KVSSNRao's Handbook of Mergers and Acquisitions

Handbook of Mergers and Acquisitions - Proposed Contents

2012-12-01T07:35:00.000-08:00

Proposed Contents

Introduction

History

Science of Mergers, Acquisitions and Divestitures
Theories of Merger and Acquisitions
Empirical Studies on Merger and Acquistion Theories

Legal, Regulatory and Tax Issues
India
International

Initiating and Completing Merger/Acquisition Transactions

Initiating and Completing Divestiture Transactions

Merger/Acquisition/Divestiture Practice of Investment Banking

Case Studies

Case Study: The General Motors Bankruptcy - 2009

2011-12-18T20:16:00.001-08:00

Author
Donald DePamphilis
Clinical Professor of Finance
California
Article available on Google Knol under Creative Commons 3.0 Licence.

Background

Rarely has a firm fallen as far and as fast as General Motors (GM). Founded in 1908, GM dominated the car industry through the early 1950s with its share of the U.S. car market reaching 54 percent in 1954. However, this proved to be the firm’s high water mark. Efforts in the 1980s to cut cost by building brands on common platforms blurred their distinctiveness. Following increasing healthcare and pension benefits paid to employees, concessions made to unions in the early 1990s to pay workers even when their plants were shutdown reduced the ability of the firm to adjust to changes in the cyclical car market. GM was increasingly burdened by so-called legacy costs, i.e., healthcare and pension obligations to increasing large retiree population. Over time, GM’s labor costs soared compared to the firm’s major competitors. To cover these costs, GM continued to make higher margin medium to full size cars and trucks, which in the wake of higher gas prices could only be sold with the help of highly attractive incentive programs. Forced to support an escalating array of brands, the firm was unable to provide sufficient marketing funds for any one of its brands.
With the onset of one of the worst global recessions in the post World War II, auto sales worldwide collapsed by the end of 2008. All auto makers’ sales and cash flows plummeted. Unlike Ford, GM and Chrysler were unable to satisfy their financial obligations. The U.S. government, in an unprecedented move, agreed to lend GM and Chrysler $13 billion and $4 billion, respectively. The intent was to buy time to develop an appropriate restructuring plan.
Having essentially ruled out liquidation of GM and Chrysler, continued government financing was contingent on gaining major concessions from all major stakeholders such as lenders, suppliers, and labor unions. With car sales continuing to show harrowing double-digit year over year declines during the first half of 2009, the threat of bankruptcy was used to motivate the disparate parties to come to an agreement. With available cash running perilously low, Chrysler entered bankruptcy in early May and GM on June 1^st, with the government providing debtor in possession financing during their time in bankruptcy. In its bankruptcy filing for its U.S. and Canadian operations only, GM listed $82.3 billion in assets and $172.8 billion in liabilities. In less than 45 days each, both GM and Chrysler emerged from government sponsored sales in bankruptcy court, a feat that many thought impossible.
Judge Robert E. Gerber of the United States Bankruptcy court of New York approved the sale in view of the absence of alternatives considered more favorable to the government’s option. GM emerged from the protection of the court on July 10, 2009 in an economic environment characterized by escalating unemployment and eroding consumer income and confidence. Even with less debt and liabilities, fewer employees, the elimination of most “legacy costs,” a reduced number of dealerships and brands, GM found itself operating in an environment in 2009 in which U.S. vehicle sales totaled an anemic 9.2 million units. This compared to more than 16 million in 2008. GM’s 2009 market share slipped to a post-World War II low of 19 percent. Only the government’s “cash for clunkers” program during the summer months offered some respite from the largely unremitting downturn in U.S. auto sales. However, with the cessation of the program in late August, the boost in sales proved temporary.

Developing a Bankruptcy Strategy

While the bankruptcy option had been under consideration for several months, its attraction grew as it became increasingly apparent that time was running out for the cash strapped firm. Having determined from the outset that liquidation of GM either inside or outside of the protection of bankruptcy would not be considered, the government initially considered a prepackaged bankruptcy in which agreement is obtained among major stakeholders prior to filing for bankruptcy. The presumption is that since agreement with many parties had already been obtained, developing a plan of reorganization to emerge from Chapter 11 would move more quickly. However, this option was not pursued because of the concern that the public would simply view the post-Chapter 11 GM as simply a smaller version of its former self. The government in particular was seeking to position GM as a wholly new firm capable of profitably designing and building cars that the public wanted.
However, time was of the essence. The concern was that consumers would not buy GM vehicles while the firm was in bankruptcy. Consequently, a strategy in which GM would be divided into two firms: “old GM” containing the firm unwanted assets and “new GM” owning the most attractive assets. New GM would then emerge from bankruptcy in a sale to a new company owned by various stakeholder groups including the U.S. and Canadian Governments, a union trust fund, and to bond holders.
Buying distressed assets can be accomplished through a Chapter 11 plan of reorganization or a post-confirmation trustee. Alternatively, a 363 sale transfers the acquired assets free and clear of any liens, claims and encumbrances. The sale was ultimately completed under Section 363 of the U.S. bankruptcy code. Historically, firms used this tactic to sell failing plants and redundant equipment. In recent years, so-called 363 sales have been used to completely restructure businesses, including the 363 sales of entire companies. A 363 sale requires only the approval of the bankruptcy Judge while a plan of reorganization in Ch 11 must be approved by a substantial number of creditors and meet certain other requirements to be “confirmed.” A plan or reorganization is much more comprehensive than a 363 sale in addressing the overall financial situation of the debtor and how its exit strategy from bankruptcy will affect creditors.
Under Section 363, the bankrupt firm must file a motion with the bankruptcy court in which the case is pending seeking the bankruptcy court’s approval of the terms and conditions of the proposed sale. Opponents of the proposed sale will have a designated response period determined by the pertinent bankruptcy court (often 10-20 days) in which to file written objections to the proposed sale. Frequently, this time period will be shortened by the court to as little as a few days. Depending upon the degree of opposition to the sale and how many parties are interested in purchasing the assets being offered, the process could be completed in a matter of weeks. Once a 363 sale has been consummated and the purchase price paid, the bankruptcy court will decide how the proceeds of sale ware allocated among secured creditors with liens on the asses sold.

Terms of the Deal

GM’s U.S. and Canadian assets and liabilities were split between two companies under the protection of the bankruptcy court. GM’s exit from Chapter 11 involved the sale of its most attractive assets to a new company (dubbed the New GM) owned primarily by the American and Canadian governments and a healthcare trust for the UAW union. The unattractive assets were transferred to the other company referred to as the “Old GM.” The old GM which will be known as Motors Liquidation Company and includes various properties, including facilities already slated to be closed. Such properties will be sold to the highest bidder under court supervision. Other assets to be filed under the old GM include the brands Hummer, Saturn, and Saab for which GM already has buyers.
Total financing provided by the U.S. and Canadian (including the province of Ontario) governments amounted to $69.5 billion. U.S. taxpayer provided financing totaled $60 billion consisting of $10 billion in loans and the remainder in equity. The government decided to contribute $50 billion in the form of equity to reduce the burden on GM of paying interest and principal on its outstanding debt. Nearly $20 billion was provided prior to the bankruptcy, $11 billion to finance the firm during the bankruptcy proceedings, and an additional $19 billion was to be provided before the end of 2009. In exchange for these funds, the U.S. government will own 60.8 percent of the new GM’s common shares, while the Canadian and Ontario governments own 11.7 percent in exchange for their investment of $9.5 billion. The United Auto Workers (UAW) new voluntary employee beneficiary association (VEBA) received a 17.5 percent stake in exchange for assuming responsibility for retiree medical and pension obligations. Finally, bondholders and other unsecured creditors received a 10 percent ownership position. There will be $2.1 billion in preferred shares held by the Treasury and $6.5 billion in preferred shares which will be issued to the new VEBA.

Profiling the New GM

The new firm, which employs 244,000 workers in 34 countries, will further reduce its headcount of salaried employees to 27,200. The firm will also have shed 21,000 union workers from the 54,000 UAW workers it now employs in the U.S. and close 12 to 20 plants. GM did not include its foreign operations in Europe, Latin America, Africa, the Middle East or Asia Pacific in the Chapter 11 filing. Annual vehicle volume for the firm will decline to 10 million vehicles, compared with 15 to 17 million annual vehicle sales from 1995 through 2007. Consolidated debt for the firm will be $17 billion. The firm also will have $9 billion in 9% preferred stock, which is payable on a quarterly basis. GM will have a new board. Canada and UAW health care trust will each get a seat on the board.
GM will focus on its core brands Chevrolet, Cadillac, Buick and GMC through 3600 dealerships from its existing 5969 dealer network. The business plan calls for an IPO as early as the second quarter of 2010 depending upon stock market condition.
By offloading worker health care liabilities to the VEBA trust and seeding it mostly with stock instead of cash, GM has eliminated the need to pay more than $4 billion annually in medical costs. Concessions made by the UAW before GM entered bankruptcy have made GM more competitive in terms of labor costs with Toyota.
GM’s new cars in 2010 include the Chevrolet Volt, a plug-in hybrid electric car. However, with a price tag of $40,000, the car is likely to be only a niche brand. Other small car models include the Chevrolet Cruz and Spark which may fare well but will face intense competition from models such as Honda’s Insight and the Toyota Prius as well as Ford’s Fiesta.

Future Challenges

New products must be introduced as scheduled and they must meet or exceed the expectations of potential customers. Success in this area would represent a substantial departure from past experience. New more energy efficient models must compete against brands long-established in the marketplace such as Honda’s Insight and Toyota’s Prius.
The need to buyout and workers who will lose their jobs as a result of the eleven pending plant closings will constitute a significant drain on operating cash flow during the next several years. If the firm’s stock does not do well, the UAW will have to further cut medical benefits for workers covered by the union’s own trust. Bankruptcy allows GM to break dealer franchise contracts. Consequently, GM car owners may have to travel much further to get their cars maintained under warranty as the number of dealerships shrinks.
Finally, GM’s greatest challenge may be in changing the firm’s corporate culture which some have accused of being slow to innovate, risk adverse, and bureaucratic. The firm intends to eliminate as many as one-third of their current managers. While this may go a long way in changing the firm’s culture, it also will represent a loss of substantial expertise and experience.

Source article in Knol
http://knol.google.com/k/case-study-the-general-motors-bankruptcy-gm-arises-from-the-ashes

Case Study: Xerox Buys Affiliated Computer Systems

2011-11-29T16:07:00.000-08:00

Author
Donald DePamphilis
Clinical Professor of Finance
California
Article available on Google Knol under Creative Commons 3.0 Licence.

This case study is representative of those found in Mergers, Acquisitions, and Other Restructuring Activities, 5th edition, 2010 by Donald M. DePamphilis. For more information or to buy this book online, click here.

Changing Customer Requirements Force an Industry Shift

Reflecting the increasing cost and complexity of computing, many corporations have outsourced their information technology (IT) operations in an effort to streamline various business activities. These activities include procurement, customer tracking, record handling, and product design. Advances in technology enable IT vendors to more easily provide computing services delivered over the Internet from remote data centers (i.e., through the so-called “cloud computing”). Software such as word processing, spreadsheet, and customer management systems could be moved from desktop personal computers to become a Web-based service, accessible from anywhere.

In anticipation of a shift from hardware and software spending to technical services by their corporate customers, IBM announced an aggressive move away from its traditional hardware business and into services in the mid-1990s. Having sold its largely commodity personal computer business to Chinese manufacturer Lenovo in mid-2005, IBM became widely recognized as a largely hardware neutral systems integration, technical services, and outsourcing company whose services could be enlisted by corporations to assemble internal computer networks using the most effective hardware and software rather than only those proprietary to IBM. As part of its branding process, IBM became viewed as largely “hardware neutral” by its customers in that it offered the best possible solutions through its alliances with other IT vendors for its customers rather than favoring a particular IBM product or service offering.

As IT services have tended to be less cyclical than hardware and software sales, the move into services by IBM enabled the firm to tap a steady stream of revenue at a time when customers were keeping computers and peripheral equipment longer to save money. The 2008-09 recession exacerbated this trend as corporations spent a smaller percentage of their IT budgets on hardware and software. Software and hardware expenditures as a percent of total corporate IT budgets fell from 36 percent in 2004 to 28 percent in 2009 according to the Gartner Group, a market research firm. The remainder of corporate IT budgets were spent on operations and services provided by outside consultants.
Playing Catch Up

These developments were not lost on other IT companies. Hewlett-Packard (HP) bought tech services company EDS in 2008 for $13.9 billion. On September 21, 2009, Dell announced its intention to purchase another IT services company, Perot Systems, for $3.9 billion, a whopping 68 percent premium. One week later, Xerox announced a cash and stock bid for Affiliated Computer Systems (ACS) totaling $6.4 billion, a 34 percent premium to ACS’s closing price on September 25, 2009.

Each firm was moving to position itself as a total solution provider for its customers, achieving differentiation from its competitors by offering a broader range of both hardware and business services. While each firm focused on a somewhat different set of markets, they all shared an increasing focus on the government and healthcare segments. Consequently, these markets were likely to become increasingly competitive. However, by containing to retain a large proprietary hardware business, each firm faced challenges in convincing customers that they could provide objectively enterprise-wide solutions that reflected the best option for its customers.
The Xerox Strategy

Historically known as “the Document Imaging Company,” Xerox intends to move into providing technology services such as into the outsourcing business with a major focus on healthcare and government. Services contracts tend to provide a more recurring revenue stream than hardware sales. Xerox increasingly believes its customers wanted a stronger connection with vendors who could provide both back office (e.g., application and claims processing) and front office (e.g., customer service) information technology product and services.

Previous Xerox efforts to move beyond selling printers, copiers, and supplies and into services achieved limited success due largely to poor management execution. In an effort to expand into services, Xerox bought Amici for $174 million in 2006 to enter the business of helping lawyers organize digital documents created during the legal discovery process. In 2007, the firm acquired Advectis, which helps banks and consumers electronically manage mortgage documents for $32 million. While some progress in shifting away from the firm’s dependence on printers and copier sales was evident, the pace was far too slow. Xerox was looking for a way to accelerate the transition from a largely product driven company to one whose revenues were more dependent on the delivery of business services.
Why ACS?

With annual sales of about $6.5 billion, ACS handles paper-based tasks such as billing and claims processing for governments and private companies. With about one-fourth of ACS’ revenue derived from the healthcare and government sectors through long-term contracts, the acquisition gives Xerox a greater penetration into markets which should benefit from the 2009 government stimulus spending and healthcare legislation. More than two-thirds of ACS’ revenue comes from the operation of client back office operations, with the rest coming from providing technology consulting services. ACS would also triple Xerox’s service revenues to $10 billion, with almost 80 percent due to recurring revenue based on services and equipment leases.

Xerox is betting that it can apply its globally recognized brand and worldwide sales presence to expand ACS into Britain, Germany, Spain, and other geographic areas. Currently, about 92 percent of ACS’s revenue comes from the U.S. ACS technologies could also benefit from Xerox’s research in imaging and text recognition.

Xerox expects to save $300 million to $400 million in the first three years after the deal closes in early 2010. Most of the cost savings will come from ACS providing services to Xerox operations that would allow for some internal staff reduction.
Investor Reaction Mixed

The cash and stock offer for ACS was valued at $63.11 a share. ACS shares rose by 14 percent to $53.86 while Xerox shares dropped 14 percent to $7.68. Xerox also will assume $2 billion of ACS debt and issue $300 million in convertible preferred Xerox stock to ACS’s founder Darwin Deason to acquire his super-voting shares (i.e., those having multiple voting rights) which give him about 42 percent of total voting rights in ACS.

A perceived lack of synergies between the two firms, Xerox’s rising debt levels, and the firm’s struggling printer business fueled concerns about the long-term viability of the merger. Xerox has about $1 billion in cash and expects to borrow another $3 billion. Standard & Poor’s put Xerox’s credit on the “watch list,” with a credit downgrade to triple-B-minus, one notch above junk, likely.

Integration is Xerox’s major challenge as the firm has not done a lot of large deals. The two firms revenue mixes are very different as are their customer bases, with government customers often requiring substantially greater effort to close sales than Xerox’s traditional commercial customers. Xerox intends to operate ACS as a standalone business which will postpone the integration of its operations consisting of 54,000 employees with ACS’ 74,000. If Xerox intends to realize significant incremental revenues by selling ACS services to current Xerox customers, some degree of integration of the sales and marketing organizations would seem to be necessary.

With little experience in managing a services company, the acquisition will put Xerox in head-to-head competition with a variety of U.S. and foreign competitors. These include HP, Accenture, and Computer Sciences Corporation, as well as Indian service providers such as Satyam Computer Services, Infosys Consulting, and Wipro Technologies.
Concluding Comments

Operating ACS as a separate business could significantly reduce the ability of Xerox to realize the anticipated revenue gains due to cross selling. While Xerox notes that only 20 percent of the customers of the two firms overlap, it is hardly a foregone conclusion that customers will buy ACS services simply because the ACS sales representatives gain access to current Xerox customers. Presumably, additional incentives are needed such as some packaging of Xerox hardware with ACS IT services. However, this may require significant price discounting at a time when printer and copier profit margins already are under substantial pressure.

Dell, HP, and Xerox are primarily hardware firms desirous of moving increasingly into services. The presumption seems to be that the distinction between selling product and services is becoming blurred, particularly as “cloud computing” makes it increasingly attractive to deliver services from remote locations. Nonetheless, given their long histories, customers are likely to continue, at least in the near term, to view these firms more as product than service companies. The sale of services will require significant spending to rebrand these companies so that they will be increasingly viewed as service vendors.

The continued dependence of all three firms on the sale of hardware may retard their ability to sell packages of hardware and IT services to customers. With hardware prices under continued pressure, customers may be more inclined to continue to buy hardware and IT services from separate vendors to pit one vendor against another. Moreover, with all three firms targeting the healthcare and government markets, pressure on profit margins could increase for all three firms. The success of IBM’s services strategy could suggest that pure IT service companies are likely to perform better in the long-run than those that continue to have a significant presence in both the production and sale of hardware as well as IT services.

Source
http://knol.google.com/k/case-study-hardware-companies-race-to-move-into-it-services-xerox-buys#

Enron - Breakdown of Corporate Governance - Case Study

2011-11-28T16:25:00.000-08:00

Author
Donald DePamphilis
Clinical Professor of Finance
California
(Article available on Knol under creative commons 3.0 license)

This article is taken from Mergers, Acquisitions, and Other Restructuring Activities, 5th edition, 2009 by Donald M. DePamphilis. For more information or to buy this book online, click here.

Background

What started in the mid-1980s as essentially a staid "old-economy" business became the poster child in the late 1990s for companies wanting to remake themselves into "new-economy" powerhouses. Unfortunately, what may have started with the best of intentions emerged as one of the biggest business scandals in U.S. history. Enron was created in 1985 as a result of a merger between Houston Natural Gas and Internorth Natural Gas. In 1989, Enron started trading natural gas commodities and eventually became the world's largest buyer and seller of natural gas. In the early 1990s, Enron became the nation's premier electricity marketer and pioneered the development of trading in such commodities as weather derivatives, bandwidth, pulp, paper, and plastics. Enron invested billions in its broadband unit and water and wastewater system management unit and in hard assets overseas. In 2000, Enron reported $101 billion in revenue and a market capitalization of $63 billion.

