Business restricting components: 1.

Finance
2. HR
1. Merger 3. Marketing
2. Acquisition 4. I.T. infrastructure
3. Joint venture 5. Production
4. Dis investment a. Material planning
5. De merger b. Inventory
6. Francisee c. Production
7. Alliance 6. Commercials
8. Networking 7. R&D

Facts finding at the time of

merger and acquisition:

Definition of fair value - The amount at which assets are exchanged between a
non eligible willing buyer and non eligible willing seller

Pooling method - All assets and liabilities taken over by transferee company at
the same amount

Purchasing method

All assets and liabilities of transfer company recorded at same price

Or
At high price then the difference between the value is treated as goodwill
Or
At low price then the difference between the value treated as amalgamation
reserve

Partial Selloff
A partial selloff, also called slump sale, involves the sale of a business unit or plant
of one firm to another. It is the mirror image of a purchase of a business unit or
plant. From the seller’s perspective, it is a form of contraction; from the buyer’s
point of view it is a form of expansion. For example, when Coromandal Fertilisers
Limited sold its cement division to India Cement Limited, the size of Coromandal
Fertilisers contracted whereas the size of India Cement Limited expanded.

Due diligence
"Due diligence" is a term used for a number of concepts involving either an investigation of a business or
person prior to signing a contract, or an act with a certainstandard of care. It can be a legal obligation, but
the term will more commonly apply to voluntary investigations. A common example of due diligence in
various industries is the process through which a potential acquirer evaluates a target company or its
assets for acquisition

The Due Diligence process (framework) can be divided into nine distinct areas:[3]

1.

2. Compatibility audit.

3. Financial audit.
 4. Macro-environment audit.

5. Legal/environmental audit.

6. Marketing audit.

7. Production audit.

8. Management audit.

9. Information systems audit.

10. Reconciliation audit.

Leveraged Buyout
A leveraged buyout is financing technique where debt is used to purchase the
stock of a corporation.

Elements of a typical leverage buyout operation

Stage 1- Raising cash required for the buyout and devising the management in the
entire system.10% cash is put top level management (exchange for stock option )
60% Borrowing against the company’s assets through secured loans. Balance is
obtained by pvt. placement or public offer as bonds etc..

Stage 2 - Transaction involves making the firm pvt. The company to be made pvt. is
in either a stock purchase format where all the shares of the company are bought
or in an asset purchase format where some of the part of business is sold off by the
new management to reduce the debt.

Stage 3 - Management tries to increase the profit and cash flow by cutting operating
costs and changing marketing strategies.

Stage 4 - Investor group may again make the company public. The process called
reverse leverage buy out.

About Horizontal Mergers

Horizontal mergers are those mergers where the companies manufacturing similar kinds of commodities
or running similar type of businesses merge with each other. The principal objective behind this type of
mergers is to achieve economies of scale in the production procedure through carrying off duplication of
installations, services and functions, widening the line of products, decrease in working capital and fixed
assets investment, getting rid of competition, minimizing the advertising expenses, enhancing the market
capability and to get more dominance on the market.

Nevertheless, the horizontal mergers do not have the capacity to ensure the market about the product
and steady or uninterrupted raw material supply. Horizontal mergers can sometimes result in monopoly
and absorption of economic power in the hands of a small number of commercial entities.

According to strategic management and microeconomics, the expression horizontal merger delineates a
form of proprietorship and control. It is a plan, which is utilized by a corporation or commercial enterprise
for marketing a form of commodity or service in a large number of markets. In the context of marketing,
horizontal merger is more prevalent in comparison to horizontal merger in the context of production or
manufacturing.