Mergers and Acquisitions Services: What Every Business Needs to Know

Mergers and Acquisitions (M&A) often can make the break for a lot of companies, whether they are looking to expand, diversify, or just simply find some new opportunities. But let’s be honest—M&A isn’t as simple as it might sound. At NBFC Advisory, we have walked numerous companies through this process relieving them knowing that there is a time and place for every decision.

This blog will tell about the M&A phenomenon, the importance of proper services in this regard, and finally, how and why these transactions are valuable for both large corporations and small businesses. So, let’s dive in!

In this process there are so many things such as due diligence as well as valuation and regulatory compliance. But, there is hope.

A well-versed counsellor who knows the ins and outs of such undertakings is an instrument for triumph. To this end, timeliness, accuracy and focus on the key aspects of each phase of the transaction is ensured.

All the M&A process management and elements are important but what matters the most is who is tracking those principles. Why defining and understanding a strategic need in case of M&A is never too easy.

What Is the Meaning of Mergers and Acquisitions?

Simply put, Mergers and Acquisitions deal with the coming together of businesses. It is, however, possible for this to take several forms:

• Merger: Imagine two entities coming together and creating one new company out of the two existing companies. It’s not about supremacy where one side wins—both sides have their strengths in their contribution to the merger and bear both responsibility and benefits.
• Acquisition: In this case, there are companies involved, but one firm wants to control the other. The controlling company gets the assets, facilities and sometimes the trade organization of that company.In acquisitions, there are specific roles:

• Buyer: Also “Acquirer”, the company which takes control of the target entity.
• Seller: That entity or a combination of entities being acquired or purchased, often trunk or parent company with subsidiaries.
• Target: The organization which is subject of acquisition or takeover, may be a subsidiary unit or main company.

In mergers, however, there are no buyers or sellers as there are two equal merging entities. M & A can occur within one country or with companies of other countries.

The cross-border M&A activities are more difficult compared to the domestic M&A in that they tackle different parties like regulatory and advisory units.

Mergers and Acquisitions Services Overview

Over the years, the Indian M&A market has undergone numerous transformations and grown in response to the global – India included within that global space – economy.

An overview of how events have progressed over the years lets us give a more comprehensive definition of the growing M&A industry in India.

• The Boom in Investors: Before the turn of the century, Mergers and Acquisition relations can be traced back to the tendency of investors to expand their horizon across boundaries. As a result of this and many other such factors, companies began to actively invest in India.
• Boom July 2015 to December 2019: A Mergers and Acquisitions boom was witnessed in India during these years especially after the Indian Parliament passed the Insolvency and Bankruptcy Code (IBC) upon which things came into focus on distressed assets giving rise to such strategic acquisitions.
• Global Examples: Stepping back from India, let us take an example of Walmart winding up with Flipcart. This is a perfect example of a company using tools of M&A not just for expansion within the primary market but also for thinking ahead of competition. Through this move, Walmart was able to reinforce its presence in the fast-growing e-commerce industry of India.
• The Ongoing Period: The volume of M&A activity declined in 2020, as external factors caused various disruptions. However, this remains an advantage for companies that are dynamic and wish to change in other dimensions.

Off late Mergers and Acquisitions advisory services have become crucial in assisting businesses in this transformation, ensuring that burying heads in the sand is not the option with respect to actual market and regulatory conditions. With the help of able counsel, success is more than just closing a particular transaction.

Types of Mergers

Mergers and acquisitions may be defined and grouped in many different ways depending on their applicability in business and void of relationships:

• Vertical Merger: this refers to a situation where firms that are at different levels in the production process combine. A clear example is when a soft drink producer merges its operations with a company that produces soda bottles and cans.
• Horizontal Merger: When a merger occurs between two or more firms within the same industry to increase market share, for instance, two law offices merging into one.
• Conglomerate Merger: When companies in unrelated industries come together, for example a vehicle manufacturing company and a computer programming company.
• Concentric Merger: In this case, the companies are involved in the production of different goods and services but concern the same clients e.g. a smartphone maker merging with its touch screen manufacturer.
• Co-Generic Merger: These types of mergers, while horizontal in nature, do not involve the companies that are competitors.
• Cash Merger: When a merger takes place, the shareholders of the company receive cash as part of the payment.
• Reverse Merger: This enables a private firm to enter the capital market in a very short time by merging with an already listed entity.