The Virtual Company

Enron was essentially a company whose trading and risk management business strategy was built on assets largely owned by others. The complex financial maneuvering and off-balance-sheet partnerships that former CEO Jeffrey K. Skilling and chief financial officer Andrew S. Fastow implemented were intended to remove everything from telecommunications fiber to water companies from the firm's balance sheet and into partnerships. What distinguished Enron's partnerships from those commonly used to share risks were their lack of independence from Enron and the use of Enron's stock as collateral to leverage the partnerships. If Enron's stock fell in value, the firm was obligated to issue more shares to the partnership to restore the value of the collateral underlying the debt or immediately repay the debt. Lenders in effect had direct recourse to Enron stock if at any time the partnerships could not repay their loans in full. Rather than limiting risk, Enron was assuming total risk by guaranteeing the loans with its stock.

Enron also engaged in transactions that inflated its earnings, such as selling time on its broadband system to a partnership at inflated prices at a time when the demand for broadband was plummeting. Enron then recorded a substantial profit on such transactions. The partnerships agreed to such transactions because Enron management seems to have exerted disproportionate influence in some instances over partnership decisions, although its ownership interests were very small, often less than 3 percent. Curiously, Enron's outside auditor, Arthur Andersen, had a dual role in these partnerships, collecting fees for helping to set them up and auditing them.
Time to Pay the Piper

At the time the firm filed for bankruptcy on December 2, 2001, it had $13.1 billion in debt on the books of the parent company and another $18.1 billion on the balance sheets of affiliated companies and partnerships. In addition to the partnerships created by Enron, a number of bad investments both in the United States and abroad contributed to the firm's malaise. Meanwhile, Enron's core energy distribution business was deteriorating. Enron was attempting to gain share in a maturing market by paring selling prices. Margins also suffered from poor cost containment.

Dynegy Corp. agreed to buy Enron for $10 billion on November 2, 2001. On November 8, Enron announced that its net income would have to be restated back to 1997, resulting in a $586 million reduction in reported profits. On November 15, chairman Kenneth Lay admitted that the firm had made billions of dollars in bad investments. Four days later, Enron said it would have to repay a $690 million note by mid-December and it might have to take an additional $700 million pretax charge. At the end of the month, Dynegy withdrew its offer and Enron's credit rating was reduced to junk bond status. Enron was responsible for another $3.9 billion owed by its partnerships. Enron had less than $2 billion in cash on hand.

The end came quickly as investors and customers completely lost faith in the energy behemoth as a result of its secrecy and complex financial maneuvers, forcing the firm into bankruptcy in early December. Enron's stock, which had reached a high of $90 per share on August 17, 2001, was trading at less than $1 by December 5, 2001.

In addition to its angry creditors, Enron faced class-action lawsuits by shareholders and employees, whose pensions were invested heavily in Enron stock. Enron also faced intense scrutiny from congressional committees and the U.S. Department of Justice. By the end of 2001, shareholders had lost more than $63 billion from its previous 52-week high, bondholders lost $2.6 billion in the face value of their debt, and banks appeared to be at risk on at least $15 billion of credit they had extended to Enron. In addition, potential losses on uncollateralized derivative contracts totaled $4 billion. Such contracts involved Enron commitments to buy various types of commodities at some point in the future.

Questions remain as to why Wall Street analysts, Arthur Andersen, federal or state regulatory authorities, the credit rating agencies, and the firm's board of directors did not sound the alarm sooner. It is surprising that the audit committee of the Enron board seems to have somehow been unaware of the firm's highly questionable financial maneuvers. Inquiries following the bankruptcy declaration seem to suggest that the audit committee followed all the rules stipulated by federal regulators and stock exchanges regarding director pay, independence, disclosure, and financial expertise. Enron seems to have collapsed in part because such rules did not do what they were supposed to do. For example, paying directors with stock may have aligned their interests with shareholders, but it also is possible to have been a disincentive to question aggressively senior management about their financial dealings.

The Lessons of Enron

Enron may be the best recent example of a complete breakdown in corporate governance, a system intended to protect shareholders. Inside Enron, the board of directors, management, and the audit function failed to do the job. Similarly, the firm's outside auditors, regulators, credit rating agencies, and Wall Street analysts also failed to alert investors. What seems to be apparent is that if the auditors fail to identify incompetence or fraud, the system of safeguards is likely to break down. The cost of failure to those charged with protecting the shareholders, including outside auditors, analysts, credit-rating agencies, and regulators, was simply not high enough to ensure adequate scrutiny.

What may have transpired is that company managers simply undertook aggressive interpretations of accounting principles then challenged auditors to demonstrate that such practices were not in accordance with GAAP accounting rules (Weil, 2002). This type of practice has been going on since the early 1980s and may account for the proliferation of specific accounting rules applicable only to certain transactions to insulate both the firm engaging in the transaction and the auditor reviewing the transaction from subsequent litigation. In one sense, the Enron debacle represents a failure of the free market system and its current shareholder protection mechanisms, in that it took so long for the dramatic Enron shell game to be revealed to the public. However, this incident highlights the remarkable resilience of the free market system. The free market system worked quite effectively in its rapid imposition of discipline in bringing down the Enron house of cards, without any noticeable disruption in energy distribution nationwide.

Epilogue

Due to the complexity of dealing with so many types of creditors, Enron filed its plan with the federal bankruptcy court to reorganize one and a half years after seeking bankruptcy protection on December 2, 2001. The resulting reorganization has been one of the most costly and complex on record, with total legal and consulting fees exceeding $500 million by the end of 2003. More than 350 classes of creditors, including banks, bondholders, and other energy companies that traded with Enron said they were owed about $67 billion.

Under the reorganization plan, unsecured creditors received an estimated 14 cents for each dollar of claims against Enron Corp., while those with claims against Enron North America received an estimated 18.3 cents on the dollar. The money came in cash payments and stock in two holding companies, CrossCountry containing the firm's North American pipeline assets and Prisma Energy International containing the firm's South American operations.

After losing its auditing license in 2004, Arthur Andersen, formerly among the largest auditing firms in the world, ceased operation. In 2006, Andrew Fastow, former Enron chief financial officer, and Lea Fastow plead guilty to several charges of conspiracy to commit fraud. Andrew Fastow received a sentence of 10 years in prison without the possibility of parole. His wife received a much shorter sentence. Also in 2006, Enron chairman Kenneth Lay died while awaiting sentencing, and Enron president Jeffery Skilling received a sentence of 24 years in prison.

Citigroup agreed in early 2008 to pay $1.66 billion to Enron creditors who lost money following the collapse of the firm. Citigroup was the last remaining defendant in what was known as the Mega Claims lawsuit, a bankruptcy lawsuit filed in 2003 against 11 banks and brokerages. The suit alleged that, with the help of banks, Enron kept creditors in the dark about the firm's financial problems through misleading accounting practices. Because of the Mega Claims suit, creditors recovered a total of $5 billion or about 37.4 cents on each dollar owed to them. This lawsuit followed the settlement of a $40 billion class action lawsuit by shareholders, which Citicorp settled in June 2005 for $2 billion.

Source

http://knol.google.com/k/case-study-the-enron-shuffle-a-scandal-to-remember#

Government's Authority to Review Acquisitions in USA

2011-11-27T15:19:00.001-08:00

The President or the President’s designee may make an investigation to determine the effects on national security of mergers, acquisitions, and takeovers proposed or pending on or after the date of enactment of this section [Aug. 23, 1988] by or with foreign persons which could result in foreign control of persons engaged in interstate commerce in the United States.

Exon-Florio

A Section in the Defense Production Act of 1950, USA

§ 2170. Authority to review certain mergers, acquisitions, and takeovers

(a) Investigations

The President or the President’s designee may make an investigation to determine the effects on national security of mergers, acquisitions, and takeovers proposed or pending on or after the date of enactment of this section [Aug. 23, 1988] by or with foreign persons which could result in foreign control of persons engaged in interstate commerce in the United States. If it is determined that an investigation should be undertaken, it shall commence no later than 30 days after receipt by the President or the President’s designee of written notification of the proposed or pending merger, acquisition, or takeover as prescribed by regulations promulgated pursuant to this section. Such investigation shall be completed no later than 45 days after such determination.

(b) Mandatory investigations

The President or the President’s designee shall make an investigation, as described in subsection (a), in any instance in which an entity controlled by or acting on behalf of a foreign government seeks to engage in any merger, acquisition, or takeover which could result in control of a person engaged in interstate commerce in the United States that could affect the national security of the United States. Such investigation shall—

(1) commence not later than 30 days after receipt by the President or the President’s designee of written notification of the proposed or pending merger, acquisition, or takeover, as prescribed by regulations promulgated pursuant to this section; and

(2) shall be completed not later than 45 days after its commencement.

(c) Confidentiality of information

Any information or documentary material filed with the President or the President’s designee pursuant to this section shall be exempt from disclosure under section 552 of title 5, United States Code, and no such information or documentary material may be made public, except as may be relevant to any administrative or judicial action or proceeding. Nothing in this subsection shall be construed to prevent disclosure to either House of Congress or to any duly authorized committee or subcommittee of the Congress.

(d) Action by the President
Subject to subsection (d), the President may take such action for such time as the President considers appropriate to suspend or prohibit any acquisition, merger, or takeover, of a person engaged in interstate commerce in the United States proposed or pending on or after the date of enactment of this section [Aug. 23, 1988] by or with foreign persons so that such control will not threaten to impair the national security. The President shall announce the decision to take action pursuant to this subsection not later than 15 days after the investigation described in subsection (a) is completed. The President may direct the Attorney General to seek appropriate relief, including divestment relief, in the district courts of the United States in order to implement and enforce this section.

(e) Findings of the President

The President may exercise the authority conferred by subsection (c) only if the President finds that—

(1) there is credible evidence that leads the President to believe that the foreign interest exercising control might take action that threatens to impair the national security, and

(2) provisions of law, other than this section and the International Emergency Economic Powers Act (50 U.S.C. 1701–1706), do not in the President’s judgment provide adequate and appropriate authority for the President to protect the national security in the matter before the President.

The provisions of subsection (d) of this section shall not be subject to judicial review.

(f) Factors to be considered

For purposes of this section, the President or the President’s designee may, taking into account the requirements of national security, consider among other factors—

(1) domestic production needed for projected national defense requirements,

(2) the capability and capacity of domestic industries to meet national defense requirements, including the availability of human resources, products, technology, materials, and other supplies and services,

(3) the control of domestic industries and commercial activity by foreign citizens as it affects the capability and capacity of the United States to meet the requirements of national security,

(4) the potential effects of the proposed or pending transaction on sales of military goods, equipment, or technology to any country—

(A) identified by the Secretary of State—

(i) under section 6(j) of the Export Administration Act of 1979, as a country that supports terrorism;

(ii) under section 6(l) of the Export Administration Act of 1979 , as a country of concern regarding missile proliferation; or

(iii) under section 6(m) of the Export Administration Act of 1979, as a country of concern regarding the proliferation of chemical and biological weapons; or

(B) listed under section 309(c) of the Nuclear Non-Proliferation Act of 1978 on the “Nuclear Non-Proliferation-Special Country List” (15 C.F.R. Part 778, Supplement No. 4) or any successor list; and

(5) the potential effects of the proposed or pending transaction on United States international technological leadership in areas affecting United States national security.

(g) Report to the Congress

The President shall immediately transmit to the Secretary of the Senate and the Clerk of the House of Representatives a written report of the President’s determination of whether or not to take action under subsection (d), including a detailed explanation of the findings made under subsection (e) and the factors considered under subsection (f). Such report shall be consistent with the requirements of subsection (c) of this Act.

(h) Regulations

The President shall direct the issuance of regulations to carry out this section. Such regulations shall, to the extent possible, minimize paperwork burdens and shall to the extent possible coordinate reporting requirements under this section with reporting requirements under any other provision of Federal law.

(i) Effect on other law

Nothing in this section shall be construed to alter or affect any existing power, process, regulation, investigation, enforcement measure, or review provided by any other provision of law.

(j) Technology risk assessments

In any case in which an assessment of the risk of diversion of defense critical technology is performed by a designee of the President, a copy of such assessment shall be provided to any other designee of the President responsible for reviewing or investigating a merger, acquisition, or takeover under this section.

(k) Quadrennial report

(1) In general

In order to assist the Congress in its oversight responsibilities with respect to this section, the President and such agencies as the President shall designate shall complete and furnish to the Congress, not later than 1 year after the date of enactment of this section and upon the expiration of every 4 years thereafter, a report which—

(A) evaluates whether there is credible evidence of a coordinated strategy by 1 or more countries or companies to acquire United States companies involved in research, development, or production of critical technologies for which the United States is a leading producer; and

(B) evaluates whether there are industrial espionage activities directed or directly assisted by foreign governments against private United States companies aimed at obtaining commercial secrets related to critical technologies.

(2) “Critical technologies” defined

For the purposes of this subsection, the term “critical technologies” means technologies identified under title VI of the National Science and Technology Policy, Organization, and Priorities Act of 1976 or other critical technology, critical components, or critical technology items essential to national defense identified pursuant to this section.

(3) Release of unclassified study

The report required by this subsection may be classified. An unclassified version of the report shall be made available to the public.

For Further Study

http://moritzlaw.osu.edu/lawjournal/issues/volume67/number4/byrne.pdf

Source:
http://knol.google.com/k/legal-and-regulatory-framework-for-mergers-and-acquisitions-in-usa#
By Narayana Rao K.V.S.S.

Case Study: The Challenges of Post-Merger Integration

2011-11-27T15:13:00.000-08:00

The Arcelor and Mittal Merger

The focus in the case study is on the formation of the integration team, the importance of communication, and the realization of anticipated synergies during the post-merger period. The discussion centers on the events that followed the merger of steel giants Arcelor and Mittal into ArcelorMittal in mid-2006.

Author of the Case Study
Donald DePamphilis
Clinical Professor of Finance
California
(Article available under Creative Commons 3.0 license on Knol of Google)

Taken from Mergers, Acquisitions, and Other Restructuring Activities, 5th edition, 2009, by Donald M. DePamphilis. For more information, click here.

Background

The merger of Arcelor and Mittal into ArcelorMittal in June 2006 resulted in the creation of the world’s largest steel company. With 2007 revenue of $105 billion and its steel production accounting for about 10 percent of global output, the behemoth has 320,000 employees in 60 contries, and it is a global leader in all of its target markets.

Arcelor was a product of three European steel companies (Arbed, Aceralia, and Usinor). In contrast, Mittal resulted from a series of international acquisitions. Despite being competitors, the two firms exhibited little overlap in terms of their operations. However, their attributes proved to be highly complementary with Mittal owning much of its raw materials such as iron ore and coal and Arcelor having extensive distribution and service center operations. Like most mergers, ArcelorMittal faced the challenge of integrating management teams; sales, marketing, and product functions; production facilities; and purchasing operations. Unlike many mergers involving direct competitors, a relatively small portion of cost savings would come from eliminating duplicate functions and operations.

Top Management Sets Expectations

ArcelorMittal top management set three driving objectives before undertaking the postmerger integration effort. These included the following: (1) achieve rapid integration; (2) manage effectively daily operations; and (3) accelerate revenue and profit growth. The third objective was viewed as the primary motivation for the merger. The goal was to combine what were viewed as entities having highly complementary assets and skills. This goal was quite different from the way Mittal had grown historically, which was a result of acquisitions of turnaround targets focused on cost and productivity improvements.
Developing the Integration Team

The formal phase of the integration effort was to be completed in six months. Consequently, it was crucial to agree on the role of the management integration team (MIT), key aspects of the integration process such as how decisions would be made, and the roles and responsibilities of team members.

Activities were undertaken in parallel rather than sequentially. Teams from the two firms were identified. The teams were then asked to submit a draft organization to the MIT. The profiles of the people who would occupy the senior positions were defined and selection committees established. Once the senior managers were selected, they were to build their own teams to identify the synergies and to create action plans for realizing the synergies. Teams were formed before the organization was announced and implementation of certain actions began before detailed plans had been developed fully. Progress was monitored to plan on a weekly basis, enabling the MIT to identify obstacles facing the 25 decentralized task forces and, when necessary, to resolve issues.

The integration team leader was selected based on their demonstrated ability to be collaborative and process-oriented, enabling them to manage the weekly reviews and to resolve issues as they arose. The leader would also have to be sensitive to cultural differences in order to be able to get people to work together. Finally, the team leader would have to be someone who had the confidence of the CEO and other top managers.
Developing Communication Plans

Considerable effort was spent in getting line managers involved in the planning process and to sell the merger to their respective operating teams. Initial communication efforts included the launch of a top-mangement “road-show.” The new company also established a Web site and introduced Web TV. Senior executives provided two-to-three minute interviews on various topics giving everyone with access to a personal computer the ability to watch the interviews onscreen.
Owing to the employee duress resulting from the merger, uncertainty was high as employees with both firms wondered how the merger would impact them. To address employee concerns, managers were given a well-structured message about the significance of the merger and the direction of the new company. Furthermore, the new brand, ArcelorMittal, was launched at a meeting attended by 500 of the firm’s top managers during the spring of 2007. This meeting marked the end of the formal integration process. Finally, all communication of information disseminated throughout the organization was focused rather than of a general nature.

External communication was conducted in several ways. Immediately following closing, senior managers traveled to all the major cities and sites of operations (i.e., the road show) talking to local management and employees at these locations. Typicallly, media interviews also were conducted around these visits, providing an opportunity to convey the ArcelorMittal message to the communities through the press. In March 2007, the new firm held a media day in Brussels, which involved presentations on the status of the merger. Journalists were invited to go to the different businesses and review the progress themselves.

Within the first three months folowing closing, customers were informed about the advantages of the merger for them, such as enhanced R&D capabilities and wider global coverage. The sales forces of the two organizations were charged with the task of creating a single "face" to the market.

Achieving Operational and Functional Integration
ArcelorMittal management set a target for annual cost savings of $1.6 billion annually, based on their experience with earlier acquisitions. The role of the task forces was first to validate this number from the bottom up and then to tell the MIT how the synergies would be achieved. As the merger progressed, it was necessary to get the business units to assume ownership of the process to formulate the initiatives, timetables, and key performance indicators that could be used to track performance against objectives. In some cases, synergy potential was larger than anticipated, while smaller in other situations. The expectation was that the synergy could be realized by mid-2009. The integration objectives were included in the 2007 annual budget plan. As of the end of 2007, the combined firms were on track to realize their goal with annualized cost savings running $1.4 billion.

Concluding Formal Integration Activities
The integration was deemed complete when the new organization, the brand, the “one face to the customer” requirement, and the synergies were finalized. This occurred within eight months of the closing. However, integration would continue for some time to achieve cultural integration. Cultrural differences within the two firms are significant. In effect, neither company was homogeneious from a cultural perspective. ArcelorMittal management viewed this diverity as an advantage, since it provided an opportunity to learn new ideas.

This case study relies upon information provided in an interview with Jerome Ganboulan (formerly of Arcelor) and William A. Scotting (formerly of Mittal), the two executives charged with directing the postmerger integration effort. See Jan De Mdedt and Michel Van Hoey, "Integrating Steel Giants: An Interview with the Arcelor Mittal Post-Merger Managers," Mckinsey Quarterly, Februrary, 2008.

