Procedural Aspects of Mergers and Acquisitions

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Questions and Answers

What percentage of M&A value was accounted for by cross-border deals in 2014?

50% (correct)

90%

75%

25%

Which of the following is NOT listed as an issue in cross-border M&A?

Legal problems

Technological differences

Failure to integrate

Global market fluctuations (correct)

What is one of the major outcomes of the Tata - Corus deal?

Corus Group Plc was dissolved.

Tata Steel became the largest steel producer in Asia.

Tata lost significant market share.

TSL emerged as the fifth largest steel producer in the world. (correct)

Which company conducted the largest overseas acquisition by an Indian company?

Tata Steel Limited Signup and view all the answers

Which issue in cross-border M&A pertains to the integration of human resources?

HR issues Signup and view all the answers

What factor can lead to difficulties in carrying out business transactions?

Unstable politics Signup and view all the answers

Which of the following is commonly perceived as a challenge during cross-border acquisitions?

Weak understanding of acquired business fundamentals Signup and view all the answers

Which report outlines challenges perceived during recent cross-border acquisitions?

Mergermarket Report Signup and view all the answers

What must both the transferor and transferee companies file before the meeting of shareholders?

A declaration of solvency Signup and view all the answers

How many days in advance should the notice for convening a meeting of members be sent?

21 days Signup and view all the answers

What information must be included in the notice sent to creditors regarding the meeting?

Details of the merger, the scheme, and the declaration of solvency Signup and view all the answers

What is the purpose of the objections or suggestions received from the registrar during the meeting of members?

To discuss and vote upon in the meeting Signup and view all the answers

For the convening of a meeting of creditors, what timeframe is necessary for sending the notice?

21 days prior Signup and view all the answers

Which of the following is NOT required from both the transferor and transferee companies?

Financial audit report Signup and view all the answers

What is Form CAA used for in the context of fast track mergers?

To file declaration of solvency Signup and view all the answers

Who is required to comply with sending the notice for a meeting of members?

Both the transferor and transferee companies Signup and view all the answers

What is the maximum time allowed to file the confirmation order with the ROC after receiving the confirmation of the scheme?

30 days Signup and view all the answers

Who is required to comply with the filing of the confirmation of the scheme?

Both the transferor and transferee companies Signup and view all the answers

What does the term 'Home Country' refer to in the context of international mergers and acquisitions?

The state of origin of the acquiring company Signup and view all the answers

Which of the following best describes a cross-border merger?

A merger involving at least one Indian company and a foreign company Signup and view all the answers

How are cross-border mergers defined according to APEC?

Transactions of assets between firms located in different economies Signup and view all the answers

What is a common characteristic of cross-border acquisitions?

They involve firms from two different economies Signup and view all the answers

What is the role of the Official Liquidator in the procedure for fast track mergers?

To send confirmation copies to the Registrar Signup and view all the answers

What does the 'Host Country' represent in cross-border mergers and acquisitions?

The country where the target company is situated Signup and view all the answers

What is the maximum duration allowed for opening an overseas bank account for a resultant company during an inbound merger?

2 years Signup and view all the answers

Which of the following is true about outbound mergers for Indian companies?

They can only merge with companies in specified jurisdictions Signup and view all the answers

What is a requirement for a jurisdiction to be eligible for outbound mergers?

Not listed by the Financial Action Task Force Signup and view all the answers

In compliance with ODI Regulations, what must be ensured when acquiring securities in an outbound merger?

The acquisition should be within fair market value limits Signup and view all the answers

What does Annexure-B specify regarding securities market regulators in outbound mergers?

They must be signatories to relevant Memoranda of Understanding Signup and view all the answers

What is a prerequisite for the acquisition of securities by non-residents in an outbound merger?

Adhering to Liberalized Remittance Scheme limits Signup and view all the answers

Which of the following conditions does NOT apply to outbound mergers according to the regulations?

Investments in jurisdictions with FATF deficiencies Signup and view all the answers

Which entity is affected by the AML and CFT deficiencies mentioned in relation to outbound mergers?

Jurisdictions involved in the merger Signup and view all the answers

What core values were emphasized in the culture fit between Corus and the other organization?

Customer focus and respect for people Signup and view all the answers

Which areas are central to Daiichi Sankyo's research and development?

