The liberalisation of the Indian economy has been accompanied by several amendments in the legal provisions and act of Indian legislation. The introduction of corporate law has made the economy more market oriented. This has led to the introduction of mergers and acquisitions in the market for a continuous process in restructuring.
A merger is a process which takes place when two or more companies merge to form one company. In this process, one company usually survives while the other loses its corporate existence. The surviving company gets all the stocks and shares of the company which loses its corporate existence. A takeover is a process where one company (the surviving company) acquires the control of the company which has lost its existence. The point of difference between takeover and a merger is that it can be unilateral or a hostile takeover. An acquisition is usually a result of a takeover. It can be of the property of the company directly.
the competition act, 2002 was introduced in the month of august and it represents the country’s economy. Section 5 of the act deals with mergers and acquisitions. Under this section the words can become a combination only if they are subject to a few scrutiny’s they are:
? Enterprises which have their operation in India: asset value: Rs 1000 crore, turnover: Rs 3000 crore.
? Enterprises which have global operation: asset value: $500 million, turnover: $1500 million
? Group of companies which have operations in India: asset value: Rs 4000 Crore, turnover: Rs 12000 crore
? The group of companies with global operation: $2 billion asset value, turnover $6 billion
The mergers and acquisitions which do not adhere to these scrutiny’s have an adverse effect in the market. This section is however an exemption to share subscriptions, facilities related to finances etc.
The competition act has sought to be a friendly act to the concept of merger. This act has made it significant to think about the line of mergers and acquisitions. The intention of this act in this line is however, yet not very clear.