Source:
http://knol.google.com/k/case-study-the-challenges-of-post-merger-integration#

Performance of the blog

2011-11-27T15:04:00.000-08:00

Monthly page views

28 November 756

2010 Acquisition and Mergers - Who bought Whom

2011-03-05T03:39:00.000-08:00

Top 15 top tech acquisitions so far 30.7.2010

40 acquisitions by Google in 2010

Top IT acquisitions of 2010 December 2010

Parker Hannifin - A Century of Mergers

2008-05-25T23:29:00.000-07:00

I came to know from a Wall Street Journal article republished in Mint that Parker Hannifin made more than 100 acquisitions. It will be interesting to study this company acquisition process to understand the practices that make a merger a success.

A brief about Parker Hannifin

Arthur L. “Art” Parker founded Parker Appliance Co. in 1918. It had to be closed and Parker went back to job. He restarted the company offering tube fitting components, attracting both automotive and industrial customers. One of his first customers was a rather famous one: Charles Lindbergh who used the components for his aeroplane.

In the mid 1930s, Art Parker took a major step forward by purchasing from the bankrupt Hupp Motor Co. an enormous, 500,000-square-foot manufacturing facility in Cleveland. Years later, the entire facility was fully utilized by Parker operations. By the end of the decade, Parker Appliance reached $3 million in sales.

Art Parker died in 1945 and his wife Helen (Fitzgerald) Parker invested his $1 million life insurance policy back into Parker company. She acquired Berea Rubber Company.

Another family member, Patrick S. (Pat) Parker was named president in 1968 and at that time annual sales revenue was $197 million. He retired from the position of chairman in 1999 and, by the time of his death in 2005, the company had become an $8 billion global giant of pneumatic, hydraulic, and electromechanical products.

Parker acquired 42 businesses in the 1994-2000 period.

Present chairman and CEO, Donald E. Washkewicz started with Parker in 1972 as an engineer in the Hose Products division. He carries on the Parker tradition of acquisitions, while also building brands and globalizing.

The result is stunning growth and nearly $11 billion in annual sales in fiscal 2007.

http://www.ien.com/article/ien-75th-anniversary/114645

Parker Hannifin, the Cleveland-based industrial products manufacturer, has made around 100 acquisitions in the past 10 years. According to CEO, Donald Washkewicz every acquisition fits their core business and is something they know well.

The company strives to keep talent at acquired companies by communicating frequently with employees and sticking to an orderly integration process. An “integration manager” is deputed to each acquired company to get to know its managers and rank-and-file employees and to help them understand Parker Hannifin’s goals. The company then sends teams of supply chain and sales managers, who share how they get the best prices for both supplies they use in manufacturing and for their own products. Finally, an innovation team urges acquired companies to launch new products to expand their units.

“We don’t try to ram our ways down everyone’s throat because that won’t fly, but instead try to get employees’ approval by showing how they can be even more successful (with us) than before they were acquired,” says Washkewicz. Do they remove people from acquired companies? The answer is yes, managers who don’t get results are removed.

http://www.livemint.com/2008/05/23235306/In-dealmaking-keep-people-in.html

Branding and Mergers & Acquisitions

2008-05-22T23:38:00.000-07:00

Not much is precisely known about the effects of M&A on brands, brand management and brand equity.

What are the critical questions to be asked by companies before an M&A?
What happens when two big brands come together either through a merger or through an acquisition?
How should the brand strategy of the resulting entity be designed?

Some of the critical questions are examined by Martin Roll, an expert on branding in an articel that you can access from the website of venturerepublic.

http://www.venturerepublic.com/resources/Branding_and_M_A_marketing_strategy_brand_leadership.asp

Integration - Google Books

2008-05-13T04:29:00.000-07:00

Done Deal: Your Guide to Merger and Acquisition Integration By M Beth Page, Withers, Pam, Kennelly, Phyllis

http://www.google.co.in/books?id=7qEwQyMZeA8C&printsec=frontcover&dq=integration+merger&lr=&ei=g3spSL7FGpXgtAPBu7y4DQ&sig=79oXhCpS9qq7cOVTgCnpjUncO0A#PPP11,M1

Mergers and Acquisitions: Managing Culture and Human Resources By Günter K. Stahl, Mark E. Mendenhall

http://www.google.co.in/books?id=juH17s4HF5AC&printsec=frontcover&dq=mergers+and+acquisitions&lr=&ei=V30pSIrzHI3ssQOImt27DQ&sig=J0nYLK94oKiHbiRiRvfajS3FMT0

Due Diligence Google Books

2008-05-13T04:10:00.000-07:00

Due Diligence for Global Deal Making: The Definitive Guide to Cross-border Mergers

http://www.google.co.in/books?id=DkkVXp-fkmUC&printsec=frontcover&dq=due+diligence&ei=wXUpSPfhE4XusQPM5c22DQ&sig=eWHLNZ1Etl4IjA00Rm11ufWXqmE

Due Diligence: The Critical Stage in Mergers and Acquisitions By Peter Howson

http://www.google.co.in/books?id=qBbWiLNDsVkC&printsec=frontcover&dq=due+diligence&ei=wXUpSPfhE4XusQPM5c22DQ&sig=iW8EZG5e75-RAUxrmdHzswXJyg4

The art of M&A due diligence: navigating critical steps & uncovering crucial ... By Alexandra Reed Lajoux, Charles M
http://www.google.co.in/books?id=l9UXkqvkPBYC&printsec=frontcover&dq=due+diligence&ei=wXUpSPfhE4XusQPM5c22DQ&sig=BW3Weja-wTowRRnSUY6v9azzv4c

Articles on Negotiation

2008-04-28T04:53:00.000-07:00

Use Your Brain - Sharpen Key IT Negotiation Skills - by Jan Potgieter
In the IT environment, there are many kinds of negotiations; IT directors are continually involved with users, partners, executive management, staff and, of course, suppliers. The environment in which we negotiate is now so specialised that a generic approach no longer delivers the best results.

Collaborative Negotiation Strategy - by Jan Potgieter
Learn how to take a collaborative negotiation approach by understanding the needs and interests of all your commercial clients.

Negotiation Training and Sales Strategy - by Jan Potgieter
Create a negotiation sales strategy for your organization. One approach to creating a negotiation strategy is mapped out in summary.

Negotiation Training Skills Part I Of II - by Jan Potgieter
Discover how organizations can enhance their negotiation training skills to increase their sales. Provide your clients with a better approach and increase your business in the process.

A Creative Model for Team Negotiations - by Michal Zieba
Increase the creativity of your negotiation team.Develop the professional resources of your business by focussing on skills within your organisa tion.

Cultural Negotiation Boundaries - by Professor Manie Spoelstra
Vital intercultural secrets essential to negotiators deal success across borders internationally

How to Neutralise Aggressive Negotiators Tactics - by Calum Coburn
Beat aggression through managing the manipulative negotiation tactics of the other party by asking the right questions.

Negotiation Opening Offer - by Dr DP Venter
Whether negotiators are busy negotiating the acquisition of a new business, a revised wage agreement, or the purchase of a property, one of the negotiators needs to make the first offer. The million-dollar questions are....

Negotiating Strategic Alliance Partnerships - by Associate Professor Rajesh Kumar
Navigate the complex challenges of strategic alliances through planning your partner relationships. Deal with ambiguity management problems.

10 Key Lessons from the World of Negotiation - Part 2 - by Dr David Venter
Learn five valuable tips to enhance your negotiation with another party. Use questions to find opportunity, and to gain both trust and credibility.

Persuasive Sales Negotiation (Part III of III) - by Jan Potgieter
This article provides your business with valuable insight to enhance your sales training for any negotiation. It examines how scarcity and authority influences how individuals perceive information.

Mutually Acceptable Agreements - Negotiation Guide (Part 1) - by Dr David Venter
Discover how to gain a better mutual negotiation outcome by understanding the positions of both negotiating parties. 5 general guidelines on how to enhance your agreements.

Persuasive Sales Negotiation (Part II of III) - by Jan Potgieter
The third principle of persuasion according to Dr Robert Cialdini, is the the principle of "Social Proof". This principle states that we determine what is correct by finding out what other people think is correct

Negotiating with an unreasonable manager - by Calum Coburn
Learn how to deal with an unreasonable manager. This article will show you how to incorporate a negotiation style and give advice on the best time to have a meeting and make it right.

Persuasive Sales Negotiation (Part I of III) - by Jan Potgieter
Learn how your sales negotiation process and style can be enhanced through two of the principles of persuasion - Reciprocation and Consitency and Commitment.

The Top 10 Reasons Why Your Boss Doesn't Pay You More - by Calum Coburn
You're good at what you do, your boss loves your work, so why aren't you making more money? Yes, we all know it's unfair, but you're paid what you can negotiate.

Framing your Negotiations - by Dr David Venter
Research to consider when framing and reframing your negotiation language in a positive manner to increase the probability of your success - by Dr D Venter.

Raise your Salary through Negotiations - by Calum Coburn
Negotiate a higher salary with your employer. Get more value by expanding your negotiator skills for better pay, benefit, bonuses and promotions.

Effective Negotiation Tools - by Jan Potgieter
Learn the right negotiating tools to use in all your negotiations. Discover the positive way to make a sound business proposal for any situation.

Amazon Blames Google for Publishing Private Information - by Suki Mhay
Amazon.com is no longer the epitome of online customer service. They allow our personal information to be accessable by search engines and blame the likes of Google when these details are published rather than owning up to their own responsibilities.

Sales Negotiation Strategy - by Jan Potgieter
Discover how your sales purchasing negotiations team can enhance their training programs. Increase the selling power of your company with any client.

BATNA Negotiations - by Dr David Venter
This article discusses how a negotiator can use their BATNA and their available alternatives to attain a better bottom line instead of making a bad agreement.

What Bush doesn't want you to know about Iran's Nukes - by Calum Coburn (26 March 2007)
The Bush administration's accusation that Iran is building nuclear weapons is a smoke screen. This well researched article proves that the real Bush administration agenda centres on stealing Iran and Iraq's oil wealth.

Negotiation Persuasion - by Dr David Venter
When approached correctly, persuasion is potentially one of the most important skills in the armour of the business manager. Like power, persuasion can be a force of enormous good for our businesses and for all other aspects of society.

Consequences of Negotiation Failure - by Professor Manie Spoelstra
This article examines the consequences and results when people fail to negotiate.

Negotiating Common Ground - by Sebastian Herweg
Learn how negotiating parties can find and create common ground in any negotiation.

Organisational Sales Process Negotiations - by Jan Potgieter
Learn how to enhance the sales process negotiations strategy of your organisation. Increase your negotiator capability by using the support tools to achieve a better result.

Negotiation as a Corporate Capability (Part I of II) - by Jan Potgieter
This article discusses how to increase the negotiations and skills capability and knowledge base in the organisational sales process with all your clients.

Negotiation Across Cultural Boundaries - by Professor Manie Spoelstra
This article dicusses how a negotiator should approach the differences found in other cultures. Learn about the importance of physical gestures, physical contact, time, silence and much more.

Book Review: Getting to Yes - by Sebastian Herweg
The book review of Getting to Yes will be worthwhile for all negotiators. Learn the principles of negotiation tactics and how to negotiate with other people.

Positive Email Negotiations - by Professor Manie Spoelstra
Discover how to properly use email in your negotiations. Learn how to build rapport and develop a positive relationship by knowing how to create trust in the message you send

Negotiations Strategy - by Jan Potgieter
Every organisation must learn to apply a negotiation strategy with all their clients. Discover the four basic questions to ask in your negotiations process before you begin to negotiate.

Stealing from Dealers: Your Car Negotiation Guide - by Calum Coburn
You wouldn't play poker against a guy called "Vegas", so don't negotiate with a black belt dealer unprepared. Read this guide before setting foot on the dealer's lot.

How to Counter a Negotiator's Tactic (Part 2 of 2) - by Jan Potgieter
Do you know when to walk away while a negotiator uses a tactic against you. Learn how to recognise what the other party might use against you and how to counter any tactic.

Negotiator Differences in the Seller - Buyer Ploy (Part 1 of 2) - by Jan Potgieter
A negotiator might apply a different ploy when acting as either a buyer or a seller. Discover how to use any ploy in either situation to create an opportunity and get a more favourable price with your client

Referent Power Information Expertise - by Jan Potgieter
Expertise conveys integrity in the individual who possesses specialised information. Learn how you might counter the expert and how to understand the limits of their personal referent power

The Coercive and Reward Power Tactic (Part 2 of 3) - by Jan Potgieter
Do you understand the different types of power that can offer rewards, obedience or be used as a threat? Learn the fundamentals of the reward and coercive power tactic

Negotiator Power Authority (Part 1 of 3) - by Jan Potgieter
As a negotiator, do you know the difference between power and authority? Learn how people use their position to influence and interact with their subordinates

What Interview Questions You need to Know - by Professor Manie Spoelstra
Do know what interview questions an employer might ask you? Learn how to turn your meeting into an opportunity and get the position you desire

Rapport Behaviour in Negotiations - by Wayne Berry
Do you know the verbal and body language to gauge your level of rapport in your negotiations? Discover how you can alter your signals and change the level of your interactions.

The Rule of Reciprocation - by Professor Manie Spoelstra
Learn the rule of reciprocation for all your negotiations. Discover when it is best to make a concession, retreat and what obligations are expected of you at the table

Relevant Resume Employment Experience - by Professor Manie Spoelstra
Learn how to make your employment resume stand out by knowing how to use the most relevant qualifications and experience that applies to the job or position

The Vision and Mission of the Organisation Paradigm - by JJ Murphy
Learn the new approach on how an organisation should state its mission, which includes a new perspective on its vision. Discover how effective new business strategies affect the values and focus of today's organisation.

The New Virtual Business Organisation - by JJ Murphy
Learn how the new virtual sciences have impacted the new management organisational paradigm. Discover how online technology has necessitated a re-think of traditional business strategy and how to meet these changes.

Hate Your Job? Here’s How to Leave - by David Westbrook
Leaving your current job shouldn't result in a damaging future career hangover. This article shares the important strategies behind quitting right.

http://www.negotiationtraining.com.au/articles/

Et's Think Turf Panel Discussion on M and A

2008-02-04T01:29:00.000-08:00

October 2007

A panel discussion and mergers and acquisition was organized by Economic Time (ET) and Computer Associates (CA).

Experts said companies must exercise caution not to jump into the M &A bandwagon without a strategic purpose, early preparation and a clear roadmap for integration.

A warning was given that acquisitions can become the winner's curse if merely undertaken for its own sake rather than a compelling need.

Mr. Anil Singhvi, MD Ican Investment Advisors, has said when times are good, bigger mistakes are made. So companies have to be mreo careful.

V.N.Dhoot of Videocon group said taht preparation is the key. At Videocon, executives keep an eye out for companies that might come out for sale in the next few years and study them beforehand. This provides a competitive advantage when a 90-day typical auction window is opened. Acquisitions fail when done without homework.

Standard Charteted Bank's MD of corporate advisory and finance, Sunil Mehra emphasized the importance of integration. The success of an acquisition directly depends on the quality of integration and whether one can digest the acquired firm.

Ashank Desai said frankly that there are no mergers and only acquisitions are there. If the both the companies are of equal size there will be more problems in integration.

John Swainson, President and CEO, CA gave the key note address and said his experience of more than 40 acuisitions points out the need for the integration of information technology infrastructure to make the companies work successfully post integration.

Alcatel-Lucent Post Merger Performance

2008-01-23T20:53:00.000-08:00

Information accesses on 24 Jan 2008 from http://www.alcatel-lucent.com

Incorporated in:
France

Executive Offices:
54 rue la Boétie
Paris 75008, France

Chief Executive Officer:
Patricia Russo

Employees:
79,000* in 130 countries

Stock Listing:
Euronext Paris and NYSE - ALU

Revenues:
€18.3 billion* (CY06)

* after completion of the Thales transaction

Alcatel-Lucent's vision is to enrich people’s lives by transforming the way the world communicates. Born with an unparalleled ability to offer end-to-end communications solutions to our customers, we are focused on enhancing client relationships and enriching the lives of people through communications. Expert, driven, intuitive, innovative, Alcatel-Lucent is the first truly global communications solutions provider, with the most complete end-to-end portfolio of solutions and services in the industry.

About Alcatel-Lucent
Alcatel-Lucent’s vision is to enrich people’s lives by transforming the way the world communicates. Alcatel-Lucent provides solutions that enable service providers, enterprises and governments worldwide, to deliver voice, data and video communication services to end-users. As a leader in fixed, mobile and converged broadband access, carrier and enterprise IP technologies, applications, and services, Alcatel-Lucent offers the end-to-end solutions that enable compelling communications services for people at home, at work and on the move.

With 79,000 employees (after the completion of the Thales transaction) and operations in more than 130 countries, Alcatel-Lucent is a local partner with global reach. The company has the most experienced global services team in the industry, and Bell Labs, one of the largest research, technology and innovation organizations focused on communications. Alcatel-Lucent achieved adjusted proforma revenues of Euro 18.3 billion* in 2006, and is incorporated in France, with executive offices located in Paris.

Organization
With a strong focus on complete solutions maximizing value for customers, Alcatel-Lucent is organized around three business groups and two geographic regions. The Carrier Business Group serves fixed, wireless and convergent service providers - as well as enterprises and governments for their business critical communications. The Enterprise Business Group focuses on meeting the needs of business customers. The Services Business Group designs, deploys, manages and maintains networks worldwide. The company's geographic regions are the Americas and Asia-Pacific, Europe, Middle East, and Africa.

Innovation & Technology
Alcatel-Lucent today is one of the largest innovation powerhouses in the communications industry, representing a combined R&D investment of Euro 2.7 billion in 2005, and a portfolio of over 25,000 active patents spanning virtually every technology area. At the core of this innovation is Alcatel-Lucent’s Bell Labs, which brings together Lucent Technologies' Bell Labs and Alcatel’s Research & Innovation organizations, providing Alcatel-Lucent with an innovation engine comprising researchers and scientists at the forefront of research into areas such as multimedia and convergent services and applications, new service delivery architectures and platforms, wireless and wireline, broadband access, packet and optical networking and transport, network security, enterprise networking and communication services and fundamental research in areas such as nanotechnology, algorithmic, and computer sciences.

History
Formed from the merger of Alcatel and Lucent Technologies, Alcatel-Lucent combines two entities that share a common lineage that can be traced back to 1986, when Alcatel’s parent company, CGE (la Compagnie Générale d’Electricité), acquired ITT’s European telecom business. Nearly 60 years earlier, ITT had purchased most of AT&T’s manufacturing operations outside the United States. AT&T was Lucent’s former parent company.

By creating Alcatel-Lucent we are bringing our common lineages back together and starting an exciting new chapter of our history -- creating the world’s first truly global communications solutions provider, with the most complete end-to-end portfolio of solutions and services in the industry.

-------------------

September 2007

Restructuring Plan

Pat Russo, chief executive of Alcatel-Lucent, has been given one month to present an emergency restructuring plan to her board, as well as lay out where the group should focus its future research and sales efforts.

Ms Russo is also being urged to streamline the telecommunications equipment group’s organisational structure, particularly the executive committee, which has grown top heavy since the merger of equals between Alcatel of France and Lucent of the US
Directors believe this has slowed decision-making and helped spark the crisis that has led to three profit warnings in less than 10 months.

The group’s directors met in Paris on Friday for an update on the crisis, where they told Ms Russo to present the information at the next board meeting on October 30. Directors are intersted to know the next step, after the restructuring is done.

