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Amalgamation as per AS-14 and IFS.

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Amalgamation refers to the process of combining two or more companies into a
single entity. AS-14 and IFRS 3 provide guidelines for accounting for amalgamations.

AS-14, "Accounting for Amalgamations," provides guidelines for accounting for


amalgamations in India. According to AS-14, an amalgamation can be classified as
either a merger or an acquisition. In a merger, two or more companies combine to
form a new entity, while in an acquisition, one company acquires another and the
acquired company ceases to exist as a separate entity.

AS-14 requires that the amalgamation be accounted for using the pooling of
interests method, which involves combining the assets and liabilities of the
companies at their book values. The resulting entity's shares are then issued to the
shareholders of the merged or acquired companies in proportion to their ownership.

IFRS 3, "Business Combinations," provides global standards for accounting for


amalgamations. IFRS 3 requires that the amalgamation be accounted for using the
acquisition method, which involves recording the assets and liabilities of the
acquired company at their fair values on the acquisition date. Any excess of the
consideration paid over the fair value of the net assets acquired is recognized as
goodwill.

Both AS-14 and IFRS 3 require that the amalgamation be accounted for using the
accrual basis of accounting and that the financial statements reflect the effects of
the amalgamation from the date it takes place. They also require disclosure of the
details of the amalgamation, including the method of accounting used and the
financial effects of the amalgamation on the combined entity.

Merger Aspects under Competition Law,


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In the context of competition law, a merger is the acquisition or combination of two
or more businesses into a single entity. Mergers can have significant implications for
competition in the market, and therefore, are closely scrutinized by competition
authorities.

The following are some of the aspects of mergers under competition law:

1. Anti-competitive effects: One of the primary concerns of competition


authorities is whether a merger will have anti-competitive effects on the
market. If the merged entity gains significant market power, it may be able to
raise prices, reduce output or quality, or exclude competitors. Such effects
can harm consumers and reduce overall welfare.
2. Market definition: Competition authorities first define the relevant market in
which the merger takes place. This involves identifying the products or
services that the merged entity will offer and the geographic area in which it
will operate. The relevant market definition is crucial in assessing the
potential impact of the merger on competition.
3. Market share: The market share of the merged entity is an important factor in
assessing the potential anti-competitive effects of the merger. A high market
share indicates that the merged entity may have significant market power
and can harm competition.
4. Entry barriers: Competition authorities also consider the extent to which entry
barriers exist in the relevant market. If entry barriers are high, new
competitors may find it difficult to enter the market and compete with the
merged entity.
5. Remedies: If the competition authority concludes that a merger is likely to
have anti-competitive effects, it may require the merged entity to undertake
certain remedies. Remedies can include divestitures, licensing agreements, or
behavioral commitments to reduce the anti-competitive effects of the merger.

In summary, competition law closely scrutinizes mergers to ensure that they do not
harm competition in the market. Competition authorities consider factors such as
market definition, market share, entry barriers, and potential remedies to assess the
potential impact of the merger on competition.

Merger Aspects under Competition Law, Competition Bill 2002.


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The Competition Bill of 2002 is an Indian legislation that was enacted to replace the
outdated Monopolies and Restrictive Trade Practices Act (MRTP) of 1969. The new
law seeks to promote competition and protect the interests of consumers by
preventing anti-competitive practices in the market.

One important aspect of the Competition Bill 2002 is the regulation of mergers and
acquisitions. The law prohibits any merger or acquisition that may have an adverse
effect on competition within the relevant market. The Competition Commission of
India (CCI) is responsible for ensuring that mergers and acquisitions do not result in
the abuse of market power or the creation of a monopoly.

Under the Competition Bill 2002, a merger or acquisition must be notified to the CCI
if the following criteria are met:

1. The combined assets or turnover of the parties involved in the merger exceed
certain thresholds as prescribed by the CCI.
2. The merger or acquisition results in a combined market share of 15% or more
in the relevant market.
3. The merger or acquisition results in a change in control of an enterprise or
assets of an enterprise that was previously controlled by another enterprise.

Once a merger or acquisition is notified to the CCI, the commission conducts a


detailed investigation to determine whether the merger is likely to have an adverse
effect on competition in the relevant market. The CCI considers factors such as
market concentration, barriers to entry, and the extent of competition in the market.

