Hostile takeovers happen seldom even in the most full-grown economies, so it ought not be amazing that in India, where the economy was just changed in 1991, a simple dozen or something like that antagonistic takeover have been endeavoured. The following years were unfortunately harsh on Tata’s European operations due to the recession in 2008 followed by reduced demand for steel. This eventually resulted in a number of lay-offs and sales of some of its operations. One of the major reasons for the increasing competition is owed to the changing landscape after the increasing availability and use of the internet. The effects of increased competition are more evident in companies from the eCommerce industry. This industry has paved way for some of the most aggressive M&A in the recent past.
More so, the Code contains no onerous requirements for hostile takeovers that would undermine the aim of such a bid. Despite the lack of a legal structure forbidding hostile takeovers, India appears to be reluctant to engage in shark-bait takeovers. The Takeover regulations have been made to protect the investors and provide a fair working environment. The Securities and Exchange Board of India Regulations, 2011 governs the mergers and acquisitions transactions which involve acquisition of a substantial stake in a publicly listed company.
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“It was as big an idea as Andrew Carnegie’s merger of steel companies in Britain and the US”. In what remains the biggest outbound deal by an Indian, the L.N.Mittalowned Mittal Steel acquired Arcelor for $33.7 billion in October 2006.The acquisition was perhaps one of the greatest hostile takeovers. Mittal’s aggressive bid shook the world,especially Europe, with French and Indian governments intervening. In the business world, where a particular sector has numerous companies with an established market share, a takeover is a very common and effective method.
The ‘losing’ competing acquirer is not permitted to sell the shares acquired by him under the competing offer to the winner of the competing bid. Therefore, any person making a competing offer will continue to be a shareholder in the target company, regardless of whether his competing offer has fizzled. Today, we take a look at some of the biggest and most famous mergers and acquisitions of 2022. Some happened due to personal vendettas, some to bail out a failing company, but most mergers and acquisitions transpired to increase profits. 2022 was a financially turbulent year and saw many high-profile mergers and acquisitions, like Elon Musk buying Twitter and the PVR and INOX merger. Read on to learn about the top 10 most high profile mergers and acquisitions of 2022.
A business taking over another business occurs more frequently than you think. Situations, where two or more companies come together to form a single company, are known as mergers. The possible risks of hostile takeovers include negative publicity, loss of control, damaged relationships between the two entities, financial losses, regulatory and legal hassles, loss of employee morale, and more. Under this strategy, the target company changes the bylaws or issues new shares which makes it more expensive for the acquiring company to purchase the target company. The recent news of Minda Corp buying a significant stake of approximately 15.7% in Pricol Limited has generated buzz around hostile takeovers. This was the second instance of a company buying another after Adani Group purchased a huge stake in NDTV.
There have been very few instances of hostile takeovers in the Indian
To manage and accommodate reasonable and compelling competition among acquirers burning of assuming control over a similar objective organization. An acquirer who has launched a Voluntary Offer is also not permitted to acquire shares of the target company for a period of 6 months after the completion of the Voluntary Offer, except under another Voluntary Offer. This does not prohibit the acquirer from launching a competing offer under the Takeover Regulations.
A takeover works with a company buying a majority stake in another company, either through agreed-upon terms or by forcibly buying the shares from the open market. In June 2021, a subsidiary of Tata Sons, named Tata Digital Services, signed a takeover deal with online pharmaceutical delivery startup 1Mg to buy a controlling 60% stake for $230 million. The investment was in line with Tata’s vision of a comprehensive digital ecosystem to address customer needs across various categories. Generally, companies buy other companies by offering equity as compensation. However, a takeover can also move forward as a cash deal or a mix of cash and equity. The factors of the takeover deal are mutually agreed upon by the two companies beforehand.
In India, takeovers are primarily governed under the Takeover Code- that goes by the name SEBI Regulations, 2011. The Code defines an Acquirer as a person who, directly or indirectly, acquires shares or voting rights or control over a Target Company by himself or through persons acting in concert with him. Further, Regulation 3 permits such Acquirers to make a public announcement of an open offer in case they aim to acquire more than 25% of the voting rights of the Target Company. It is easy to conclude that the Takeover Code provides no legal protection against a hostile takeover. Furthermore, there is no distinction in the Code between a friendly and hostile takeover.
Process of Mergers & Acquisitions in India
Mergers and acquisitions (M&A) are mind boggling business exchanges with much on the line. If a merger or Acquisition isn’t effective, a business can lose considerable resources. Law offices – driving global and local law offices to provide M&A counseling services, particularly to business elements that are being merged or acquired across borders. Effective and complete execution of mergers and acquisition process includes technique which is structured with the aim to maximize the profit and minimize the level of risk. It can be done by either acquiring the assets and liabilities of the target company or buying the shares of the target company.
This merger is estimated to be worth $23,000,000,000/- (United States Dollar twenty-three billion only). Two of India’s largest media companies, Zee Entertainment Enterprises Limited and Sony Pictures Networks India, have agreed to a multibillion-dollar merger. The arrangement has the potential to turn the merged entity into one of the largest and most sought-after in the country. Both companies are expected to benefit from the merged entity and the synergies produced between them, which will not only accelerate business growth but will also allowshareholders to participate in its future success. Acquisition usually refers to a larger commercial entity acquiring a smaller company. In a broad sense, acquisition refers to acquiring company ownership wherein, one company purchases another outright.