Alcatel-Lucent has been struggling with a rapidly deteriorating market in the US, as well as the typical integration problems that beset many mergers. However, some inside the company say management has not been quick enough to make the necessary hard decisions, including a far more radical approach to cost-cutting and the elimination of management and operational duplications.

Per Lindberg, analyst at Dresdner Kleinwort, on Thursday published a research note calling on Alcatel-Lucent to replace Ms Russo with Mike Quigley, former chief operating officer and one-time heir apparent to Mr Tchuruk, who quit last month.

Mr Lindberg, who changed his rating on Alcatel-Lucent from “hold” to “buy”, said the company should consider disposals so as to pay for a more ambitious reduction in its workforce.

Alcatel-Lucent is planning to reduce the workforce by 12,500, but Mr Lindberg said it should be cut by 30,000, so as to bring productivity in line with rivals such as Ericsson.

He added that Alcatel-Lucent should refocus its research and marketing on areas where the company had competitive strength.

“There is little doubt that the merger between Alcatel and Lucent has turned into a veritable fiasco,” said Mr Lindberg.

http://www.ft.com/cms/s/0/4b6ecf2e-6d2f-11dc-ab19-0000779fd2ac.html
----------------------

Patricia Russo was beaming on Dec. 1, 2006, when she appeared at a Paris press conference celebrating her appointment as chief executive officer of Alcatel-Lucent, a $26 billion global telecom equipment giant newly created by an historic Franco-American merger. She has had little reason to smile since then. Alcatel-Lucent (ALU) has posted three consecutive quarterly losses.

On Oct. 31, 2007 the company announced an emergency restructuring plan under which one in five of its 80,000 employees will lose his job by 2009. Shares are down a stomach-churning 50% since January, and five of Russo's top deputies have left the company. Many industry-watchers now say the merger was a mistake.

Russo agrees it has been an awful year for Alcatel-Lucent. But she staunchly defends the merger and cites evidence the worst is now over. Alcatel-Lucent's recent turmoil stems not from bad strategy but from "problems that we're going to work our way out of."

One of those problems, Russo now admits, was that integrating Alcatel and Lucent proved more disruptive than expected. Customers, uncertain about possible changes in the merged company's product lineup, hesitated to place new orders. At the same time many employees were "distracted" by worries their jobs would change or be eliminated, she says.

That opened the door to aggressive competitors such as mobile equipment market leader Ericsson (ERIC) and Huawei Technologies, who have grabbed market share from Alcatel-Lucent's wireless network business. "Our competitors pulled the rug out from under us," Russo says. "They put forward some very aggressive pricing." Some mobile operators jumped ship, and while Alcatel-Lucent was able to hold onto others, it often had to give discounts or concessions that ate up profits.

Profitability also suffered as Alcatel-Lucent tried to streamline its product lineup. Take W-CDMA, the third-generation wireless technology the company adopted as a successor to the so-called CDMA technology central to its U.S. wireless business. Russo says she decided to discontinue much of the W-CDMA gear developed by Alcatel, replacing it with equipment made by a unit of Nortel (NT), which the merged company acquired earlier this year. When customers began changing over to new equipment, Alcatel-Lucent had to absorb much of the cost.

Russo acknowledges too that until a few months ago, some of Alcatel-Lucent's product offerings weren't up to par technologically. "We were late in getting to the refresh of the latest technology" for GSM networks—the second-generation mobile standard used in most countries outside the U.S. The GSM offering was updated several months ago, she says, and now "That business is doing just fine."

Indeed, Russo says many of the problems bedeviling Alcatel-Lucent over the past year are starting to ease. Customers now have clearer information about the merged company's product portfolio. And rivals such as Ericsson can't afford to keep luring customers away with aggressive pricing, as their own profits have tumbled .

According to Russo,Alcatel-Lucent also is powering ahead in developing countries Just this week it won a $1.1 billion contract with two Chinese mobile operators for network equipment. Its fixed-telephone and broadband equipment business, though suffering from the housing slump in the U.S., is generally healthy too. The company remains the world leader in digital subscriber line (DSL) broadband equipment and hopes to translate its big customer footprint and strong carrier relationships into a post position for the coming rollout of optical networks to neighborhoods and homes.

With an eye to falling prices and tightening margins for basic telecom equipment, Russo also is pushing Alcatel-Lucent increasingly into the service and support business, where it already ranks No. 2 globally—behind Ericsson. A team of 20,000 field technicians operating in 130 countries has won Alcatel-Lucent contracts to build and operate fixed and mobile networks for carriers around the world, and services should account for about one-quarter of the company's top line this year, up from 20% in 2006. The services market worldwide is growing at double the rate of telecom equipment.

Russo is confident the company will emerge stronger and more competitive. "This merger still has strategic logic," she says.

http://www.businessweek.com/globalbiz/content/nov2007/gb20071128_204292.htm?chan=top+news_top+news+index_businessweek+exclusives

Is the Worst Over at Alcatel-Lucent?
Business Week, Europe November 28, 2007,

---------------------

M & A Advisors

2008-01-03T21:19:00.000-08:00

Allegiance Capital:

Allegiance Capital Corporation is a full-service investment banking firm specializing in the middle market (companies with revenue from $20 million to $500 million), with offices in Dallas, New York, Minneapolis/St. Paul, Vancouver, British Columbia, Shanghai and Tel Aviv. Through its worldwide network, Allegiance Capital assists companies in every aspect of selling and financing a business, including debt restructuring, mezzanine financing, buy out management, strategic partnering, consulting and other related services. Allegiance Capital differentiates itself by having deep industry knowledge, vast contacts with potential buyers, heavy investment in educating sellers and obtaining premium pricing for clients. For more information, refer to the company website at www.allcapcorp.com.

Allegiance Capital Corporation
David Lonsdale, 214-217-7723
President/Managing Director
dlonsdale@allcapcorp.com
---------------

Mergers and Acquisitions Advisor Awards for 2006

2008-01-03T21:14:00.000-08:00

http://www.manewyorkevent.com/winners2007.pdf

6th Annual Middle-Market M&A Awards Winners

Announced December 11, 2007

Industry/Sector Deals of the Year

Business to Business Services Deal of the Year
Sale of Corillian, Financial Technology Partners

Consumer Services Deal of the Year
Sale of Ria Envia Inc., Manatt, Phelps & Phillips, LLP

Energy Deal of the Year
Acquisition of Markwest Hydrocarbon Inc., Akin Gump Strauss Hauer & Feld

Professional Services Deal of the Year
Acquisition of Honeywell/Dimensions International, Inc., BB&T Capital Markets

Media, Entertainment and Telecom Deal of the Year
Sale of Picture Production Co., Houlihan Lokey Howard & Zukin

Consumer Product Deal of the Year
Sale of Dimensions Holdings Inc., Edgeview Partners

Life Sciences Deal of the Year
Sale of Valeant Pharmaceutical selected assets, FTI Consulting

Retailing Deal of the Year
Tie -
Sale of Stride Rite, Financo, Inc.
Sale of Collective International LP, Financo, Inc.

Computer and Information Technology Deal of the Year, Below $100M
Sale of Xcitek, Marlin & Assoc., LLC.

Computer and Information Technology Deal of the Year, Above $100M
Sale of Latent Zero, Financial Technology Partner

6th Annual Middle-Market
M&A Awards Winners

Financial Services Deal of the Year, Below $100M
Sale of Xcitek, Inc., Marlin & Assoc., LLC

Financial Services Deal of the Year, Above $100M
Sale of Corillian, Financial Technology Partners
Manufacturing Deal of the Year - Consumer Product, Below $100M
Sale of American Furniture Manufacturing Inc., Edgeview Partners

Manufacturing Deal of the Year - Consumer Product, Above $100M
Sale of Wilton Industries, Inc., Robert W. Baird & Co.

Manufacturing Deal of the Year-Industrial, Below $100M
Sale of Aeroglide Corp., Edgeview Partners

Manufacturing Deal of the Year-Industrial, Above $100M
LKQ acquisition of Keystone Automotive Industries, Robert W. Baird & Co.

Firms and Product of the Year

Investment Banking Firm
Marlin & Assoc.

Law Firm of the Year
Akin Gump Strauss Hauer & Feld, LLP

Private Equity Firm of the Year
Sun Capital Partners, Inc.

Due Diligence/Valuation Firm of the Year
Crowe Chizek and Company, LLC

Product of the Year
M&A Acquisition Tool, LexisNexis

Major Awards:

International/Cross Border Deal of the Year, Below $100M
Sale of Hugin ASA, Marlin & Assoc. LLC

International/Cross Border Deal of the Year, Above $100M
Sale of Ria Envia Inc., Manatt, Phelps & Phillips, LLP

Strategic Acquisition of the Year
Tie:
Sale of Stride Rite, Financo, Inc.
Sale of Collective International LP, Financo, Inc

Deal of the Year
Sale of Ria Envia Inc., Manatt, Phelps & Phillips, LLP

Dealmaker of the Year
Steven McLaughlin, Managing Partner, Financial Technology Partners

2007 Lifetime Achievement Award
David T. Morgenthaler

Case RBS - ABN AMRO

2008-01-02T22:43:00.000-08:00

The case needs to be developed. Presently relevant materials are being assembled
-------------------
3rd Jan 2008

THE 71 billion takeover of Dutch bank ABN Amro was a coup. Sir Fred Goodwin, the 49-year-old chief executive of Royal Bank of Scotland (RBS) has been confirmed as the uber-hero of Scottish business and finance. The three-way takeover, in which RBS acquired the Dutch lender's European corporate and investment banking arms as well as its Asian operations, with other parts going to RBS's bidding partners Banco Santander and Fortis, is the largest and most complex banking takeover ever. At a stroke it has transformed RBS into a much more global financial services player, enabling it to narrow the gap with giants such as Citigroup and HSBC.

The most challenging task facing Goodwin and his close colleague Mark Fisher (RBS's director of manufacturing) is to deliver on promises they made to investors during the gruelling takeover battle, which lasted from April to October. This will include dividing up the spoils between the three winning banks without upsetting customers or staff as well as integrating the businesses that RBS has acquired with the Edinburgh-based bank's existing operations - again without alienating ABN Amro's customers or staff.

Given that Goodwin has promised cost savings of 1.3bn a year from the parts of ABN Amro that he is acquiring, job losses are clearly on his agenda. There could be as many as 20,000, and he has said they will not uniquely fall on the previously underperforming Dutch side of the equation.

On December 6, 2007, Goodwin - said: "One of the most important things we've been doing is looking at management structures. One of the things we did after NatWest, and it slows things down a little bit but it's critically important, in making all the management appointments, is to go through an interview process and we involve external consultants in the process, to ensure fairness and also to ensure an appearance of fairness. Once the senior appointments have been made, it removes a lot of uncertainty."

RBS's shares were trading at 705p on February 16, 2007 before Goodwin announced his intention to bid for the Amsterdam-based bank. They have since fallen 39% to 432p.

Admittedly, all bank shares have taken a hammering over worries about exposure to bad debts arising from the sub-prime mortgage crisis. Investors have been fretting about the true level of that exposure, enmeshed as it is in opaque and convoluted financial instruments such as collateralised debt obligations (CDOs), which are basically parcels of debt extended to sub-prime borrowers in the US.

After the $10.5bn acquisition of Ohio-based Charter One Financial in May 2004, Goodwin came in for a similar drubbing from investors, dismayed that he had overpaid for the US bank. Goodwin was forced to promise to steer clear of further big acquisitions and pledged to do more to boost shareholder value, through organic growth, higher dividends and share buybacks. For a couple of years, he kept to his pledges, but when the opportunity to acquire ABN Amro arose last spring, he could not resist having a go.

Writing in the Financial Times in October, Lina Saigol claimed that Goodwin and his Dos Amigos - Emilio Botin, patriarch of Madrid-based Banco Santander and Jean-Paul Votron, boss of Belgian-Dutch bank Fortis - were "driven by ego, conceit and a deep-seated need for power" to plough ahead with the ABN Amro deal even as global capital markets were collapsing. She argued they were paying a 70% premium to ABN Amro's share price prior to the announcement of its abortive tie-up with Barclays. Many critics argue the three bidding banks would have been better advised to walk away or at least lower their offer for ABN Amro. They say they could have invoked a so-called "material adverse change" clause, arguing that the sub-prime crisis - which had yet to erupt when they made their offer in April - had changed the value of ABN Amro for good.

James Eden, bank analyst at Exane BNP Paribas, says: "We did not condone the decision by RBS management to press ahead with the value destructive acquisition of ABN Amro. In our view, it could - and should - have walked away, or at least secured a lower acquisition price."

In October and December he was keen to stress the value that he believes lurks within ABN Amro's international franchise. He also said it had only about £300 million of markdowns on its sub-prime related investments.

Speaking on December 6, Goodwin argued that RBS's prime motivation for the ABN Amro deal was to diversify its asset base and give the Edinburgh bank a wider range of strategic options. "What we've been trying to do for a long time now is build a group that has sufficient diversification in its income streams that we've opportunity to participate in growth whenever and wherever it happens No single economy is ever going to be booming all the time but having a finger in a greater number of pies gives us a greater opportunity to deliver sustainable good quality earnings."

On that occasion Goodwin also took the opportunity to reassure investors that RBS's annual results for 2007 (due in February) will be ahead of analysts' estimates - in other words more than £10 billion - and that the merged bank's exposure to the whole sub-prime mess would be much lower than had been feared. Overall, he said the bank will write-off about £1.5bn because of its exposure to the toxic tide and that large areas of RBS are performing strongly.

After biting his tongue for several weeks while the brickbats fell all around, Goodwin clearly relished being able to deliver a much more positive story than many in Square Mile had expected on December 6. He said: "It hasn't exactly been beer and skittles this year but we're anticipating a strong set of results. I think you'll see in the body of the pre-close trading statement a comment suggesting that when you strip out the markdowns and the gains, you'll see a growth trajectory that's pretty consistent."

Goodwin is also surprisingly upbeat about the outlook for the UK economy - which some believe will follow the US into recession. "It is not in bad shape," he says. "Slowing down never feels as good as speeding up or being at a constant speed. From our customers' perspective it doesn't look too bad. Obviously the retailers are all looking to see anxiously what happened over the Christmas period but touch wood so far so good. We're seeing some very high levels of credit-card spend."

Nor does Goodwin believe the crisis at Northern Rock will affect consumer confidence or cause people to leave their credit cards at home. He says: "Insofar as there's any damage from Northern Rock, I think it's more to do with international perceptions of the UK financial services industry. I don't think it will affect the behaviour of the consumers in the UK because no consumers have lost any money as a result of Northern Rock."

He also points out that RBS has been a major beneficiary of the Newcastle-based lender's collapse, with many depositors shifting savings to RBS and NatWest as part of a "flight to quality". Overall, he says, RBS saw inflows of more than £1bn during September (the month in which Northern Rock collapsed).

Goodwin was rumoured to have been approached to take over from Charles "Chuck" Prince as chief executive of Citigroup. Even though such a move would see him multiply his remuneration package tenfold, Goodwin is seen as unlikely to want to take over the reins at the New York-based banking giant. He recognises that his job at RBS is far from complete. As long as he can apply the same ruthless determination to integrating ABN Amro as he applied to the integration of NatWest, he will almost certainly be able to prove his critics wrong.

Excerpts from the article from Sunday Herald, 3 Jan 2008
http://www.sundayherald.com/business/businessnews/display.var.1932743.0.goodwin_hunting.php
-----------------

Analysis of M&A Deals in 2007

2008-01-01T22:00:00.000-08:00

Article in McKinsey Quarterly Winter 2008 Issue

Global deal making n 2007: is the boom in M&As over?
Antonio Capaldo, Richard Dobbs, and Hannu Suonio

Announced mergers reached $4.4 trillion globally in the first 11 months of 2007.

Merger activity plunged about 40% from the second to the third quater.

The slowdown was concentrated mainly in PE sector. Corporate M&A lost none of its vigour.

The PE volume fell by 50%. Before the credit crunch in August 2007, PE activity reached unprecedented levels, four times higher than it had been during the previous peak, in 2000. It represented more than 20% of M&A activity in the current boom.

Cross border activity now represents 40% of globla M&A up from 20% in 2000 and 30% in 2005.

Companies in emerging markets are active in cross border deals as buyers and sellers. Asia and West Asia now account for 15% of the global volumes. The volume increases in 2007 over 2006 in India, China and West Asia are 110%, 47% and 38% respectively.

The major global deals in Asia are Tata-Corus and Vodafone-Hutchinson Essar.

Mega deals defined as deals with a value of more than $10 billion contributed 30% of 2007 volume. That is above 10-year average of 20%. The number of deals was 45 in 2007 versus 54 in 2006.

Hostile takeovers generated 12% of global volume. This considerably higher than the 10-year average of 3%.

The year's average deal value added (DVA)-our measure of total value created for buyer and seller-reached 6.5%, well above the levels of previous two years.

The interesting finding is that acquirers' DVA has gone up from an average of -7.0% (1997-2004) to around 0.5% during the past three years. By contrast, the DVA for the shareholders of target companies, has remained largely stable, at 10%, throughout the past decade.

The standard deviation of DVAs reached 32%, significantly higher than it has been in all recent years except the 2000 peak.

The shares of bad deals (deals having DVA fo less than -15%0 reached a surprising 17% of total deals in 2007. This is three times more than the level in 2006 and it is around the level in late 1990s which was characterized by a significant overall destruction of value from bad M&A.

Average premiums paid decreased to 18% from 19% in 2006.
------------
Mint published one more article on 3 Jan 2008 on deals in 2007 pages 19,20

Deals totalled $4.5 trillion, 24% increase from 2006. (Thompson Financial)
Number of deals totalled 42,364 in 2007 versus 38,602 in 2006.

Each quarter more than 10,000 deals were announced.
Deals peaked in second quarter 11,082
last quarter 10,027

Eupore deals $1.8 trillion more than $1.7 trillion of USA.

Frank Yeary head of globla M&A for Citigroup
H. Boon Sim Head of Americas M&A group at Credit suisse
Doug Braunstein Head of IB americas for J P Morgan
Pero Novelli, Head of globla M&A, UBS AG

Sovereign wealth funds invested $60 billion

Biggest LBO $32.1 billion by KKR led consortium of TXU corp.

