Managers are concerned with improving operations of the company managing the affairsof the company effectively for

all round gains and growth of the company which will provide them better deals in raising their status, perks and fringe benefits. Mergers whereall these things are the guaranteed outcome get support from managers. At the same time,where managers have fear of displacement at the hands of new management inamalgamated company and also resultant depreciation from the merger then support fromthem becomes difficult. (3) Promoters gains Mergers do offer to company promoters the advantage of increasing the size of their company and the financial structure and strength. They can convert a closely-held and private limited company into a public company without contributing much wealth andwithout losing control. In the above example of HCL, only Hindustan Reprographics Ltd.was public company whereas the other three merging entities were private limitedcompanies. The promoters of Hindustan Computers were allotted shares worth Rs.1.27crores on merger in a new company called HCL equity of Rs.1.48 crores shares. This gainwas against their original investment of meagre Rs.40 lakhs in Hindustan Computers andthey did not invest any money extra in getting shares worth Rs.1.48 crores.Another recent example is of Jaiprakash Industries which was formed out of merger of Jaiprakash Associates and Jay Pee Rewa Cement. Jaiprakash Associates was a closelyheldcompany. The merger enabled the promoters to have stake at 60% (Rs.39.85 crores) inJaiprakash Industries Ltd. against an investment of Rs.4.5 crore in Jaiprakash Associates.Thus, merger invariably results into monetary gains for the promoters and their associatesin the surviving company. Impact of mergers on general public Impact of mergers on general public could be viewed as aspect of benefits and costs to:(1)Consumers of the product of services;(2)Workers of the companies under combination;(3)General public affected in general having not been user or consumer of theworker in the companies under merger plan. (1) Consumers The economic gains realised from mergers (i.e. enhanced economies and diversificationleading to lower costs and better quality products) are passed on to consumers in the formof lower prices and better quality of the product which directly raise their standard of living and quality of life. The balance of benefits in favour of consumers will depend uponthe fact whether or not the mergers increase or decrease competitive economic and- 13 -

productive activity which directly affect the degree of welfare of the consumers throughchanges in price levels, quality of products, after sales service, etc.

(2)Workers community The benefit or loss from mergers to worker community will depend upon the level of satisfaction of their demands, merger of companies provides in the form of employment,increased wages, environmental improvements, better living conditions and amenities. Themerger or acquisition of a company by a conglomerate or other acquiring company mayhave the effect on both the sides of increasing the welfare in the form of enhanced qualityof life or decrease the welfare by creating unemployment through retrenchment andresultant lack of purchasing power and other miseries of life. Two sides of the impact asdiscussed by the researchers and academicians are: first, merges with cash payment toshareholders provide opportunities for them to invest this money in other companies whichwill generate further employment and growth to the uplift of the economy in general.Secondly, any restrictions placed on such mergers will decrease the growth and investmentactivity with corresponding decrease in employment. Both workers and communities willsuffer on lessening job opportunities, preventing the distribution of benefits resulting fromdiversification of production activity. Diversification fosters and provides opportunities for advancement in career, training in new skills amount may other alike benefits. (3)General Public Mergers result into centralised concentration of power in small number of corporateleaders which results in the concentration of an enormous aggregation of economic power in their hands. Economic power is to be understood in specific limited sense as the abilityto control prices and industries output as monopolists. Such monopolists affect social and political environment to tilt everything in their favour to maintain their power and expandtheir business empire. These advances result into deceleration of level of welfare and well being of the general public which are subjected to economic exploitation. But in a freeeconomy a monopolist does not stay for a longer period as other companies enter into thefield to reap the benefits of high prices set in by the monopolist. This enforces competitionin the market as consumers are free to substitute the alternative products. Therefore, it isdifficult to generalise that mergers affect the welfare of general public adversely or favourably. Every, merger of two or more companies has to be viewed from differentangles in the business practices which protects the interest of the shareholders in themerging company and also serves the national purpose to add to the welfare of theemployees, consumers and does not create hindrance in administration of the Government policies. Choice for alternative modes of acquisition The foregoing discussion reveals that the various terms used in business combinationscarry generally synonymous connotations and can be used interchangeably as has beenindicated while explaining the meanings of these terms. All the different terms carry onesingle meaning of merger but each term cannot be given equal treatment in the- 14 -

discussion because law has created a dividing line between take-over and acquisitions byway of merger, amalgamation or reconstruction. Particularly the takeover Regulations for substantial acquisition of shares and takeovers known as SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1977 vide section 3 excludes any attempt of merger done by way of any one more of the following modes:(a)by allotment in pursuance of an application made under a public issue;(b)allotment pursuant to an application made by the shareholders for right issue;(c)preferential allotment made in pursuance of a resolution passed under section81(1A) of the Companies Act, 1956;(d)allotment of the underwriters pursuant to underwriters agreements;(e)inter-se-transfer of shares amongst group companies, relatives (within the meaningof section 6 of the Companies Act, 1956, Indian promoters and foreigncollaborators who are shareholders/promoters;(f)acquisition of shares in the ordinary course of business, by registered stock brokers, public financial institutions and banks on own account or as pledges;(g)acquisition of shares by way of transmission on succession or inheritance;(h)acquisition of shares by government companies and statutory corporations;(i)transfer of shares from state level financial institutions to copromoters in pursuance to agreements between them;(j)acquisition of shares in pursuance to rehabilitation schemes under Sick IndustrialCompanies (Special Provisions) Act, 1985 or schemes of arrangements, mergers,amalgamation, demerger, etc. under the Companies Act, 1956 or any law or regulations, Indian or foreign;(k)acquisition of shares of company whose shares are not listed on any stock exchange. However, this exemption is not available if the said acquisition resultsinto control of a listed company;(l)such other cases as may be exempted from the applicability of Chapter III of SEBIregulations by SEBI.The basic logic behind substantial disclosure of takeover of a company through acquisitionof shares is that the common investors and shareholders should be made aware of thelarger financial stake in the company of the person who is acquiring such companysshares.- 15 The main objective of these Regulations is to provide greater transparency in theacquisition of shares and the takeovers of companies through a system of disclosure of information. Consideration of Merger and Takeover Merger and takeovers are two different approaches to business combinations. Mergers are pursued under the Companies Act, 1956 vide sections 391/394 thereof or may beenvisaged under the provisions of Income-tax Act, 1961 or arranged through BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985 whereas takeovers fall solelyunder the regulatory frame work of the SEBI (Substantial Acquisition of Shares &Takeovers) Regulations, 1997