Types of Acquisitions

Acquisitions may also come in various forms, depending on the objective.

• Share Buyout: The purchaser buys the shares of the target company thus obtaining control over its assets and employees and use its intellectual property.
• Assets Acquisition: The buyer purchases certain assets of the target company, which gives it the advantage of discretion in selecting the areas it needs.

Every form of acquisition has its advantages and therefore it is important to pick the one that suits the objectives of your company.

Objectives of Mergers and Acquisitions Services

So, why do organizations seek M and A? This is what propels them:

• Development and Growth: M and A facilitates the entry into new markets within a short time frame without the inconveniences of starting from the scratch.
• Reduction in Costs: Operations can be combined and so some of the companies can achieve reduced cost and enhanced efficiency as a result of economies of scale.
• Easier Due Diligence: Requesting for services from any external M&A consultant, businesses will not be required to hire a due diligence team, thus cutting on project expenses.
• Professional Mobilization: Transaction advisory eliminates all the hurdles related to the varying aspects of the transaction such as legal services and business valuations.

At NBFC Advisory, we concentrate on ensuring that every M&A transaction is done in respect of your overall business plan and in a way that enhances value.

Laws Regulating Mergers and Acquisitions in India

In India, mergers and acquisitions fall within the ambit of a few important laws.

• Companies Act, 2013: This law deals with all issues relating to merger and acquisition, emphasizing the aspect of synergy and scale.
• SEBI Takeover Regulations, 2011: When it concerns publicly traded companies, the SEBI guidelines are applied to maintain the principle of equality while effecting the takeover of a target company.
• Income Tax Act, 1961: This Act deals with the tax repercussions for sale of an asset, and capital gain focusing on tax ability of the transaction.
• Competition Act, 2002: This Act addresses the issue of whether the merger or acquisition would adversely affect competition in the relevant market.
• FEMA: This Act comes into play when the transaction involves cross-border deals and deals with the external positioning of the currency.

While it can be a daunting activity considering all these laws, NBFC Advisory makes it easier in ensuring that you do not step out of the legal provisions at any level.

Stages of Mergers and Acquisition Processes

The M&A process generally consists of the following significant stages:

• Term Sheet Issuance: The primary purpose of the term sheet is to set certain guidelines regarding the transaction in question so as to guide the parties to the transaction properly.
• Engaging Third-party Professionals: All the necessary processes complete with an appropriate legal background and advisors.
• Price Determination: The price one is willing to pay, price components, how the payment will be made – cash or shares.
• Employee Contract Negotiations: Reconciling human resource policies and service contracts with the new organization.
• Clarifying Warranties and Guarantees: Understanding the duties both of the parties, which include but are not limited to, the liabilities.
• Exclusivity Clauses: A clause that prohibits the seller from soliciting bids from other interested parties during the negotiations.
• Maintaining Confidentiality: Confidentiality agreements are put in place to cover the information shared during the course of doing business together.
• Due Diligence: This incorporates an expansive assessment of the target company’s financials, operations, and risks involved prior to a given buyer making a decision.
• Post-Merger Integration: The integration of people and processes to ensure effective operation after the deal.

Documents Necessary for the Merger and Acquisition Services

There are several specific documents that you will have to produce in order to facilitate M&A transaction:

• Incorporation Documents: Memorandum and Articles of Association.
• Term Sheet: Document explaining non-binding conditions of the deal.
• Process Letter: Document explaining the procedure and the period involved.
• Due Diligence Questionnaire: Document requesting for relevant information.
• Employment Contracts: Documents having the necessary clauses for the transition of employees.
• Non-Disclosure Agreements (NDAs): Agreements that in cordon the access of confidential information.

These documents outline the stages of a well-organized merger and acquisition undertaking.

Mergers and Acquisitions Services to Make Progress in Your Business

The Growth potential that comes with Mergers and Acquisitions is immense. However, it can be quite a process and that is why it is also important to have proper assistance in place.

At NBFC Advisory, our experience guarantees that every M&A deal is not about a mere closing of deals but building satisfactory relationships that will yield positive outcomes long after the deal.

If it’s a case of looking at buying a company for its potential markets or merging in order to improve operations, we are with you along the way.