Also bid of $35.3 billion for BCE by an investor group that includes Providence Equity Partners

BHP Billioton's $145 billion offer for rival Rio Tinto

Top Advisors
2007

Goldman Sachs
Morgan Stanley
Citigroup
J P Morgan
UBS
Credit Suisse Group

Top Legal Advisors

London's Allen and Overry LLP
Sullivan & Cromwell LLP of NY
Freshfields Bruckhaus Deringer LLP of london
Skadden, Arps, Slate, Meagher & flom LLP of NY
Linlaters LLP of london
Clifford Chance LLP london

*Deallogic reported $4.7 billion for 2007

Top M&A Deals of 2007

2008-01-01T21:47:00.000-08:00

Rank --- Partners *** Date ====== Value, US$m
1 AstraZeneca - MedImmune *** Apr '07===== $15,600
2 Schering-Plough - Organon*** Mar '07 $14,500
3 Siemens - Dade-Behring*** Jul '07 $7,000
4 Merck Serono - Mylan*** May '07 $6,700
5 Hologic - Cytyc*** May '07 $6,200
6 Nestle - Gerber Products*** Apr '07 $5,500
7 Warburg P. - Bausch & Lomb*** May '07 $4,500
8 Mitsubishi - Tanabe*** Feb '07 $4,300
9 Eisai - MGI Pharma*** Dec '07 £3,900
10 Blackstone - Cardinal Hea.*** Jan '07 $3,300
11 Roche - Ventana ***Jun '07 $3,000
12 Celgene - Pharmion*** Nov '07 $2,900
13 Shire - New River*** Feb '07 $2,600
14 Nestle - Novartis*** Jul '07 $2,500
15 Reckitt - Adam Resp.*** Dec '07 £2,300
16 Inverness Med In - Biosite ***May '07 $1,700
17 GSK - Reliant ***Nov '07 $1,650
18 Qiagen - Digene ***Jun '07 $1,600
19 EQT - Dako Feb ***'07 $1,300
20 Axcan - TPG Capital ***Nov '07 $1,300

Source: CurrentPartnering, 2007
http://www.currentpartnering.com/scorecard/scorecardmanda2007

M&A scorecard in detail
1. AstraZeneca - MedImmune

Acquisition - Headline value: $15,600m
Apr '07

AstraZeneca has entered into a definitive agreement to acquire MedImmune, in an all-cash transaction.

Under the terms of the agreement, which has unanimous MedImmune Board support, AstraZeneca will acquire all of the fully diluted shares of MedImmune common stock at a price of $58 per share, for a total consideration of approximately $15.6 billion (including approximately $340m net cash).

2. Schering-Plough - Organon

Acquisition - Headline value: $14,500m
Mar '07

Akzo Nobel announced that it received an offer for the purchase of its wholly owned subsidiary Organon BioSciences NV from Schering-Plough for EUR 11 billion in cash.

3. Siemens - Dade-Behring

Merger - Headline value: $7,000m
Jul '07

Dade Behring Holdings and Siemens have entered into a definitive merger agreement under which Siemens will acquire all of the outstanding shares of Dade Behring for $77.00 per share in cash.

Dade Behring realized sales of approx. $1.7 billion in fiscal year 2006 and an EBIT of $201 million including $21 million restructuring expense.

Closing is expected in the second quarter of fiscal year 2008. Completion of the merger is subject to receipt of regulatory approvals and other customary closing conditions.

http://www.siemens.by/en/press/releases/2007/behring/

http://www.healthcareitnews.com/story.cms?id=7484

4. Merck Serono - Mylan

Acquisition - asset - Headline value: $6,700m

May '07

Mylan Laboratories and Merck KGaA announced the signing of a definitive agreement under which Mylan will acquire Merck's generics business for EUR 4.9 billion ($6.7 billion) in an all-cash transaction.

5. Hologic - Cytyc

Merger - Headline value: $6,200m

Hologic and Cytyc announced a definitive agreement to combine the two companies in a cash and stock transaction.

Under the terms of the merger agreement, Cytyc shareholders will receive 0.52 shares of Hologic common stock and $16.50 in cash for each share of Cytyc common stock they own. Based on the companies’ closing stock prices on May 18, 2007, this represents $46.46 per share of consideration to be received by Cytyc shareholders, or a total consideration of approximately $6.2 billion; the consideration represents a premium of approximately 33%.

6. Nestle - Gerber Products

Acquisition - asset - Headline value: $5,500m

Apr '07

Novartis has signed a definitive agreement to sell its Gerber baby food business to Nestlé for USD 5.5 billion in cash.

http://www.hellocompany.org/entry/nestle-to-acquire-gerber-for-55-billion/
http://www.nytimes.com/2007/04/13/business/13gerber.html?_r=1&oref=slogin

7. Warburg Pincus - Bausch & Lomb

Acquisition - Private equity - Headline value: $4,500m

Bausch & Lomb has entered into a definitive merger agreement with affiliates of Warburg Pincus, in a transaction valued at approximately $4.5 billion, including approximately $830 million of debt.

Under the terms of the agreement, affiliates of Warburg Pincus will acquire all of the outstanding shares of Bausch & Lomb common stock for $65.00 per share in cash. This represents a premium of approximately 26% over the volume weighted average price of Bausch & Lomb's shares for 30 days prior to press reports of rumors regarding a potential acquisition of the Company.

8. Mitsubishi - Tanabe

Merger - Headline value: $4,300m

Mitsubishi Pharma and Tanabe Seiyaku along with Mitsubishi Chemical Holdings have reached a basic agreement on the proposed merger between Mitsubishi Pharma and Tanabe Seiyaku, effective October 1, 2007.

9. Eisai - MGI Pharma

Acquisition - Headline value: $3,900m

The merger agreement has been unanimously approved by the MGI PHARMA Board of Directors. The acquisition is expected to occur by means of a tender offer followed by a cash merger, is subject to customary closing conditions and regulatory approvals, and is expected to be completed during the first quarter of 2008.

10. Blackstone - Cardinal Health

Acquisition - asset - private equity - Headline value: $3,300m

Cardinal Health has reached an agreement to sell its Pharmaceutical Technologies and Services segment to The Blackstone Group for approximately $3.3 billion in cash.

11. Roche - Ventana

Acquisition - Headline value: $3,000m

Roche make a tender offer to acquire all outstanding shares of common stock of Ventana Medical Systems.

Under the terms of the tender offer, Roche is offering to acquire Ventana for $75.00 per share in cash, or an aggregate of approximately $3 billion. This offer represents a 44% premium to Ventana's close of $51.95 on June 22, 2007 (the last trading day before Roche submitted its proposal in writing to Ventana) and a 55% premium to its three-month average of $48.30.

12. Celgene - Pharmion

Acquisition - Headline value: $2,900m

Celgene Corporation and Pharmion Corporation have jointly announced the signing of a definitive merger agreement pursuant to which Celgene has agreed to acquire Pharmion.

Under the terms of the merger agreement, Celgene will acquire all of the outstanding shares of Pharmion common stock for $72.00 per share payable in a combination of cash and shares of Celgene common stock. The transaction is expected to be slightly dilutive to earnings in 2008 and accretive in 2009 and beyond.

13. Shire - New River

Acquisition - Headline value: $2,600m

Shire has agreed to acquire New River Pharmaceuticals for $64 per New River share, or approximately $2.6 billion in total, in an all cash transaction unanimously recommended by the Boards of both companies.

14. Nestle - Novartis

Acquisition - asset - Headline value: $2,500m

Novartis has completed the sale of its Medical Nutrition business to Nestlé for USD 2.5 billion, one of the final steps in a divestment program to focus the Group’s strategy on healthcare with pharmaceuticals at the core.

15. Reckitt Benckiser - Adams Respiratory Therpaeutics

Acquisition - Headline value: $2,300m

A definitive agreement under which Reckitt Benckiser will tender for the acquisition of Adams for $60 per share in cash, representing a total consideration for Adams' fully diluted share capital of approximately $2.3bn (1.1bn pounds Sterling). This transaction will be financed by Reckitt Benckiser by cash on hand and existing credit facilities.

16. Inverness Medical Innovation - Biosite

Merger - Headline value: $1,700m

Biosite has received a binding offer from Inverness Medical Innovations to enter into a merger transaction pursuant to which Inverness would acquire 100% of the outstanding shares of common stock of Biosite, other than Biosite shares already owned by Inverness, for $90.00 per share in cash.

17. GSK - Reliant

Acquisition - Headline value: $1,650m

GlaxoSmithKline and Reliant Pharmaceuticals reached an agreement under which Reliant will be acquired by GSK for $1.65 billion in cash.

Reliant, a privately held specialty pharmaceutical company focused on cardiovascular therapies, recorded net sales of $341 million in the nine months ending September 30, 2007, an increase of 62% over the comparable time period a year earlier.

GSK expects the transaction will be slightly accretive to earnings in 2008, excluding integration costs, and will create additional value in following years.

18. Qiagen - Digene

Acquisition - Headline value: $1,600m

QIAGEN and Digene Corp announced a definitive agreement to combine the two companies to create market- and technology-leadership in molecular diagnostics.

Under the terms of the agreement, the transaction will be effected as an exchange offer, followed by a merger of Digene into a subsidiary of QIAGEN. The acquisition consideration will consist of cash and QIAGEN stock, and Digene shareholders may elect to receive for each Digene share either US$61.25 in cash or 3.545 shares of QIAGEN stock, subject to pro-ration so that the total consideration issued for Digene stock consists of 55% cash and 45% QIAGEN stock. Based on the companies' closing stock prices on June 1, 2007, the US$61.25 per share of consideration to be received by Digene shareholders represents a premium of 37% and total equity consideration of approximately US$1.6 billion, which includes US$170 million in cash.

It is anticipated that the stock portion of the consideration will be tax-free to Digene shareholders and QIAGEN shareholders will own approximately 78% of the combined company on a fully diluted basis, and Digene shareholders will own approximately 22%.

19. EQT - Dako

Acquisition - private equity - Headline value: $1,300m

EQT V has signed a definitive agreement to acquire 100% of Dako, a leading Denmark-based supplier of systems for cancer diagnostics in pathology laboratories. The total consideration for the transaction is DKK 7.25 billion.

20. Axcan - TPG Capital

Acquisition - private equity - Headline value: $1,300m

An all-cash transaction with a total value of approximately US$1.3 billion.

Under the terms of the transaction, TPG Capital and its affiliates will acquire all of the common shares of Axcan for an offer price of US$23.35 per common share. The purchase price represents a 28 percent premium over the average trading price of Axcan's common shares on November 28, 2007, the last trading day on the NASDAQ prior to this announcement. Axcan anticipates that the transaction will be completed in the first calendar quarter of 2008.

Why so many PE deals are blowing up?

2007-12-09T20:24:00.000-08:00

This question was addressed by jack and Suzy Welch. Reference Mint, Campaign, 10 Dec 2007, Page C8

They say material adverse change clause is being invoked by buyers due to the credit constraints they are facing now. The MAC clause is vaguely worded and they emphasize on CEO taking interest in the contract till the last word rather than leaving it to lawyers. When stakes are high, you have no choice but to be there till the end.

Possible litigations mentioned:

Sallie Mae, Inc. vs. JC Flowers & Co., PE firm
United Rentals vs. Cerberus capital management, PE firm

Takeover Code - India - 1

2007-12-06T02:37:00.002-08:00

SECURITIES AND EXCHANGE BOARD OF INDIA
(SUBSTANTIAL ACQUISTION OF SHARES AND TAKEOVERS)
REGULATIONS, 1997

Some Important Provisions

CHAPTER I

PRELIMINARY
Short title and commencement

1 (1) These Regulations shall be called the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
(2) These Regulations shall come into force on the date of their publication in the Official Gazette.

Definitions

2 (1) In these Regulations, unless the context otherwise requires:-
(a) "Act" means the Securities and Exchange Board of India Act, 1992 (15 of 1992);
(b) "acquirer" means any person who, directly or indirectly, acquires or agrees to acquire shares or voting rights in the target company, or acquires or agrees to acquire control over the target company, either by himself or with any person acting in concert with the acquirer;
(c) "control" shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner;
["Explanation:(i) Where there are two or more persons in control over the target company, the cesser of any one of such persons from such control shall not be deemed to be a change in control of management nor shall any change in the natureand quantum of control amongst them constitute change in control of management.
Provided that the transfer from joint control to sole control iseffected in accordance with clause (e) of sub - regulation (1) of regulation3.
(ii). If consequent upon change in control of the target companyin accordance with regulation 3, the control acquired is equal to or lessthan the control exercised by person (s) prior to such acquisition of control,such control shall not be deemed to be a change in control".]
(cc) "disinvestment" means the sale by the Central Government 3[orby the State Government as the case may be] of its shares or voting rights and / or control in a listed Public Sector Undertaking;]

(d) "investigating officer" means any person appointed by the Board under Regulation 38;

(e) "person acting in concert" comprises, -
(1) persons who, for a common objective or purpose of substantial acquisition of shares or voting rights or gaining control over the target company, pursuant to an agreement or understanding (formal or informal),directly or indirectly co-operate by acquiring or agreeing to acquire shares or voting rights in the target company or control over the target company.
(2) Without prejudice to the generality of this definition, the following persons will be deemed to be persons acting in concert with other persons in the same category, unless the contrary is established :
(i) a company, its holding company, or subsidiary of such company or company under the same management either individually or together with each other;
(ii) a company with any of its directors, or any person entrusted with the management of the funds of the company;
(iii) directors of companies referred to in sub-clause(i) of clause (2) and their associates;
(iv) mutual fund with sponsor or trustee or asset management company;
(v) foreign institutional investors with sub account(s);
(vi) merchant bankers with their client(s) as acquirer;
(vii) portfolio managers with their client(s) as acquirer;
(viii) venture capital funds with sponsors;
(ix) banks with financial advisers, stock brokers of the acquirer, or any company which is a holding company, subsidiary or relative of the acquirer.
Provided that sub-clause (ix)shall not apply to a bank whose sole relationship with the acquirer or with any company, which is a holding company or a subsidiary of the acquirer or with a relative of the acquirer, is by way of providing normal commercial banking services or such activities in connection with the offer such as confirming availability of funds, handling acceptances and other registration work.
(x) any investment company with any person who has an interest as director, fund manager, trustee, or as a shareholder having not less than 2% of the paid-up capital of that company or with any other investment company in which such person or his associate holds not less than 2% of the paid up capital of the latter company.
Note: For the purposes of this clause `associate' means:
(a) any relative of that person within the meaning of section 6 of the Companies Act, 1956 (1 of 1956); and
(b) family trusts and Hindu Undivided Families.
(f) "offer period" means the period between the date of entering into Memorandum of Understanding or the public announcement, as the case may be and the date of completion of offer formalities relating to the offer made under these regulations.];
(g) "panel" means a panel constituted by the Board for the purpose of Regulation4;
5
(h)."Promoter" means -

(a) any person who is in control of the target company;
(b) any person named as promoter in any offer document of the target company or any shareholding pattern filed by the target company with the stock exchanges pursuant to the Listing Agreement, whichever is later;
and includes any person belonging to the promoter group as mentioned in Explanation I:
Provided that a director or officer of the target company or any other person shall not be a promoter, if he is acting as such merely in his professional capacity.
Explanation I: For the purpose of this clause, 'promoter group' shall include:
(a) in case promoter is a body corporate -
(i) a subsidiary or holding company of that body corporate;
(ii) any company in which the promoter holds 10% or more of the equity capital or which holds 10% or more of the equity capital of the promoter;
(iii) any company in which a group of individuals or companies or combinations thereof who holds 20% or more of the equity capital in that company also holds 20% or more of the equity capital of the target company; and
(b) in case the promoter is an individual -
(i) the spouse of that person, or any parent, brother, sister or child of that person or of his spouse;
(ii) any company in which 10% or more of the share capital is held by the promoter or an immediate relative of the promoter or a firm or HUF in which the promoter or any one or more of his immediate relative is a member;
(iii) any company in which a company specified in (i) above, holds 10% or more, of the share capital; and
(iv) any HUF or firm in which the aggregate share of the promoter and his immediate relatives is equal to or more than 10% of the total.
Explanation II: Financial Institutions, Scheduled Banks, Foreign Institutional Investors (FIIs) and Mutual Funds shall not be deemed to be a promoter or promoter group merely by virtue of their shareholding. Provided that the Financial Institutions, Scheduled Banks and Foreign Institutional Investors (FIIs) shall be treated as promoters or promoter group for the subsidiaries or companies promoted by them or mutual funds sponsored by them.

(i) "public financial institution" means a public financial institution as defined in Section 4A of the Companies Act, 1956.
(ii)"Public Sector Undertaking" means a company in which the Central Government7[or a State Government holds 50% or more of its equity capital or is in control of the company;

(j)"public shareholding" means shareholding held by persons other than promoters as defined under clause (h)
(k) "shares" means shares in the share capital of a company carrying voting rights and includes any security which would entitle the holder to receive shares with voting rights 8[but shall not include preference shares].

(l) "sick industrial company" shall have the same meaning assigned to it in clause (o) of sub-section (1) of Section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) or any statutory re-enactment thereof.

(m) "state level financial institution" means a state financial corporation established under Section 3 of the State Financial Institutions Act, 1951and includes development corporation established as a company by a State Government with the object of development of industries or agricultural activities in the state;

(n) "stock exchange" means a stock exchange which has been granted recognition under Section 4 of the Securities Contracts (Regulation) Act, 1956 (42of 1956);

(o) "target company" means a listed company whose shares or voting rights or control is directly or indirectly acquired or is being acquired;

(p) "working days" shall mean the working days of the Board."]

(2) All other expressions unless defined herein shall have the same meaning as have been assigned to them under the Act or the Securities Contracts (Regulation) Act, 1956, or the Companies Act, 1956, or any statutory modification or reenactment thereto, as the case may be.

The Takeover Panel

4. (1) The Board shall for the purposes of this Regulation constitute a Panel of majority of independent persons from within the categories mentioned in sub-section (5) of Section 4 of the Act.
(2) For seeking exemption underclause (l) of sub-regulation (1) of Regulation (3), the acquirer shall file an application 27[supported by a duly sworn affidavit] with the Board, giving details of the proposed acquisition and the grounds on which the exemption has been sought.[Formatof application]
(3) The acquirer shall, along with the application referred to under sub pay a fee of 27a [one lakh rupees] to the Board, either by a bankers cheque or demand draft in favor of the Securities and Exchange Board of India, payable at Mumbai.
(4) The Board shall within 5 days of the receipt of an application under sub-regulation(2) forward the application to the Panel.
(5) The Panel shall within 15 days from the date of receipt of application make a recommendation on the application to the Board.
(6) The Board shall after affording reasonable opportunity to the concerned parties and after considering all the relevant facts including the recommendations, if any, pass a reasoned order on the application under sub-regulation (2) within 30days thereof.
(7) The order of the Board under sub-regulation(6) shall be published by the Board.

CHAPTER II

DISCLOSURES OF SHAREHOLDING AND CONTROL IN A LISTED COMPANY

Acquisition of 5% and more shares of a company
7.(1) Any acquirer, who acquires shares or voting rights which(taken together with shares or voting rights, if any, held by him) would entitle him to more than five per cent or ten per cent. or fourteen percent.28aor fifty four per cent. or seventy four per cent shares or voting rights ina company, in any manner whatsoever, shall disclose at every stage the aggregate of his shareholding or voting rights in that company to the company and to the stock exchanges where shares of the target company are listed.]
(1A) Any acquirer who has acquired shares or voting rights of a company under sub-regulation(1) of regulation 11, shall disclose purchase or sale aggregating two percent. or more of the share capital of the target company to the target company, and the stock exchanges where shares of the target company are listed within two days of such purchase or sale along with the aggregate shareholding after such acquisition or sale.]
[Explanation- for the purposes of sub-regulations (1) and (1A), the term 'acquirer? shall include a pledgee, other than a bank or a financial institution and such pledgee shall make disclosure to the target company and the stock exchange within two days of creation of pledge.]
(2) The disclosures mentioned in 31*[sub-regulations(1) and (1A)] shall be made within 32[twodays], -
(a) the receipt of intimation of allotment of shares; or
(b) the acquisition of shares or voting rights, as the case may be.
(2A) The stock exchange shall immediately display the information received from the acquirer under sub-regulations (1) and (1A) on the trading screen, the notice board and also on its website.]
(3) Every company, whose shares are acquired in a manner referred to in 34*[sub-regulation(1) and (1A)] shall disclose to all the stock exchanges on which the shares of the said company are listed the aggregate number of shares held by each of such persons referred above within seven days of receipt of information under35*[sub-regulations(1) and (1A)]

Continual disclosures

8. (1) Every person, including a person mentioned in Regulation6 who holds more than
fifteen percent shares or voting rights in any company, shall, within 21 days from the financial year ending March 31, make yearly disclosures to the company, in respect of his holdings as on 31st March.
(2) A promoter or every person having control over a company shall, within 21 days from the financial year ending March31, as well as the record date of the company for the purposes of declaration of dividend, disclose the number and percentage of shares or voting rights held by him and by persons acting in concert with him, in that company to the company.
(3) Every company whose shares are listed on a stock exchange, shall within 30 days from the financial year ending March 31, as well as the record date of the company for the purposes of declaration of dividend, make yearly disclosures to all the stock exchanges on which the shares of the company are listed, the changes, if any, in respect of the holdings of the persons referred to under sub-regulation (1) and also holdings of promoters or person(s) having control over the company as on 31st March.
(4) Every company whose shares are listed on a stock exchange shall maintain a register in the specified format to record the information received under sub-regulation(3) of Regulation 6, sub-regulation (1) of Regulation7 and sub-regulation (2) of Regulation 8.

