to the conditions of listing agreement. When a profit earning company takes over a financially sick company to bail it out, it is known as ‘bail out takeover’. Such takeovers are in pursuance of a scheme of rehabilitation approved by public financial institutions. Corporate takeovers in India are governed by the listing agreement with stock exchanges and the SEBI Substantial Acquisition of Shares and Takeover (SEBI Code) Code. The raid, bids and defences are the outcome of takeover. Corporate can stall such takeover through strategic defensive steps.

Mergers and takeovers are motivated and negotiated under the dominance of hostility and friendliness pressure and influences and are accordingly classified as friendly mergers and hostile mergers. The raids, bids and defences are the outcome of human moods. Corporate wars and offensive postures can be avoided and can be stalled through defensive steps.

There are two types of takeover bids as discussed below:

Friendly Takeover

Mergers and takeovers could be through negotiations with the consent of target company’s executives or Board of Directors. Such mergers are called friendly mergers. These mergers are negotiated mergers and if the parties do not reach an agreement during negotiations, the proposal stands terminated.

Hostile takeover

An acquirer company may not offer the target company the proposal to acquire its undertaking, but silently and unilaterally may pursue efforts to gain controlling interest in it against the wishes of the management. Such acts of acquirer are known as “raid” or “Take over raids”. These “raids” when organized in a systematic way are called “Takeover bids”. Both the raids and bids, lead to merger or takeover. A takeover is hostile when it is in the form of “raid”. The forces of competition and product provide strength and weakness to the rivals in the industry, trade or commerce.

Takeover bid

A takeover bid gives impression of the intention reflected in the action of acquiring shares of a company to gain control of its affairs. A bid has been distinguished as below:

Partial Bids

Partial bid is understood when a bid made for acquiring part of the shares of a class of capital where the offer or intends to obtain effective control of the offered through voting powers. Such bids are made for equity shares carrying voting rights. Partial bid is also understood when the offer or bids all the issued non-voting shares in a company. Regulation 12 of SEBI Takeover Regulations, 1997, it is necessary to make public announcement in accordance with the Regulations.

Competitive Bid

This can be made by any person within 21 days of public announcement of the offer made by the acquirer. Such bid shall be made through public announcement in pursuance of provisions of regulation 25 of the SEBI take over regulation 1997. Such competitive bid shall be for the equal number of shares or more for which first offer was m

Q.2 Discuss the factors in post-merger integration process.

Q.3 What is the basis for valuation of a target company?

 

 

Q.4 What are the legal compliance issues a company has to adhere to in case of a merger. Explain through an example.

 

 

Q.5 Choose any firm of your choice and identify suitable acquisition opportunity and give reasons for the same.

 

 

Q.6 Take a cross border acquisition by an Indian company and critically evaluate.