DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : MAJOR K. SIVA KUMAR
Designation : HEAD OF SECTION
Branch : Diploma in Commercial and
Computer Practice
Institute : Government Polytechnic, Srikakulam
Year/Semester : V Semester
Subject : Banking
Subject Code : CCP504(B)
Topic : Lead Banks and Merchant Banking
Duration : 50 Mts
Sub Topic : Functions of Merchant Bankers
Teaching aids : PPT and Animations
CCP504 (B) .85 1
Services of Merchant Banker :

Objectives :
On completion of this period, you would be able to:
 Understand the function of mergers and
acquisitions by merchant bankers.
 Understand the function of arrangement for
fixed deposits.
 Understand the other specialist activities of
merchant bankers.

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Recap :

 In the previous class, you have learnt some of the

important functions of merchant bankers. They are:
 Portfolio means total holdings securities belonging to
any person.
 It is also known as investment management.

CCP504 (B) .85 3

Recap :

 Venture capital financing is a long-term financing

which involves high risk.
 Merchant bankers are intermediaries between
investors looking for high return and entrepreneurs
who need institutional capital as they are not yet
ready to go for public issue.

CCP504 (B) .85 4

Known to Unknown :

 What is a merger?
 Have you come across the word merger or
takeover in newspapers?
 Can you say any one recent takeover or merger
 Why firms merge with each other

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Mergers and Amalgamations :

 Mergers, amalgamations, acquisitions and

takeovers are emerging as important financial
services of merchant bankers.
 Appointment of category I merchant banker is
necessary for the acquirer before making any
public announcement of offer.

CCP504 (B) .85 6

Amalgamation :

 An amalgamation is an arrangement in which

the assets/liabilities of two or more firms become
vested in another firm.

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Functions of Merchant Banker :

The following are the functions of merchant

banker in mergers and acquisitions:-
 He has to see that the acquirer is able to
implement the offer.
 The provision relating to escrow account has
been made.
 Firm arrangement for funds and money for
payment through verifiable means to fulfill the
obligations under the offer are in place.
CCP504 (B) .85 8
Functions of Merchant Banker :

 The public announcement of offer is made in terms

of code/regulations.
 He should furnish to the SEBI a due diligence
certificate which should accompany draft letter of
offer.

CCP504 (B) .85 9

Functions of Merchant Banker :

 Upon fulfilment of all obligations by the acquirer, the

merchant banker would cause the bank with whom
the escrow amount has been deposited to release
the balance amount to the acquirers.
 He should send a final report to the SEBI within 45
days from the date of closure of the offer.

CCP504 (B) .85 10

Arrangement for Fixed Deposits :

 Merchant bankers help companies to raise finance

by way of fixed deposits from the public.
 For this purpose they provide the required
guidance.
 They act as brokers for mobilization of public
deposits.

CCP504 (B) .85 11

Other Specialist Activities of
Merchant Bankers :
 They provide the services to Non-resident Indians
for suitable investment opportunities in India.
 They provide assistance in negotiations of foreign
collaboration.
 They help in arranging technology and finance for
entrepreneurs.

CCP504 (B) .85 12

Summary :

 Mergers, amalgamations, acquisitions and

takeovers are emerging as important financial
services of merchant bankers.
 Merchant bankers help companies to raise finance
by way of fixed deposits from the public.
 They guide the entrepreneurs in mobilization of
funds from public by way of deposits.

CCP504 (B) .85 13

Summary (Contd..) :
 They provide services to NRIs for suitable
investment opportunity in India.
 They provide assistance in negotiations of foreign
collaboration.
 They help in arranging technology and finance for
entrepreneurs.

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Quiz :

1. Merger means
a) A combination of two or more firms in
which only one firm would survive and
the other would cease to exit
b) Two governments exist together
c) Both A & B

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Quiz :

1. An arrangement in which the assets /

liabilities of two or more firms become vested
in another firm is called
a) Merger
b) Acquisition
c) Amalgamation
d) Both a & b

CCP504 (B) .85 16

Quiz :

3. In how many days, the merchant banker has

to send a final report form the date of closure
of the offer
a) 30 days
b) 90 days
c) 45 days
d) None

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Frequently Asked Questions :

1. Write about the function of mergers and

amalgamations by merchant bankers ?

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Assignment :

1. Collect data from any News Paper about the

recent merger or acquisition.

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