CHAPTER III

SUBSTANTIAL ACQUISITION OF SHARES OR VOTING RIGHTS IN AND ACQUISITIONOF CONTROL OVER A LISTED COMPANY

Acquisition of fifteen or more of the shares or voting rights of any company.

10. No acquirer shall acquire shares or voting rights which (taken together with shares or voting rights, if any, held by him or by persons acting in concert with him), entitle such acquirer to exercise fifteen percent or more of the voting rights in a company, unless such acquirer makes a public announcement to acquire shares of such company in accordance with the Regulations.

Consolidation of holdings

11. (1) No acquirer who, together with persons acting in concert with him, has acquired, in accordance with the provisions of law, 15per cent or more but less than fiftyfive per cent.(55%) of the shares or voting rights in a company, shall acquire, either by himself or through or with persons acting in concert with him, additional shares or voting rights entitling him to exercise more than 5%of the voting rights, in any financial year ending on 31st March, unless such acquirer makes a public announcement to acquire shares in accordance with the Regulations.

(2) No acquirer, who together with persons acting in concert with him holds, fifty five per cent. (55%) or more but less than seventy five per cent. (75%) of the shares or voting rights in a target company, shall acquire either by himself or through persons acting in concert with him any additional shares or voting rights therein, unless he makes a public announcement to acquire shares in accordance with these Regulations:
Provided that in a case where the target company had obtained listing of its shares by making an offer of at least ten per cent. (10%) of issue size to the public in terms of clause (b) of sub-rule (2) of rule 19 of the Securities Contracts (Regulation) Rules, 1957, or in terms of any relaxation granted from strict enforcement of the said rule, this sub-regulation shall apply as if for the words and figures ?seventy five per cent. (75%)?, the words and figures ?ninety per cent. (90%)? were substituted.

(2A) Where an acquirer who (together with persons acting in concert with him) holds fifty five per cent. (55%) or more but less than seventy five per cent. (75%) of the shares or voting rights in a target company, is desirous of consolidating his holding while ensuring that the public shareholding in the target company does not fall below the minimum level permitted by the Listing Agreement, he may do so only by making a public announcement in accordance with these regulations:
Provided that in a case where the target company had obtained listing of its shares by making an offer of at least ten per cent. (10%) of issue size to the public in terms of clause (b) of sub-rule (2) of rule 19 of the Securities Contracts (Regulation) Rules, 1957, or in terms of any relaxation granted from strict enforcement of the said rule, this sub-regulation shall apply as if for the words and figures ?seventy five per cent. (75%)?, the words and figures ?ninety per cent. (90%)? were substituted.
43*[ (3)Not withstanding anything contained in Regulations10, 11 and 12, in case of disinvestment of a Public Sector Undertaking , an acquirer who together with persons acting in concert with him, has made a public announcement, shall not be required to make another public announcement at the subsequent stage of further acquisition of shares or voting rights or control of the Public Sector Undertaking provided:-
(i) both the acquirer and the seller are the same at all the stages of acquisition, and
(ii) disclosures regarding all the stages of acquisition, if any, are made in the letter of offer issued in terms of Regulation 18 and in the first public announcement.]
Explanation:- For the purposes of Regulation 10 andRegulation11, acquisition shall mean and include,-
(a) direct acquisition in a listed company to which the Regulations apply;
(b) indirect acquisition by virtue of acquisition of44[*]companies, whether listed or unlisted, whether in India or abroad.
Acquisition of control over a company
12. Irrespective of whether or not there has been any acquisition of shares or voting rights in a company, no acquirer shall acquire control over the target company, unless such person makes a public announcement to acquire shares and acquires such shares in accordance with the Regulations.
Provided that nothing contained herein shall apply to any change in control which takes place in pursuance to a 45[special resolution] passed by the shareholders in a general meeting.
46["Provided further that for passing of the special resolution facility of voting through postal ballot as specified under the Companies (Passing of the Resolutions by Postal Ballot) Rules, 2001 shall also be provided.]
Explanation:
47[For the purposes of this Regulation, acquisition shall include direct or indirect acquisition of control of target company by virtue of acquisition of companies, whether listed or unlisted and whether in India or abroad]
Appointment of a Merchant Banker
13. Before making any public announcement of offer referred to in Regulation10 or Regulation 11 or Regulation12, the acquirer shall appoint a merchant banker in Category-I holding a certificate of registration granted by the Board, who is not associate of or group of the acquirer or the target company
Timing of the Public Announcement of Offer
14. (1) The public announcement referred to in Regulation10 or Regulation 11 shall be made by the merchantbanker not later than four working days of entering into an agreement for acquisition of shares or voting rights or deciding to acquire shares or voting rights exceeding the respective percentage specified therein:
48*[Provided that in case of disinvestment of a Public Sector Undertaking, the public announcement shall be made by the merchant banker not later than 4 working days of the acquirer executing the Share Purchase Agreement or Shareholders Agreement with the Central Government 49[or the State Government as the case may be] for the acquisition of shares or voting rights exceeding the percentage of share holding referred to in Regulation 10 or Regulation11 or the transfer of control over a target Public Sector Undertaking]
(2) In case of an acquirer acquiring securities, including Global Depositories Receipts or American Depository Receipts which, when taken together with the voting rights, if any already held by him or persons acting in concert with him, would entitle him to voting rights, exceeding the percentage specified in Regulation 10 or Regulation11, the public announcement referred to in sub-regulation(1) shall be made not later than four working days before he acquires voting rights on such securities upon conversion, or exercise of option, as the case may be.
(3) The public announcement referred to in Regulation12 shall be made by the merchant banker not later than four working days after any such change or changes are decided to be made as would result in the acquisition of control over the target company by the acquirer.
50[(4) Incase of indirect acquisition or change in control, a public announcement shall be made by the acquirer within three months of consummation of such acquisition or change in control or restructuring of the parent or the company holding shares of or control over the target company in India.]
Public Announcement of Offer
15. (1) The public announcement to be made under Regulations10 or Regulation 11 or Regulation12 shall be made in all editions of one English national daily with wide circulation, one Hindi national daily with wide circulation and a regional language daily with wide circulation at the place where the registered office of the target company is situated and at the place of the stock exchange where the shares of the target company are most frequently traded.
51[2) Simultaneously with publication of the announcement in the newspaper in terms of sub-regulation (1), a copy of the public announcement shall be,
(i) submitted to the Board through the merchant banker,
(ii) sent to all the stock exchanges on which the shares of the company are listed for being notified on the notice board,
(iii) sent to the target company at its registered office for being placed before the Board of Directors of the company.]
52[(3)]
?(4) The offer under these Regulations shall be deemed to have been made on the date on which the public announcement has appeared in any of the newspapers referred to in sub-regulation (1).
Contents of the Public Announcement of Offer
16. The public announcement referred to in Regulations 10 orRegulation11 or Regulation 12 shall contain the following particulars, namely :-
(i) the paid up share capital of the target company, the number of fully paid up and partly paid up shares;
(ii) the total number and percentage of shares proposed to be acquired from the public, subject to a minimum as specified in sub-regulation(1) of Regulation 21;
(iii) the minimum offer price for each fully paid-up or partly paid up share;
(iv) mode of payment of consideration;
(v) the identity of the acquirer(s) and in case the acquirer is a company or companies, the identity of the promoters and, or the persons having control over such company(ies) and the group, if any, to which the company(ies) belong;
(vi) the existing holding, if any, of the acquirer in the shares of the target company, including holdings of persons acting in concert with him;
52a(via)the existing shareholding, if any, of the merchant banker in the target company ;
(vii) salient features of the agreement, if any, such as the date, the name of the seller, the price at which the shares are being acquired, the manner of payment of the consideration and the number and percentage of shares in respect of which he acquirer has entered into the agreement to acquire the shares or the consideration, monetary or otherwise, for the acquisition of control over the target company, as the case maybe;
(viii) the highest and the average price paid by the acquirer or persons acting in concert with him for acquisition, if any, of shares of the target company made by him during the twelve month period prior to the date of public announcement;
(ix) Object and purpose of the acquisition of the shares and future plans, if any, of the acquirer for the target company, including disclosures whether the acquirer proposes to dispose of or otherwise encumber any assets of the target company in the succeeding two years, except in the ordinary course of business of the target company
Provided that where the future plans are set out , the public announcement shall also set out how the acquirers propose to implement such future plans.
53["Provided further that the acquirer shall not sell, dispose of or otherwise encumber any substantial asset of the target company except with the prior approval of the shareholders.
(ixa) an undertaking that the acquirer shall not sell, dispose of or otherwise encumber any substantial asset of the target company except with the prior approval of the shareholders.]
(x) the `specified date' as mentioned in Regulation19;
(xi) the date by which individual letters of offer would be posted to each of the shareholders;
(xii) the date of opening and closure of the offer and the manner in which and the date by which the acceptance or rejection of the offer would be communicated to the shareholders;
(xiii) the date by which the payment of consideration would be made for the shares in respect of which the offer has been accepted;
(xiv) disclosure to the effect that firm arrangement for financial resources required to implement the offer is already in place, including details regarding the sources of the funds whether domestic i.efrom banks, financial institutions, or otherwise or foreign i.e., from Non-Resident Indians or otherwise.
(xv) provision for acceptance of the offer by person(s)who own the shares but are not the registered holders of such shares;
(xvi) statutory approvals, if any, required to be obtained for the purpose of acquiring the shares under the Companies Act,1956 (1 of 1956), the Monopolies and Restrictive Trade Practices Act, 1969(54 of 1969), The Foreign Exchange Regulation Act, 1973, (46 of 1973) and/or any other applicable laws;
(xvii) approvals of banks or financial institutions required, if any;
(xviii) whether the offer is subject to a minimum level of acceptance from the shareholders; and
(xix) such other information as is essential for the shareholders to make an informed decision in regard to the offer.
Brochures, advertising material etc.
17. The public announcement of the offer or any other advertisement, circular, brochure, publicity material or letter of offer issued in relation to the acquisition of shares shall not contain any misleading information.
Submission of Letter of offer to the Board

18 (1) Within fourteen days from the date of public announcement made under Regulation 10, Regulation11 or Regulation 12 as the case may be, the acquirer shall, through its merchant banker, file with the Board, the draft of the letter of offer, containing disclosures as specified by the Board.

(2) The letter of offer shall be dispatched to the shareholders not earlier than 21 days from its submission to the Board under sub-regulation(1).
Provided that if, within 21 days from the date of submission of the letter of offer, the Board specifies changes, if any, in the letter of offer, (without being under any obligation to do so) the merchant banker and the acquirer shall carry out such changes before the letter of offer is dispatched to the shareholders.

Provided further that if the disclosures in the draft letter of offer are inadequate or the Board has received any complaint or has initiated any enquiry or investigation in respect of the public offer, the Board may call for revised letter of offer with or without rescheduling the date of opening or closing of the offer and may offer its comments to the revised letter of offer within seven working days of filing of such revised letter of offer.

55[Offer price.
20(1) The offer to acquire shares under regulations10,11 or 12 shall be made at a price not lower than the price determined as per sub-regulations (4)and (5).
(2) The offer price shall be payable -
(a) in cash ;
(b) by issue, exchange and, or transfer of shares (other than preference shares) of acquirer company, if the person seeking to acquire the shares is a listed body corporate; or
(c) by issue, exchange and, or transfer of secured instruments of acquirer company with a minimum ?A? grade rating from a credit rating agency registered with the Board;
(d) a combination of clause (a),(b)or (c) :
Provided that where the payment has been made in cash to any class of shareholders for acquiring their shares under any agreement or pursuant to any acquisition in the open market or in any other manner during the immediately preceding twelve months from the date of public announcement, the letter of offer shall provide an option to the shareholders to accept payment either in cash or by exchange of shares or other secured instruments referred to above:
Provided further that the mode of payment of consideration may be altered in case of revision in offer price or size subject to the condition that the amount to be paid in cash as mentioned in any announcement or the letter of offer is not reduced.
(3) In case the offer price consists of consideration payable in the form of securities issuance of which requires approval of the shareholders, such approval shall be obtained by the acquirer within 55i[seven days] from the date of closure of the offer:
Provided that in case the requisite approval is not obtained, the acquirer shall pay the entire consideration in cash.
(4) For the purposes of sub-regulation (1), the offer price shall be the highest of -
(a) the negotiated price under the agreement referred to in sub-regulation(1) of regulation 14;
(b) price paid by the acquirer or persons acting in concert with him for acquisition, if any, including by way of allotment in a public or rights or preferential issue during the twenty six week period prior to the date of public announcement, whichever is higher;
(c) the average of the weekly high and low of the closing prices of the shares of the target company as quoted on the stock exchange where the shares of the company are most frequently traded during the twenty-six weeks or the average of the daily high and low of the 55ia{deleted}prices of the shares as quoted on the stock exchange where the shares of the company are most frequently traded during the two weeks preceding the date of public announcement, whichever is higher.
55a[Provided that the requirement of average of the daily high and low of the closing prices of the shares as quoted on the stock exchange where the shares of the company are most frequently traded during the two weeks preceding the date of public announcement, shall not be applicable in case of disinvestment of a Public Sector Undertaking.] ?
Explanation:
In case of disinvestment of a Public Sector Undertaking, the relevant date for the calculation of the average of the weekly prices of the shares of the Public Sector Undertaking, as quoted on the stock exchange where its shares are most frequently traded, shall be the date preceding the date when the Central Government or the State Government opens the financial bid.
(5) Where the shares of the target company are infrequently traded, the offer price shall be determined by the acquirer and the merchant banker taking into account the following factors:
(a) the negotiated price under the agreement referred to in sub-regulation(1) of regulation 14;
(b) the highest price paid by the acquirer or persons acting in concert with him for acquisitions, if any, including by way of allotment in a public or rights or preferential issue during the twenty six week period prior to the date of public announcement;
(c) other parameters including return on net worth, book value of the shares of the target company, earning per share, price earning multiple vis-୶is the industry average:
Provided that where considered necessary, the Board may require valuation of such infrequently traded shares by an independent merchant banker (other than the manager to the offer) or an independent chartered accountant of minimum ten
years? standing or a public financial institution.
Explanation :-
(i) For the purpose of sub-regulation (5), shares shall be deemed to be infrequently traded if on the stock exchange, the annualized trading turnover in that share during the preceding six calendar months prior to the month in which the public announcement is made is less than five percent. (by number of shares) of the listed shares. For this purpose, the weighted average number of shares listed during the said six months period may be taken.
(ii) In case of disinvestment of a Public Sector Undertaking, the shares of such an undertaking shall be deemed to be infrequently traded, if on the stock exchange, the annualized trading turnover in the shares during the preceding six calendar months prior to the month, in which the Central Government or the State Government as the case may be opens the financial bid, is less than five per cent. (by the number of shares) of the listed shares. For this purpose, the weighted average number of shares listed during the six months period may be taken.
(iii)In case of shares which have been listed within six months preceding the public announcement, the trading turnover may be annualised with reference to the actual number of days for which the shares have been listed.
(6) Notwithstanding anything contained in sub-regulation (5), in case of disinvestment of a Public Sector Undertaking, whose shares are infrequently traded, the minimum offer price shall be the price paid by the successful bidder to the Central Government or the State Government, arrived at after the process of competitive bidding of the Central Government or the State Government for the purpose of disinvestment.
(7) Notwithstanding anything contained in the provisions of sub-regulations(2), (4),(5) and (6), where the acquirer has acquired shares in the open market or through negotiation or otherwise, after the date of public announcement at a price higher than the offer price stated in the letter of offer, then, the highest price paid for such acquisition shall be payable for all acceptances received under the offer:
Provided that no such acquisition shall be made by the acquirer during the last seven working days prior to the closure of the offer.
55b[55c Provided further that nothing contained in sub-regulation (7) shall be construed to authorise an acquirer who makes a public announcement in terms of sub-regulation (2A) of regulation 11 to acquire any shares during the offer period in the open market or through negotiation or in any other manner otherwise than under the public offer.
(8) Any payment made to the persons other than the target company in respect of non compete agreement in excess of twenty five per cent. of the offer price arrived at under sub-regulations (4) or (5) or (6)shall be added to the offer price.
(9) In case where shares or secured instruments of the acquirer company are offered in lieu of cash payment, the value of such shares or secured instruments shall be determined in the same manner as specified in sub-regulation(4) or sub-regulation (5) to the extent applicable, as duly certified byan independent merchant banker (other than the manager to the offer) oran independent chartered accountant of a minimum ten years standing or a public financial institution.
(10) The offer price for partly paid up shares shall be calculated as the difference between the offer price and the amount due towards calls-in-arrears or calls remaining unpaid together with interest, if any, payable on the amount called up but remaining unpaid.
(11) The letter of offer shall contain justification or the basis on which the price has been determined.
Explanation:
(i) The highest price under clause (b) or the average price under clause(c) of sub-regulation (4) may be adjusted
for quotations, if any, on cum-rights or cum-bonus or cum-dividend basis during the said period.
(ii) Where the public announcement of offer is pursuant to acquisition by way of firm allotment in a public issue or preferential allotment, the average price under clause (c) of sub-regulation (4) shall be calculated with reference to twenty six week period preceding the date of the board resolution which authorized the firm allotment or preferential allotment.
(iii) Where the shareholders have been provided with an option to accept payment either in cash or by way of exchange of security, the pricing for the cash offer could be different from that of a share exchange offer or offer for
exchange with secured instruments provided that the disclosures in the letter of offer contains suitable justification for such differential pricing and the pricing is subject to other provisions of this regulation.
(iv) Where the offer is subject to a minimum level of acceptance, the acquirer may, subject to the other provisions of this regulation, indicate a lower price for the minimum acceptance upto twenty per cent., should the offer not receive full acceptance.
(12) The offer price for indirect acquisition or control shall be determined with reference to the date of the public announcement for the parent company and the date of the public announcement for acquisition of shares of the target company, whichever is higher, in accordance with sub-regulation (4) or sub-regulation (5).]
56[Acquisition price under creeping acquisition
"20A. (1) An acquirer who has made a public offer and seeks to acquire further shares under sub-regulation (1) of regulation 11 shall not acquire such shares during the period of 6 months from the date of closure of the public offer at a price higher than the offer price.
(2) Sub-regulation (1) shall not apply where the acquisition is made through the stock exchanges.]
Minimum number of shares to be acquired
57[21. (1)The public offer made by the acquirer to the shareholders of the target company shall be for a minimum twenty per cent of the voting capital of the company.]