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Before this, Heritage Group’s valuation was around 295 crores, which shot up to a whopping 600 crores post-merger. Vodafone Idea Limited will receiver an all-cash amount for ₹3,760 crores for its 11.15 percent shareholding in Indus which it will sell off. The merged entity will have 172,000 towers with a tenancy of 1.83x, annualized revenue of Rs 25,400 crore, and Ebitda of Rs 12,500 crore, as per reports from CLSA. KYC is one time exercise while dealing in securities markets – once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary. Under this strategy, a financial incentive is given to the top executives of the target company in the event of a change in ownership or control.
Under the Takeover Regulations, a takeover gets triggered upon acquisition of, whether directly or indirectly, a certain threshold of shares or control. For the purpose of this article, we will take 25% acquisition of the target company as a trigger point (“Trigger Threshold”). If an acquisition by a prospective acquirer crosses the Trigger Threshold, then he must make an open offer for the acquisition of a further minimum of 26% of shares or voting rights. Additionally, post the acquisition of 27.26% stake in NDTV by Radhika Roy Prannoy Roy Holding Private Limited (“RRPR”), indirectly AEL currently owns 64.71% in NDTV . The simple meaning of hostile takeover is when a corporate acquisition of a target company is attempted by the acquiring company against the wishes of the former’s management and board of directors. Under a hostile takeover, the acquiring company can make a direct offer to the shareholders of the target company in order to purchase their shares bypassing the management and the Board of the company.
Taking in view the most recent successful attempt of L&T to acquire Mindtree in a rather hostile manner has piqued the interest of many law enthusiasts in knowing what makes these kinds of acquisitions hostile. So, without further ado, let’s understand the intricacies of this type of takeovers. India’s two leading cinema franchises, PVR and INOX, merged in 2022 to create the largest multiplex chain in the country with over 1500 screens.
Consult a professional before relying on the intakeover examples in indiaation to make any legal, financial or business decisions. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Planning An acquirer company needs to first analyse the industry by reviewing the overall objective of takeover in context of the strength, opportunities, weakness and threats . It also involves going through other factors like management quality, capital structure and market size. In this, the acquirer company does not obtain any prior consent of the target company and forcefully pursues the process of takeover.
Friendly Takeover When the acquirer company takes the consent of the target company before undergoing the process of Takeover, it is known as the Friendly Takeover. Therefore, it is a process where both the parties mutually agree to the terms and conditions of a takeover. SEBI Regulation, 2011 The provisions of SEBI govern the process of takeover by a listed company.
- Described below are some of the commonly employed tactics by the target company to counter hostile takeover bids.
- However, an acquisition is carried out in a pre-planned manner in which both the companies mutually agree.
- On the other hand, entry of the foreign companies through M&A seems to have raised competitive pressure in the domestic market forcing the firms to boost their competitiveness.
- The initial offers from Tata were at£4.55 per sharebut following a bidding war with CSN, Tata raised its bid to£6.08 per share.
To guarantee that only those acquirers who are prepared to do really satisfying their commitments under the Takeover Guidelines make MTOs. To ensure that the affairs of the target company are conducted in the ordinary course when a target company is the subject matter of an Mandatory Tender Offer . To give transparent and straightforward lawful structure to encouraging takeover exercises.
Thus it makes almost impossible for an outsider to make voluntary open offers, since the said acquirer must have at least 25% of the shareholding in the company. UPSI may include confidential information which is not generally available to the general public, such as information about a company’s financial statements, dividend policy, merger and demerger and expansion plans, capital structure etc. This revival of interest in hostile takeovers has been triggered by L&T’s open offer to purchase a controlling stake in the multinational information technology company, Mindtree.
The pandemic was particularly tough on the film industry, and more so on theatres. The PVR and INOX merger will result in synergies in the form of advertising revenues, reduced rental costs, and convenience fees for the merged entity, which will be called PVR-INOX. In 2016, Future Group, the parent company of the famous ‘Big Bazaar’ retail group of stores merged operations with the Heritage Foods group. This deal had two fold effects, providing Heritage valuable supply chain of Future Group, while Future Group received yet another product to increase its product offering.
Takeover tactics are the possible takeover strategies a company can implement to take over another company. It allows the acquirer company to expand and cut out the competition while the acquiree company can use the cash to pay off debt. In January 2021, India’s biggest online education startup Byju’s signed a friendly takeover deal with Aakash Educational Services to take over its entire business for $1 billion. The deal is said to be the biggest educational takeover deal in India, making Byju’s the biggest ed-tech startup in the world. For companies that already have a high cash flow, a takeover is one of the most effective methods of tackling competition and ensuring long-term sustainability. This blog will infuse knowledge about everything you need to know about a takeover and how companies are using it at a time when India has become the second-largest startup ecosystem.
The Indian multinational conglomerate Adani Group, led by billionaire Gautam Adani, acquired the news channel NDTV in one of the most controversial acquisitions of recent years. Adani’s hostile takeover was termed an attack on freedom of speech and freedom of the press. Soon after the announcement, NDTV’s lead anchor, Ravish Kumar, a staunch critic of the ruling BJP government, tendered his resignation. NDTV founders and directors Prannoy and Radhika Roy also quit their posts.