If the CCI determines that the merger is likely to have an adverse effect on
competition, it may either reject the merger or impose conditions to mitigate the
potential harm to competition. The conditions may include divestiture of certain
assets or businesses, or the adoption of specific business practices to promote
competition.

Overall, the Competition Bill 2002 seeks to strike a balance between promoting
competition and encouraging mergers and acquisitions that are beneficial for the
economy. By ensuring that mergers and acquisitions do not result in the abuse of
market power or the creation of monopolies, the law promotes a level playing field
for businesses and protects the interests of consumers.
SEBI regulations on Takeovers in India (Takeover Code),
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The Securities and Exchange Board of India (SEBI) regulates takeovers in India
through the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations,
2011, commonly known as the Takeover Code. The regulations apply to both public
and private companies whose securities are listed on recognized stock exchanges in
India.

The Takeover Code applies to any acquisition of shares, voting rights, or control in a
target company that results in the acquirer holding 25% or more of the shares or
voting rights in the target company. The regulations also apply to acquisitions that
do not cross the 25% threshold but result in the acquirer gaining control over the
target company.

Some key provisions of the Takeover Code are:

1. Mandatory offer: If an acquirer acquires 25% or more of the shares or voting


rights in a target company, the acquirer is required to make a mandatory offer
to acquire an additional 26% of the shares from the public shareholders of the
target company.
2. Open offer: An acquirer who acquires more than 25% but less than 75% of the
shares or voting rights in a target company can make an open offer to acquire
additional shares from the public shareholders.
3. Pricing of open offer: The price of the open offer must be at least the highest
price paid by the acquirer for the shares or voting rights in the target
company during the preceding 26 weeks.
4. Disclosure requirements: The regulations require the acquirer and the target
company to make certain disclosures to the public, the stock exchanges, and
SEBI regarding the takeover.
5. Exemptions: The Takeover Code provides for certain exemptions from the
mandatory offer requirement in certain circumstances, such as in cases of a
transfer of shares between certain categories of persons or in cases of a
change in control due to inheritance or succession.
6. Regulation of hostile takeovers: The regulations provide for regulation of
hostile takeovers, including provisions for independent directors to provide
their views on the open offer and for a neutral advisor to provide advice on
the open offer.

The SEBI Takeover Code aims to protect the interests of all stakeholders involved in
a takeover and to ensure that the process is fair and transparent. The regulations
aim to prevent any unfair or coercive practices during the takeover process and
ensure that all shareholders receive a fair price for their shares.
Role of Merchant Bankers in Mergers & Acquisition
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Merchant bankers play an important role in facilitating mergers and acquisitions
(M&A) transactions. They are financial intermediaries who assist companies in
raising capital and provide advisory services on various corporate transactions,
including M&A.

The role of merchant bankers in M&A can be broadly categorized into the following
areas:

1. Strategy and Planning: Merchant bankers help companies in formulating their


M&A strategy by identifying potential targets, evaluating their fit with the
acquirer's business, and assessing the financial and strategic benefits of the
transaction. They also advise on the structure of the transaction, the financing
options, and the timing of the transaction.
2. Due Diligence: Merchant bankers conduct due diligence on the target
company to identify any potential risks or issues that may affect the
transaction. They assess the target's financial and operational performance,
legal and regulatory compliance, and other relevant factors.
3. Valuation: Merchant bankers provide valuation services to help the acquirer
determine the fair value of the target company. They use various methods
such as discounted cash flow analysis, comparable company analysis, and
precedent transactions analysis to arrive at a fair valuation.
4. Negotiation: Merchant bankers assist in negotiating the terms of the
transaction, including the purchase price, the structure of the deal, and any
conditions or contingencies.
5. Financing: Merchant bankers help the acquirer secure financing for the
transaction, including debt and equity financing. They advise on the optimal
financing mix, the terms and conditions of the financing, and the sources of
funding.
6. Regulatory Compliance: Merchant bankers assist in complying with various
regulatory requirements related to M&A transactions, including securities
laws, competition laws, and other applicable regulations.

Overall, the role of merchant bankers in M&A transactions is critical in ensuring that
the transaction is structured in a manner that maximizes value for the acquirer and
is compliant with regulatory requirements. They provide valuable expertise and
guidance throughout the transaction, from strategy formulation to post-merger
integration.

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