Takeover Code - India - 5 Takover Law Cases

2007-12-06T02:35:00.004-08:00

--------------------------
No open offer in Akzo Nobel’s ICI buyout

ET, 19 Dec 2007 page 9

Akzo Nobel is acquiring ICI in a deal valuing it at $8 billion.

The transaction is being done through a scheme of arrangement. This is similar to the Tata Corus deal too, which was implemented through a scheme of arrangement.

Sebi’ SAST rules have a clause that permits schemes of arrangement to avoid open offer.

Clause 3 of the regulations deal with the non-applicability of Clause 10 and 12, which require an open offer to be made.

Clause 3 (1) (j) (ii) says if a change in control happens, because of an arrangement or reconstruction, including amalgamation or merger or demerger under any law or regulation, Indian or foreign, then the takeover regulation which trigger an open offer will not apply.

Even though ICI case is an acquisition like Corus case, because the transaction is structured as a scheme of arrangement, its gets an exemption from making an open offer in India.
-----------------------

M&A - Accounting Standard - India - 1

2007-12-05T00:45:00.004-08:00

AS 14

29. An amalgamation should be considered to be an amalgamation in the nature of merger when all the following conditions are satisfied:
i. All the assets and liabilities of the transferor company become, after amalgamation, the assets and liabilities of the transferee company.

ii. Shareholders holding not less than 90% of the face value of the equity shares of the transferor company (other than the equity shares already held therein, immediately before the amalgamation, by the transferee company or its subsidiaries or their nominees) become equity shareholders of the transferee company by virtue of the amalgamation.

iii. The consideration for the amalgamation receivable by those equity shareholders of the transferor company who agree to become equity shareholders of the transferee company is discharged by the transferee company wholly by the issue of equity shares in the transferee company, except that cash may be paid in respect of any fractional shares.

iv. The business of the transferor company is intended to be carried on, after the amalgamation, by the transferee company.

v. No adjustment is intended to be made to the book values of the assets and liabilities of the transferor company when they are incorporated in the financial statements of the transferee company except to ensure uniformity of accounting policies.

30.An amalgamation should be considered to be an amalgamation in the nature of purchase, when any one or more of the conditions specified in paragraph 29 is not satisfied.

31.When an amalgamation is considered to be an amalgamation in the nature of merger, it should be accounted for under the pooling of interests method described in paragraphs 33-35.

32.When an amalgamation is considered to be an amalgamation in the nature of purchase, it should be accounted for under the purchase method described in paragraphs 36-39.

The Pooling of Interests Method

33.In preparing the transferee company’s financial statements, the assets, liabilities and reserves (whether capital or revenue or arising on revaluation) of the transferor company should be recorded at their existing carrying amounts and in the same form as at the date of the amalgamation. The balance of the Profit and Loss Account of the transferor company should be aggregated with the corresponding balance of the transferee company or transferred to the General Reserve, if any.

34.If, at the time of the amalgamation, the transferor and the transferee companies have conflicting accounting policies, a uniform set of accounting policies should be adopted following the amalgamation. The effects on the financial statements of any changes in accounting policies should be reported in accordance with Accounting Standard (AS) 5 ‘Prior Period and Extraordinary Items and Changes in Accounting Policies’. 4

35.The difference between the amount recorded as share capital issued (plus any additional consideration in the form of cash or other assets) and the amount of share capital of the transferor company should be adjusted in reserves.
The Purchase Method

36.In preparing the transferee company’s financial statements, the assets and liabilities of the transferor company should be incorporated at their existing carrying amounts or, alternatively, the consideration should be allocated to individual identifiable assets and liabilities on the basis of their fair values at the date of amalgamation. The reserves (whether capital or revenue or arising on revaluation) of the transferor company, other than the statutory reserves, should not be included in the financial statements of the transferee company except as stated in paragraph 39.

37.Any excess of the amount of the consideration over the value of the net assets of the transferor company acquired by the transferee company should be recognised in the transferee company’s financial statements as goodwill arising on amalgamation. If the amount of the consideration is lower than the value of the net assets acquired, the difference should be treated as Capital Reserve.

38. The goodwill arising on amalgamation should be amortised to income on a systematic basis over its useful life. The amortisation period should not exceed five years unless a somewhat longer period can be justified.

39.Where the requirements of the relevant statute for recording the statutory reserves in the books of the transferee company are complied with, statutory reserves of the transferor company should be recorded in the financial statements of the transferee company. The corresponding debit should be given to a suitable account head (e.g., ‘Amalgamation Adjustment Account’) which should be disclosed as a part of ‘miscellaneous expenditure’ or other similar category in the balance sheet. When the identity of the statutory reserves is no longer required to be maintained, both the reserves and the aforesaid account should be reversed.
Common Procedures

40.The consideration for the amalgamation should include any non-cash element at fair value. In case of issue of securities, the value fixed by the statutory authorities may be taken to be the fair value. In case of other assets, the fair value may be determined by reference to the market value of the assets given up. Where the market value of the assets given up cannot be reliably assessed, such assets may be valued at their respective net book values.

41.Where the scheme of amalgamation provides for an adjustment to the consideration contingent on one or more future events, the amount of the additional payment should be included in the consideration if payment is probable and a reasonable estimate of the amount can be made. In all other cases, the adjustment should be recognised as soon as the amount is determinable [see Accounting Standard (AS) 4, Contingencies and Events Occurring After the Balance Sheet Date].
Treatment of Reserves Specified in A Scheme of Amalgamation

42.Where the scheme of amalgamation sanctioned under a statute prescribes the treatment to be given to the reserves of the transferor company after amalgamation, the same should be followed. 5

Disclosure

43.For all amalgamations, the following disclosures should be made in the first financial statements following the amalgamation:
a. names and general nature of business of the amalgamating companies;

b. effective date of amalgamation for accounting purposes;

c. the method of accounting used to reflect the amalgamation; and

d. particulars of the scheme sanctioned under a statute.

44.For amalgamations accounted for under the pooling of interests method, the following additional disclosures should be made in the first financial statements following the amalgamation:
a. description and number of shares issued, together with the percentage of each company’s equity shares exchanged to effect the amalgamation;

b. the amount of any difference between the consideration and the value of net identifiable assets acquired, and the treatment thereof.

45.For amalgamations accounted for under the purchase method, the following additional disclosures should be made in the first financial statements following the amalgamation:
a. consideration for the amalgamation and a description of the consideration paid or contingently payable; and

b. the amount of any difference between the consideration and the value of net identifiable assets acquired, and the treatment thereof including the period of amortisation of any goodwill arising on amalgamation.
Amalgamation after the Balance Sheet Date

46.When an amalgamation is effected after the balance sheet date but before the issuance of the financial statements of either party to the amalgamation, disclosure should be made in accordance with AS 4, ‘Contingencies and Events Occurring After the Balance Sheet Date’, but the amalgamation should not be incorporated in the financial statements. In certain circumstances, the amalgamation may also provide additional information affecting the financial statements themselves, for instance, by allowing the going concern assumption to be maintained.

1 ............
2 AS 5 has been revised in February 1997. The title of revised AS 5 is ‘Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies’.

3 See also footnote to paragraph 42 of this Statement.

4 AS 5 has been revised in February 1997. The title of revised AS 5 is ‘Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies’.

5 See also General Clarification (GC) - 4/2002, issued by the Accounting Standards Board, published elsewhere in this Compendium.

M&A - Accounting Standard - India - 2

2007-12-05T00:45:00.003-08:00

M&A - Accounting Standard - India - 3

2007-12-05T00:45:00.001-08:00

M&A - Accounting Standard - India - 4

2007-12-05T00:44:00.000-08:00

Company Law Provisions - India - 1

2007-12-05T00:43:00.004-08:00

Company Law Provisions regarding Mergers and Acquisition in India

Statutory provisions relating to Merger and Amalgamations are contained under sections 390 to 396A of the Companies Act, 1956.

Sections 391 to 394 of the Act in combination with Companies (Court) Rules, 1959 serve as a complete guide in respect of provisions and procedures relating to sponsoring of the scheme, the approval thereof by the creditors and the members, and the sanction thereof by the court.

A Brief Overview

Section 390 interprets the expressions company, arrangement and unsecured creditors.

Section 391 lays down in details the power to make compromise or arrangements with creditors or members without going into liquidation.

Section 392 lays down the power of the High Court.

Section 393 specifies the information as to compromises or arrangements that is to be sent with every notice calling the meetings of members and creditors.

The provisions for facilitating reconstruction and amalgamation of companies are contained in Section 394.

Section 395 prescribes the power and duty of the transferee company to acquire shares of shareholders dissenting from scheme or contract approved by majority

Powers of Central Government to provide for amalgamation of companies in national interest is laid down under Section 396.

Section 396A specifies provisions for preservation of books and papers of amalgamated company.

Actual Provisions

390. Interpretation of sections 391 and 393

In sections 391 and 393,-

(a) the expression "company" means any company liable to be wound up under this Act;

(b) the Expression "arrangement" includes a reorganisation of the share capital of the company by the consolidation of shares of different classes, or by the division of shares into shares of different classes or, by both those methods; and

(c) unsecured creditors who may have filed suits or obtained decrees shall be deemed to be of the same class as other unsecured creditors.

391. Power to compromise or make arrangements with creditors and members

(1) Where a compromise or arrangement is proposed-

(a) between a company and its creditors or any class of them; or

(b) between a company and its members or any class of them,

the 1[Tribunal] may, on the application of the company or of any creditor or member of the company or, in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be to be called, held and conducted in such manner as the Tribunal directs.

(2) If a majority in number representing three-fourths in value of the creditors, or class of creditors, or members, or class of members as the case may be, present and voting either in person or, where proxies are allowed under the rules made under section 643, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Tribunal, be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or, in the case of a company which is being wound up, on the liquidator and contributories of the company:

Provided that no order sanctioning any compromise or arrangement shall be made by the Tribunal unless the Tribunal is satisfied that the company or any other person by whom an application has been made under sub-section (1) has disclosed to the Tribunal, by affidavit or otherwise, all material facts relating to the company, such as the latest financial position of the company, the latest auditor's report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under sections 235 to 351, and the like.

(3) An order made by the Tribunal under sub-section (2) shall have no effect until a certified copy of the order has been filed with the Registrar.

(4) A copy of every such order shall be annexed to every copy of the memorandum of the company issued after the certified copy of the order has been filed as aforesaid, or in the case of a company not having a memorandum, to every copy so issued of the instrument constituting or defining the constitution of the company.

(5) If default is made in complying with sub-section (4), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one hundred rupees for each copy in respect of which default is made.

(6) The Tribunal may, at any time after an application has been made to it under this section stay the commencement or continuation of any suit or proceeding against the company on such terms as the Tribunal thinks fit, until the application is finally disposed of.

[1. Subs. by Act 11 of 2003, sec. 39, for "Court".]

392. Power of Tribunal to enforce compromise and arrangement.

(1) Where the Tribunal makes an order under section 391 sanctioning a compromise or an arrangement in respect of a company, it-

(a) shall have power to supervise the carrying out of the compromise or an arrangement; and

(b) may, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement.

(2) If the Tribunal aforesaid is satisfied that a compromise or an arrangement sanctioned under section 391 cannot be worked satisfactorily with or without modifications, it may, either on its own motion or on the application of any person interested in the affairs of the company, make an order winding up the company, and such an order shall be deemed to be an order made under section 433 of this Act.

(3) The provisions of this section shall, so far as may be, also apply to a company in respect of which an order has been made before the commencement of the Companies (Amendment) Act, 2001 sanctioning a compromise or an arrangement.

393. Information as to compromises or arrangements with creditors and members

(1) Where a meeting of creditors or any class of creditors, or of members or any class of members, is called under section 391,-

(a) with every notice calling the meeting which is sent to a creditor or member, there shall be sent also a statement setting forth the terms of the compromise or arrangement and explaining its effect; and in particular, stating any material interests of the directors, managing director or manager of the company, whether in their capacity as such or as members or creditors of the company or otherwise, and the effect on those interests of the compromise or arrangement if, and in so far as, it is different from the effect on the like interests of other persons; and

(b) in every notice calling the meeting which is given by advertisement, there shall be included either such a statement as aforesaid or a notification of the place at which and the manner in which creditors or members entitled to attend the meeting may obtain copies of such a statement as aforesaid.

(2) Where the compromise or arrangement affects the rights of debenture-holders of the company, the said statement shall give the like information and explanation as respects the trustees of any deed for securing the issue of the debentures as it is required to give as respects the company's directors.

(3) Where a notice given by advertisement includes a notification that copies of a statement setting forth the terms of the compromise or arrangement proposed and explaining its effect can be obtained by creditors or members entitled to attend the meeting, every creditor or member so entitled shall, on making an application in the manner indicated by the notice, be furnished by the company, free of charge, with a copy of the statement.

(4) Where default is made in complying with any of the requirements of this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty thousand rupees; and for the purpose of this sub-section any liquidator of the company and any trustee of a deed for securing the issue of debentures of the company shall be deemed to be an officer of the company:

Provided that a person shall not be punishable under this sub-section if he shows that the default was due to the refusal of any other person, being a director, managing director, manager or trustee for debenture holders, to supply the necessary particulars as to his material interests.

(5) Every director, managing director, or manager of the company, and every trustee for debenture holders of the company, shall give notice to the company of such matters relating to himself as may be necessary for the purposes of this section; and if he fails to do so, he shall be punishable with fine which may extend to 3five thousand rupees.

394. Provisions for facilitating reconstruction and amalgamation of companies

(1) Where an application is made to the Tribunal under section 391 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the Tribunal-

(a) that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of any company or companies, or the amalgamation of any two or more companies; and

(b) that under the scheme the whole or any part of the undertaking, property or liabilities of any company concerned in the scheme (in this section referred to as a "transferor company") is to be transferred to another company (in this section referred to as "the transferee company");

the Tribunal may, either by the order sanctioning the compromise or arrangement or by a subsequent order, make provision for all or any of the following matters:-

(i) the transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of any transferor company;

(ii) the allotment or appropriation by the transferee company of any shares, debentures policies, or other like interests in that company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person;

(iii) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company;

(iv) the dissolution, without winding up, of any transferor company;

(v) the provision to be made for any persons who, within such time and in such manner as the Court directs dissent from the compromise or arrangement; and

(vi) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out:

Provided that no compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the amalgamation of a company, which is being wound up, with any other company or companies; shall be sanctioned by the Tribuna unless the Court has received a report from the Registrar that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest:

Provided further that no order for the dissolution of any transferor company under clause (iv) shall be made by the Tribunal unless the Official Liquidator has, on scrutiny of the books and papers of the company, made a report to the Tribunal that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest.

(2) Where an order under this section provides for the transfer of any property or liabilities, then, by virtue of the order; that property shall be transferred to and vest in and those liabilities shall be transferred to and become the liabilities of the transferee company and in the case of any property, if the order so directs, freed from any charge which is, by virtue of the compromise or arrangement, to cease to have effect.

(3) Within thirty days after the making of an order under this section, every company in relation to which the order is made shall cause a certified copy thereof to be filed with the Registrar for registration.

If default is made in complying with this sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees.

(4) In this section-

(a) "property" includes property rights and powers of every description; and "liabilities" includes duties of every description; and

(b) "Transferee company" does not include any company other than a company within the meaning of this Act; but "transferor company" includes any body corporate, whether a company within the meaning of this Act or not.

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394A. Notice to be given to Central Government for applications under sections 391 and 394

The Tribunal shall give notice of every application made to it under section 391 or 394 to the Central Government, and shall take into consideration the representations, if any, made to it by that Government before passing any order under any of these sections.

395. Power and duty to acquire shares of shareholders dissenting from scheme or contract approved by majority

(1) Where a scheme or contract involving the transfer of shares or any class of shares in a company (in this section referred to as "the transferor company") to another company (in this section referred to as "the transferee company"), has, within four months after the making of the offer in that behalf by the transferee company, been approved by the holders of not less than nine-tenths in value of the shares whose transfer is involved (other than shares already held at the date of the offer by, or by a nominee for, the transferee company or its subsidiary), the transferee company may, at any time within two months after the expiry of the said four months, give notice in the prescribed manner to any dissenting shareholder, that it desires to acquire his shares; and when such a notice is given, the transferee company shall, unless, on an application made by the dissenting shareholder within one month from the date on which the notice was given the 1[Tribunal] thinks fit to order otherwise, be entitled and bound to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders are to be transferred to the transferee company:

Provided that where shares in the transferor company of the same class as the shares whose transfer is involved are already held as aforesaid to a value greater than one-tenth of the aggregate of the values of all the shares in the company of such class, the foregoing provisions of this sub-section shall not apply, unless-

(a) the transferee company offers the same terms to all holders of the shares of that class (other than those already held as aforesaid) whose transfer is involved; and

(b) the holders who approve the scheme or contract besides holding not less than nine-tenths in value of the shares (other than those already held as aforesaid) whose transfer is involved, are not less than three-fourths in number of the holders of those shares.

(2) Where, in pursuance of any such scheme or contract as aforesaid, shares, or shares of any class, in a company are transferred to another company or its nominee, and those shares together with any other shares or any other shares of the same class, as the case may be, in the first-mentioned company held at the date of the transfer by, or by a nominee for, the transferee company or its subsidiary comprise nine-tenths in value of the shares, or the shares of that class, as the case may be, in the first-mentioned company, then,-

(a) the transferee company shall, within one month from the date of the transfer (unless on a previous transfer in pursuance of the scheme or contract it has already complied with this requirement), give notice of that fact in the prescribed manner to the holders of the remaining shares or of the remaining shares of that class, as the case may be, who have not assented to the scheme or contract; and

(b) any such holder may, within three months from the giving of the notice to him, require the transferee company to acquire the shares in question,

and where a shareholder gives notice under clause (b) with respect to any shares, the transferee company shall be entitled and bound to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders were transferred to it, or on such other terms as may be agreed, or as the 1[Tribunal] on the application of either the transferee company or the shareholder thinks fit to order,

(3) Where a notice has been given by the transferee company under sub-section (1) and the Tribunal has not, on an application made by the dissenting shareholder, made an order to the contrary, the transferee company shall, on the expiry of one month from the date on which the notice has been given, or, if an application to the Tribunal by the dissenting shareholder is then pending, after that application has been disposed of, transmit a copy of the notice to the transferor company together with an instrument of transfer executed on behalf of the shareholder by any person appointed by the transferee company and on its own behalf by the transferee company, and pay or transfer to the transferor company the amount or other consideration representing the price payable by the transferee company for the shares which, by virtue of this section, that company is entitled to acquire; and 2[the transferor company shall-

(a) thereupon register the transferee company as the holder of those shares, and

(b) within one month of the date of such registration, inform the dissenting shareholders of the fact of such registration and of the receipt of the amount or other consideration representing the price payable to them by the transferee company:

Provided that an instrument of transfer shall not be required for any share for which a share warrant is for the time being outstanding.

