Process of Mergers in India

A merger or acquisition is a combination of two companies where one corporation is completely absorbed by another corporation. The less important company loses its identity and becomes part of the more important corporation, which retains its identity. The leading corporation survives & takes over all rights, liabilities & privileges of the other.

Mergers and acquisitions are common these days as this is the way one can grow at faster pace. Although merger is a complex process and one need to study the business future before investing. Before going for any merger and acquisition, both the companies need to consider a few points and also need to go through some distinct steps. The merger and acquisition process is also a big point of concern for the companies involved in the deal, as the process could be full of risk and uncertainty. A perfect process can make the deal more clear & precise.

Mergers and Acquisition Process

Valuation of Company:

Present market value of the organization is very important as well as its estimated future financial performance. The demand of the product or service in which company is & its future growth potentials are reviewed and a financial proposal is been made. The information about organization, its history, products/services, facilities and ownerships are also considered.

Reason for Selling & Buying a Company:

A profit making company is rarely souled.3, If at all it is then the seller usually gets extreme high market price. The reason can be land, continuing business involvement, debt resolution, labour issues etc. as well as tax issues and business issues are considered before making merger decision. The form of compensation such as cash, bonds, inventory, brand value, future earnings share & reselling opportunities etc. also plays a major role here in determining the merger process.

Finding Right Buyer:

The company ones makes the decision to sell its organisation than the right buyer is required to buy it & process involves marketing of the business entity. While doing the marketing, selling price is never divulged to the potential buyers. Genuine buyers are identified & briefed about the opportunity.

Agreement Stage:

Seller agrees on the disseminated materials in advance. Buyer also needs to sign a Nondisclosure agreement. Seller also presents Memorandum and Profiles. Assessment and screening of buyers are done. Final letter of intent is developed after a phase of negotiation.

Letter of Intent

Both the parties take final call on their selling & buying decisions and present a agreement also call as letter of Intent to their respective attorneys. All details about handing over of company is mentioned in it, like price, liability, taxes liabilities, inventory in hand & complete details about a company's financial debts & recovery.

Investigation by Buyer:

After getting through the process of letter of intent, buyer then investigates the financial report given by the seller. Buyer does this by involving experienced financial consultants. And after thorough inspection comes the next process.

Final Purchase Agreement:

Final purchase agreement are made with signature & attestation from both the parties, including the date of handover & any other special conditions by either parties.

This process is requires an expert financial consultant, who can analyze profitable companies & can make win-win situation for both. Avendus is one such company providing consultancy for mergers & acquisitions. They have good contacts in market & can find ideal buyer as well as seller.