Questions about Mergers and Acquisitions
M&A is an agreement where one or more company or business firm’s ownership are combined in order to elevate the firm’s competitive position in the market. A merger is a legal combination of two firms or entities, where as an acquisition is when a firm or entity takes ownership of another entity’s assets and liabilities.
M&A focuses on expanding the business. A well formed M&A plan can be a successful way of setting up a business and contribute to the growth. By creating organisations, the firm will perform much efficiently. Furthermore, there’s an increase in revenue. It provides clients with strong deals and helps maximise value from deal to deal
The strategy used in M&A provides value to both the acquired and the acquiring firm. It can generate more value for the shareholders of the company by expanding the field of operations, . It also provides strategies and objectives which enhances the capabilities of the employees or the team and builds confidence in them.
To associate all Indian entrepreneurs under this company and provide functional insights about M&A and lead you to achieve the respective goals. Clients will be guided from the first step of planning till the last step of execution. building skills and imparting knowledge about M&A to our clients so that they can work more efficiently.
The Indian M&A landscape is no different from any other country. M&A’s have become an integral part of the Indian economy and daily headlines. Based on macroeconomic indicators, India is on a growth trajectory with the M&A trend. The catalysts for M&A could be varied but almost invariably, inorganic growth is on top of the agenda.
Developing a good acquisition strategy revolves around the acquirer having a clear idea of what they expect to gain from making the acquisition – what their business purpose is for acquiring the target company (e.g., expand product lines or gain access to new markets).
To set the M&A search criteria, we have to determine the key criteria for identifying potential target companies (e.g., profit margins, geographic location, or customer base).
One can search potential acquisition targets using their identified search criteria to look for and then evaluate potential target companies.
A blueprint to plan and execute the respective ideas of the client as per their need. It can be customised and changed to get the exact vision of the client and plan it accordingly. Clients may face issues at some point during a transaction, hence our company can guide and provide solutions at any given point of time.
At first, the acquirer has to contact one or more companies that meet its search criteria and if they appear to offer good value. The purpose of initial conversations is to get more information and see how consenting the target company is to a merger or acquisition.
Assuming initial contact and conversations go well, the acquirer asks the target company to provide substantial and supporting information (financials, operational and administrative details etc.) that will enable the acquirer to further evaluate the target, both as a business and as a suitable acquisition target.
After producing valuation details of the company in the discussion, sufficient supporting information needs to be shared to enable it to construct a reasonable offer. Once the initial offer has been presented, the two companies can negotiate further not only on Financials but also for management, human resources, assets, liabilities, customers, operational, administrative and other functions as well.
Due diligence is an exhaustive process that begins when the offer has been accepted; due diligence aims to confirm or correct the acquirer’s assessment of the value of the target company by conducting a detailed examination and analysis of every aspect of the target company’s operations – its financial metrics, assets and liabilities, customers, human resources, etc.
After the due diligence is completed with no major problems or concerns arising, the next step forward is executing a final contract for sale, the parties make a final decision on the type of purchase agreement, whether it is to be an asset purchase or share purchase.
The acquirer will of course, have explored financing options for the deal earlier, but the details of financing typically come together after the purchase and sale agreement has been signed.
Closing and integration of the acquisition – The acquisition deal closes. Management teams of Target and Acquirer work together on the process of merging the two firms.
In M&A deals, there are typically two types of acquirers: one is Strategic and the other is Financial. Strategic acquirers are other companies, often direct competitors or companies operating in adjacent industries, such that the target company would fit in nicely with the acquirer’s core business.
Financial buyers are institutional buyers such as private equity firms that are looking to own, but not directly operate the acquisition target. Financial buyers will often use leverage to finance the acquisition, performing a LEVERAGED BUYOUT (LBO).
With asset acquisitions, parties will have two key structuring alternatives. They may transfer either an entire running business or undertaking (also known as a ‘slump sale’) or only identified key assets (eg, material contracts and IP) while leaving other assets behind (eg, trade debts). Tax will also be a key driver for this choice of structure.
Owing to Indian exchange control restrictions on direct ownership by non-residents of certain categories of assets (eg, real estate), direct assets acquisitions by non-resident buyers are generally difficult to implement.
Unless there are concerns about historic liabilities or a carve-out transaction is contemplated, buyers will be expected to undertake a share acquisition.
Acquisition structures involving convertible securities or shares with superior voting rights, in publicly listed companies are also permitted, subject to conditions. Acquisition finance in India
M&A advisors provide a variety of services to buyers and sellers. These services can include:
- Valuing the business
- Preparing the pitch book or confidential information memorandum
- Identifying and approaching prospective buyers or sellers
- Controlling access to a seller’s proprietary information and data
- Arranging, moderating, and leading discussions between buyers and sellers
- Negotiating purchase and sale agreements (and other deal-related agreements)
- Performing or assisting with due diligence
- Resolving transaction issues that inevitably arise throughout the process.
It stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. EBITDA is a very common acronym in corporate finance. EBITDA is a measure of the cash generated from the company’s core business; it is an illustration of a company’s ability to generate cash flow for its owners. EBITDA = Net Income – Interest Income + Interest Expense + Taxes + Depreciation + Amortization.
It is EBITDA adjusted for unusual or nonrecurring expenses that are included in the income statement. Adjusted EBITDA is often referred to as normalized EBITDA. Examples of the latter include country club dues, automobile expenses, and premiums for key man life insurance.
Some level of risk is unavoidable when it comes to business, however, you want to be justifying it as much as possible and ensuring that you have a comprehensive understanding of what you are getting yourself into – particularly when it comes to mergers and acquisitions. So, it is highly recommended that you must use Advisory services. In order to make the most of your merger or acquisition, you need to be able to recognize and control risk as efficiently as possible in order to realize the full potential of the new organization. Risk advisory services will also aid you in maximizing your value creation while protecting the interests of the various stakeholders.
If you are in view of a merger, acquisition or joint venture, you want to make sure you are doing everything you can to set your organization up for success. To ensure that you are well-positioned to achieve all your key strategic objectives, reach out to our dedicated Mergers and Acquisitions (M&A) strategists today to learn how we can create a custom-made solution for you.