(4) Any sums received by the transferor company under this section shall be paid into a separate bank account, and any such sums and any other consideration so received shall be held by that company in trust for the several persons entitled to the shares in respect of which the said sums or other consideration were respectively received.

(4A)
(a) The following provisions shall apply in relation to every offer of a scheme or contract involving the transfer of shares or any class of shares in the transferor company to the transferee company, namely:-

(i) every such offer or every circular containing such offer or every recommendation to the members of the transferor company by its directors to accept such offer shall be accompanied by such information as may be prescribed;

(ii) every such offer shall contain a statement by or on behalf of the transferee company, disclosing the steps it has taken to ensure that necessary cash will be available;

(iii) every circular containing, or recommending acceptance of, such offer shall be presented to the Registrar for registration and no such circular shall be issued until it is so registered;

(iv) the Registrar may refuse to register any such circular which does not contain the information required to be given under sub-clause (i) or which sets out such information in a manner likely to give a false impression; and

(v) an appeal shall lie to the Tribunal against an order of the Registrar refusing to register any such circular.

(b) Whoever issues a circular referred to in sub-clause (iii) of clause (a) which has not been registered, shall be punishable with fine which may extend to 4[five thousand rupees].

(5) In this section-

(a) "dissenting shareholder" includes a shareholder who has not assented to the scheme or contract and any shareholder who has failed or refused to transfer his shares to the transferee company in accordance with the scheme or contract;

(b) "transferor company" and "transferee company" shall have the same meaning as in section 394.

(6) In relation to an offer made by the transferee company to shareholders of the transferor company before the commencement of this Act, this section shall have effect-

(a) with the substitution, in sub-section (1), for the words "the shares whose transfer is involved (other than shares already held at the date of the offer by, or by a nominee for, the transferee company or its subsidiary)," of the words "the shares affected" and with the omission of the proviso to that subsection;

(b) with the omission of sub-section (2);

(c) with the omission in sub-section (3) of the words "together with an instrument of transfer executed on behalf of the shareholder by any person appointed by the transferee company and on its own behalf by the transferee company" and of the proviso to that sub-section; and

(d) with the omission of clause (b) of sub-section (5).

396. Power of Central Government to provide for amalgamation of companies in 1public interest.

(1) Where the Central Government is satisfied that it is essential in the 1[public interest] that two or more companies should amalgamate, then, notwithstanding anything contained in sections 394 and 395 but subject to the provisions of this section, the Central Government may, by order notified in the Official Gazette, provide for the amalgamation of those companies into a single company with such constitution; with such property, powers, rights, interests, authorities and privileges; and with such liabilities, duties, and obligations; as may be specified in the order.

(2) The order aforesaid may provide for the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company and may also] contain such consequential, incidental and supplemental provisions as may, in the opinion of the Central Government, be necessary to give effect to the amalgamation.

(3) Every member or creditor (including a debenture holder) of each of the companies before the amalgamation shall have, as nearly as may be, the same interest in or rights against the company resulting from the amalgamation as he had in the company of which he was originally a member or creditor; and to the extent to which the interest or rights of such member or creditor in or against the company resulting from the amalgamation are less than his interest in or rights against the original company, he shall be entitled to compensation which shall be assessed by such authority as may be prescribed and every such assessment shall be published in the Official Gazette,

The compensation so assessed shall be paid to the member, or creditor concerned by the company resulting from the amalgamation.

4(3A) Any person aggrieved by any assessment of compensation made by the prescribed authority under sub-section (3) may, within thirty days from the date of publication of such assessment in the Official Gazette prefer an appeal to the Tribunal and thereupon the assessment of the compensation shall be made by the Tribunal.

(4) No order shall be made under this section, unless-

(a) a copy of the proposed order has been sent in draft to each of the companies concerned;

4(aa) the time for preferring an appeal under sub-section (3A) has expired, or where any such appeal has been preferred, the appeal has been finally disposed of; and

(b) the Central Government has considered, and made such modifications, if any, in the draft order as may seem to it desirable in the light of any suggestions and objections which may be received by it from any such company within such period as the Central Government may fix in that behalf, not being less than two months from the date on which the copy aforesaid is received by that company, or from any class of shareholders therein, or from any creditors or any class of creditors thereof.

(5) Copies of every order made under this section shall, as soon as may be after it has been made, be laid before both Houses of Parliament.

396A. Preservation of books and papers of amalgamated company.-

The books and papers of a company which has been amalgamated with, or whose shares have been acquired by, another company under this Chapter shall not be disposed of without the prior permission of the Central Government and before granting such permission, that Government may appoint a person to examine the books and papers or any of them for the purpose of ascertaining whether they contain any evidence of the commission of an offence in connection with the promotion or formation, or the management of the affairs, of the first-mentioned company or its amalgamation or the acquisition of its shares.

Company Law Provisions - India - 2

2007-12-05T00:43:00.003-08:00

Company Law Provisions - India - 3

2007-12-05T00:43:00.001-08:00

Company Law Provisions - India - 4

2007-12-05T00:42:00.000-08:00

Company Law Provisions - India - 5

2007-12-05T00:41:00.000-08:00

Income Tax Issues India - 1

2007-12-04T23:12:00.001-08:00

Important Sections Related to income from Business and Professions

Section 28
The following income shall be chargeable to income-tax under the head "Profits and gains of business or profession", -
(i) The profits and gains of any business or profession which was carried on by the assessee at any time during the previous year;

(iv) The value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession;
(v) Any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from such firm :
Provided that where any interest, salary, bonus, commission or remuneration, by whatever name called, or any part thereof has not been allowed to be deducted under clause
(b) Of section 40, the income under this clause shall be adjusted to the extent of the amount not so allowed to be deducted;

Explanation 1 : Where speculative transactions carried on by an assessee are of such a nature as to constitute a business, the business (hereinafter referred to as "speculation business") shall be deemed to be distinct and separate from any other business.

Section 29

INCOME FROM PROFITS AND GAINS OF BUSINESS OR PROFESSION, HOW COMPUTED.
The income referred to in section 28 shall be computed in accordance with the provisions contained in sections 30 to 43D.

Sec 30
RENT, RATES, TAXES, REPAIRS AND INSURANCE FOR BUILDINGS.

31
REPAIRS AND INSURANCE OF MACHINERY, PLANT AND FURNITURE.
32
DEPRECIATION.
35A
EXPENDITURE ON ACQUISITION OF PATENT RIGHTS OR COPYRIGHTS.

36
OTHER DEDUCTIONS.

Section 36
OTHER DEDUCTIONS.
(1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28 - (i) The amount of any premium paid in respect of insurance against risk of damage or destruction of stocks or stores used for the purposes of the business or profession;
(ia) The amount of any premium paid by a federal milk co-operative society to effect or to keep in force an insurance on the life of the cattle owned by a member of a co-operative society, being a primary society engaged in supplying milk raised by its members to such federal milk co-operative society;
(ib) The amount of any premium paid by cheque by the assessee as an employer to effect or to keep in force an insurance on the health of his employees under a scheme framed in this behalf by the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972), and approved by the Central Government;

(ii) Any sum paid to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission;
(iia) A sum equal to one and one-third times the amount of the expenditure incurred on payment of any salary for any period of employment before the 1st day of March, 1984 to an employee who, as at the end of the previous year, - (a) Is totally blind, or
(b) Is subject to or suffers from a permanent physical disability (other than blindness) which has the effect of reducing substantially his capacity to engage in a gainful employment or occupation :
Provided that the assessee produces before the Assessing Officer, in respect of the first assessment year for which deduction is claimed in relation to each such employee under this clause, - (i) In a case referred to in sub-clause (a), a certificate as to his total blindness from a registered medical practitioner being an oculist; and
(ii) In a case referred to in sub-clause (b), a certificate as to the permanent physical disability referred to in the said sub-clause from a registered medical practitioner :
Provided further that nothing contained in this clause shall apply in the case of an employee whose income in the previous year chargeable under the head "Salaries" exceeds twenty thousand rupees.
Explanation 1 : In this clause, "salary" includes the pay, allowances, bonus or commission payable monthly or otherwise.
Explanation 2 : For the removal of doubts, it is hereby declared that where a deduction under this clause is allowed for any assessment year in respect of any expenditure, deduction shall not be allowed in respect of such expenditure under any other provision of this Act for the same or any other assessment year; 575 ]

(iii) The amount of the interest paid in respect of capital borrowed for the purposes of the business or profession.
Explanation : Recurring subscriptions paid periodically by shareholders or subscribers in Mutual Benefit Societies which fulfil such conditions as may be prescribed, shall be deemed to be capital borrowed within the meaning of this clause;
(iv) Any sum paid by the assessee as an employer by way of contribution towards a recognised provident fund or an approved superannuation fund, subject to such limits as may be prescribed 579 for the purpose of recognising the provident fund or approving the superannuation fund, as the case may be; and subject to such conditions 580 as the Board may think fit to specify in cases where the contributions are not in the nature of annual contributions of fixed amounts or annual contributions fixed on some definite basis by reference to the income chargeable under the head "Salaries" or to the contributions or to the numbers of members of the fund;
(v) Any sum paid by the assessee as an employer by way of contribution towards an approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust;
(va) Any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date.

(vi) In respect of animals which have been used for the purposes of the business or profession otherwise than as stock-in-trade and have died or become permanently useless for such purposes, the difference between the actual cost to the assessee of the animals and the amount, if any, realised in respect of the carcasses or animals;
(vii) Subject to the provisions of sub-section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year:
Provided that in the case of an assessee to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account made under that clause;
(viia) In respect of any provision for bad and doubtful debts made by - (a) A scheduled bank not being a bank incorporated by or under the laws of a country outside India or a non-scheduled bank, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A) and an amount not exceeding [ 585c ten per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner;
Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five per cent. of the amount of such assets shown in the books of account of the bank on the last day of the previous year.

(b) A bank, being a bank incorporated by or under the laws of a country outside India, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A);
(c) A public financial institution or a State financial corporation or a State industrial investment corporation, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A).

(viii) In respect of any special reserve created and maintained by a financial corporation which is engaged in providing long-term finance for industrial or agricultural development or development of infrastructure facility in India or by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes, an amount not exceeding forty per cent of the profits derived from such business of providing long-term finance (computed under the head "Profits and gains of business or profession" before making any deduction under this clause 590a ]) carried to such reserve account :
Provided that the corporation or as the case may be the company is for the time being approved by the Central Government for the purposes of clause :
Provided further that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid up share capital and general reserves of the corporation or, as the case may be, the company, no allowance under this clause shall be made in respect of such excess;

(ix) Any expenditure bona fide incurred by a company for the purpose of promoting family planning amongst its employees :
Provided that where such expenditure or any part thereof is of a capital nature, one-fifth of such expenditure shall be deducted for the previous year in which it was incurred; and the balance thereof shall be deducted in equal instalments for each of the four immediately succeeding previous years :
Provided further that the provisions of sub-section (2) of section 32 or sub-section (2) of section 72 shall apply in relation to deductions allowable under this clause as they apply in relation to deductions allowable in respect of depreciation :
Provided further that the provisions of clauses (ii), (iii), (iv) and (v) of sub-section (2) and sub-section (5) of section 35, of sub-section (3) of section 41 and of Explanation 1 to clause (1) of section 43 shall, so far as may be, apply in relation to an asset representing expenditure of a capital nature for the purposes of promoting family planning as they apply in relation to an asset representing expenditure of a capital nature on scientific research;

(x) Any sum paid by a public financial institution by way of contribution towards any fund specified under clause (23E) of section 10.
Explanation : For the purposes of this clause, "public financial institution" shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956).

(xi) Any expenditure incurred by the assessee, on or after the 1st day of April, 1999 but before the 1st day of April, 2000, wholly and exclusively in respect of a non-Y2K compliant computer system, owned by the assessee and used for the purposes of his business or profession, so as to make such computer system Y2K compliant computer system :
Provided that no such deduction shall be allowed in respect of such expenditure under any other provisions of this Act :
Provided further that no such deduction shall be admissible unless the assessee furnishes in the prescribed form, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this clause.
Explanation. - For the purposes of this clause, - (a) "Computer system" means a device or collection of devices including input and output support devices and excluding calculators which are not programmable and capable of being used in conjunction with external files, or more of which contain computer programmes, electronic instructions, input data and output data, that performs functions including, but not limited to, logic, arithmetic, data storage and retrieval, communication and control;
(b) "Y2K compliant computer system" means a computer system capable of correctly processing, providing or receiving data relating to date within and between the twentieth and twenty-first century.
(2) In making any deduction for a bad debt or part thereof, the following provisions shall apply - (i) No such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of the business of banking or money-lending which is carried on by the assessee;
(ii) If the amount ultimately recovered on any such debt or part of debt is less than the difference between the debt or part and the amount so deducted, the deficiency shall be deductible in the previous year in which the ultimate recovery is made;
(iii) Any such debt or part of debt may be deducted if it has already been written off as irrecoverable in the accounts of an earlier previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year), but the Assessing Officer had not allowed it to be deducted on the ground that it had not been established to have become a bad debt in that year;
(iv) Where any such debt or part of debt is written off as irrecoverable in the accounts of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year) and the Assessing Officer is satisfied that such debt or part became a bad debt in any earlier previous year not falling beyond a period of four previous years immediately preceding the previous year in which such debt or part is written off, provisions of sub-section (6) of section 155 shall apply;
(v) Where such debt or part of debt relates to advances made by an assessee to which clause (viia) of sub-section (1) applies, no such deduction shall be allowed unless the assessee has debited the amount of such debt or part of debt in that previous year to the provision for bad and doubtful debts account made under that clause.

37
General
(1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession".

Income Tax Issues India - 2

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Income Tax Issues India - 3

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Income Tax Issues 4

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Income Tax Issues 5

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Acquisition Process

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Weston

Strategy formulation-- Economics of the industry
-- Organization system
-- Multiple strategies for value growth

Search processes

Economic basis-— synergy potentials
-- Restructuring potentials

Due diligence
-– legal and business
-- Cultural factors

Valuation

Negotiation

Deal structuring

Implementation and integration

Reviews and renewal process

Idea of Acquisition

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Stategic Planning for Acquisition - 1

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Stategic Planning for Acquisition - 2

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Stategic Planning for Acquisition - 3

2007-12-04T22:50:00.001-08:00

Stategic Planning for Acquisition - 3

2007-12-04T22:49:00.000-08:00

Stategic Planning for Acquisition - 4

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Stategic Planning for Acquisition - 5

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Team for Acquisitions - 2

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Team for Acquisitions - 1

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Team for Acquisitions - 2

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Team for Acquisitions - 3

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Search Process - 1

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Search Process - 2

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Search Process - 3

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Search Process - 4

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Search Process - 5

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Initial Evaluation - 1

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Initial Evaluation - 2

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Initial Evaluation - 3

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Synergy Evaluation - 1

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Synergy Evaluation - 2

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Synergy Evaluation - 3

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Synergy Evaluation - 4

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Synergy Evaluation - 5

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Initial Valuation - 1

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Initial Valuation - 2

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Initial Valuation - 3

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Making an Offer of Bid - 1

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Making an Offer or Bid - 2

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Due Diligence - 1

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Due Diligence - 2

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Due Diligence - 3

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Due Diligence - 4

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Due Diligence - 5

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Due Diligence - 6 - Commerical

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Text

Commercial Due Diligence: The Key to Understanding Value in an Acquisition

Peter Howson

Gower Publishing Limited
Aldershot, England
2006
----------------
Commercial Due Diligence
A guide to reducing risk in acquisitions
Denzil Rankine
Jun 1999, Paperback, 160 pages
Pearson Educations
----------------------

Definition

Definition of CDD: CDD is a mini-strategy review that is carried out by acquirers of companies to:

- confirm that the company they are buying has the commercial prospects they think it has;
- help plan integation;
- show how to position an acquisition or the combined entity for maximum value.

Due Diligence - 7

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Due Diligence - 8

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Due Diligence - 9

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Due Diligence - 10

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Evaluation of Due Diligence Information - 1

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Evaluation of Due Diligence Information - 2

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Final Valuation 1

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Final Valuation - 2

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Final Decision to Negotiate and Acquire

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Negotiation - 1

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Negotiation - 2

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Negotiation - 3

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Negotiation - 4

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Negotiation - 5

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Structuring the Deal

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Structuring the Deal - 2

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Implementing the Deal - 1

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Implementing the Deal - 2

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Implementing the Deal - 3

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Implementing the Deal - 4

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Implementing the Deal - 5

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Financing the Acquisition - 1

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Financing the Acquisition - 2

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Financing the Acquisition - 3

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Financing the Acquisition - 4

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Financing the Acquisition - 5

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KVSSNRao's Handbook of Mergers and Acquisitions

Handbook of Mergers and Acquisitions - Proposed Contents

Popular Posts of the Blog - Mergers and Acquisitions

Case Study: The General Motors Bankruptcy - 2009

Background

Developing a Bankruptcy Strategy

Terms of the Deal

Profiling the New GM

Future Challenges

Case Study: Xerox Buys Affiliated Computer Systems

Enron - Breakdown of Corporate Governance - Case Study

Government's Authority to Review Acquisitions in USA

Case Study: The Challenges of Post-Merger Integration

Performance of the blog

2010 Acquisition and Mergers - Who bought Whom

Parker Hannifin - A Century of Mergers

Branding and Mergers & Acquisitions

Integration - Google Books

Due Diligence Google Books

Articles on Negotiation

Et's Think Turf Panel Discussion on M and A

Alcatel-Lucent Post Merger Performance

M & A Advisors

Mergers and Acquisitions Advisor Awards for 2006

Case RBS - ABN AMRO

Analysis of M&A Deals in 2007

Top M&A Deals of 2007

Why so many PE deals are blowing up?

Takeover Code - India - 1

Takeover Code - India - 5 Takover Law Cases

M&A - Accounting Standard - India - 1

M&A - Accounting Standard - India - 2

M&A - Accounting Standard - India - 3

M&A - Accounting Standard - India - 4

Company Law Provisions - India - 1

Company Law Provisions - India - 2

Company Law Provisions - India - 3

Company Law Provisions - India - 4

Company Law Provisions - India - 5

Income Tax Issues India - 1

Income Tax Issues India - 2

Income Tax Issues India - 3

Income Tax Issues 4

Income Tax Issues 5

Acquisition Process

Idea of Acquisition

Stategic Planning for Acquisition - 1

Stategic Planning for Acquisition - 2

Stategic Planning for Acquisition - 3

Stategic Planning for Acquisition - 3

Stategic Planning for Acquisition - 4

Stategic Planning for Acquisition - 5

Team for Acquisitions - 2

Team for Acquisitions - 1

Team for Acquisitions - 2

Team for Acquisitions - 3

Search Process - 1

Search Process - 2

Search Process - 3

Search Process - 4

Search Process - 5

Initial Evaluation - 1

Initial Evaluation - 2

Initial Evaluation - 3

Synergy Evaluation - 1

Synergy Evaluation - 2

Synergy Evaluation - 3

Synergy Evaluation - 4

Synergy Evaluation - 5

Initial Valuation - 1

Initial Valuation - 2

Initial Valuation - 3

Making an Offer of Bid - 1

Making an Offer or Bid - 2

Due Diligence - 1

Due Diligence - 2

Due Diligence - 3

Due Diligence - 4

Due Diligence - 5

Due Diligence - 6 - Commerical