M & a Assignment Defense Strategies Adopted by Companies Facing the Threat of Takeover

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Defense strategies adopted by companies facing the threat of takeover Merger Merger is defined as combination of two or more companies into a single company where one survives and the others lose their corporate existence. It is the fusion of two or more existing companies. All assets, liabilities and stock of one company stand transferred to transferee company in consideration of payment in the form of equity shares of transferee company or debentures or cash or a mix of the two or three mode
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     Defense strategies adopted by companies facing the threat of takeover     Merger Merger is defined as combination of two or more companies into a singlecompany where one survives and the others lose their corporate existence. Itis the fusion of two or more existing companies. All assets, liabilities andstock of one company stand transferred to transferee company inconsideration of payment in the form of equity shares of transferee companyor debentures or cash or a mix of the two or three modes. Takeover A ‘takeover’ is acquisition and both the terms are used interchangeably.Takeover differs from merger in approach to business combinations i.e. the process of takeover, transaction involved in takeover, determination of theshare exchange or cash price and the fulfilment of goals of combination allare different in takeovers than in mergers.  Purpose of merger and acquisition 1. Procurement of supplies ã to safeguard the source of supplies of raw material or intermediary product; ã to obtain economies of purchases in the form of discount, savings intransportation costs, overhead costs in buying department, etc.2. Revamping production facilities ã to achieve economies of scale by amalgamating production facilitiesthrough more intensive utilisation of plan and resources; ã to standardise product specifications, improvement of quality of  product, expanding market and aiming at consumers satisfactionthrough strengthening after sale services.3. Market expansion and strategy ã to eliminate competition and protect existing market; ã to obtain new market outlets in possession of the offeree; ã to obtain new product for diversification or substitution of existing products and to enhance the product range;4. Financial strength ã to improve liquidity and have direct access to cash resources; ã to enhance gearing capacity, borrow on better strength and greater assets backing; ã to avail of tax benefits; and to improve EPS.  5. Corporate friendliness Although it is rare but it is true that business houses exhibit degrees of cooperative spirit despite competitiveness in providing rescues to each other from hostile takeovers and cultivate situations of collaborations sharinggoodwill of each other to achieve performance heights through businesscombinations.6. Desired level of integration Mergers and acquisitions are pursued to obtain the desired level of integration between the two combining business houses. Such integrationcould be operational or financial. This gives birth to conglomeratecombinations. Types of Mergers 1. Vertical Combination A company would like to takeover another company or seek its merger withthat company to expand esposing backward integration to assimilate thesources of supply and forward integration towards market outlets. Themerging undertaking would be either a supplier or a buyer using its productas intermediary material for final production.2.Horizontal combinationsIt is a merger of two competing firms which are at the same stage of industrial process. The acquiring firm belongs to the same industry as thetarget company. Purpose is to obtain economies of scale in production by
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