Thrombotic disorders and diabetes Signup and view all the answers

What was the total transaction value expected for the acquisition of Ranbaxy?

US$3.4 bn to US$4.6 bn Signup and view all the answers

What significant technological advancement has Ranbaxy made in its R&D efforts?

Creation of Novel Drug Delivery Systems Signup and view all the answers

In what year was Daiichi Sankyo established?

2005 Signup and view all the answers

How many countries does Ranbaxy operate in according to its international portfolio?

125 countries Signup and view all the answers

What was the share price at which Daiichi Sankyo acquired shares in Ranbaxy?

Rs. 737 per share Signup and view all the answers

What aspect of Ranbaxy's operations has contributed to its strong market presence?

Significant alliances and joint ventures Signup and view all the answers

Study Notes

Procedural Aspects of Fast Track Mergers

Declaration of Solvency: Both the transferor and transferee companies file a declaration of solvency with the ROC before the shareholder or creditor meetings.
Convening Member Meetings: A notice of the meeting is sent to all members 21 days prior to the meeting. The notice includes details of the merger, a copy of the scheme, and a copy of the declaration of solvency.
Convening Creditor Meetings: A notice is sent to all creditors 21 days before the meeting. The notice includes details of the merger, a copy of the scheme, and a copy of the declaration of solvency.
Filing Confirmation Order with ROC: A copy of the confirmation of the scheme approved by the ROC or the Official Liquidator is sent to the Registrar within 30 days of receiving the confirmation, both the transferor and transferee companies are required to comply.

Cross-border Mergers and Acquisitions

International mergers and acquisitions (M&As) take place beyond the boundaries of a particular country.
The Home Country is the origin of the acquiring company.
The Host Country is where the target company is located.
Cross-border M&As involve foreign and domestic firms, or companies with headquarters in different countries, or companies with headquarters in the same country but branches in other countries.
Cross-border M&As can occur between firms in different economies or between firms from different economies within the same economy.

Types of Mergers - Inbound Merger

Key Regulations for Inbound Mergers:
- The resultant company can open a foreign currency bank account in the overseas jurisdiction for a maximum of 2 years.

Types of Mergers - Outbound Merger

Outbound Mergers: An Indian company merges with a foreign company, resulting in a foreign company.
Outbound investment is only permitted in countries listed in Annexure-B of the Companies Amalgamation Rules.
Major Rules Governing Outbound Mergers:
- Securities issued by a foreign company to the Indian entity can be issued both to residents and non-residents of India. For residents, the acquisition must comply with ODI Regulations, and the fair market value of securities must be within limits prescribed under the Liberalized Remittance Scheme.

Annexure-B of the Companies Amalgamation Rules

Specifies jurisdictions where outbound mergers are permitted based on the following criteria:
- The securities market regulator is a signatory to the International Organization of Securities Commission’s Multilateral Memorandum of Understanding (Appendix A Signatories) or a signatory to a bilateral Memorandum of Understanding with SEBI, or
- The country’s central bank is a member of the Bank for International Settlements (BIS), and
- The jurisdiction is not identified as having strategic anti-money laundering or combating the financing of terrorism deficiencies to which countermeasures apply, or has not made sufficient progress in addressing deficiencies or has not committed to an action plan developed with the Financial Action Task Force to address the deficiencies.

Worldwide M&A Announced - 1988 to 2006

Grant Thornton (September 2006) data on worldwide M&A activity.

India Cross Border M&A Trend: 2012-2014

Data source: Grant Thornton Annual Deal Tracker 2014, EY Confidence Spurs M&A: Transactions 2015

Cross-border Merger and Acquisitions

In 2014, cross-border deals accounted for nearly 50% of M&A value.

M&A Deal Trends

M&A deal data source: Grant Thornton

Inbound M&A Deal Trend

Inbound M&A deal trend data source: Grant Thornton

Outbound M&A Deal Trend

Outbound M&A deal trend data source: Grant Thornton

Top 5 Targeted Nations by Indian Companies: 2014

Data source: Grant Thornton Annual Deal Tracker 2014, EY Confidence Spurs M&A: Transactions 2015

Continent-Wise Inbound Merger

Inbound merger activity by continent.

Continent-Wise Outbound Merger

Outbound merger activity by continent.

Challenging Zones for Cross-Border M&A

Map indicating the level of challenges perceived by respondents during their most recent cross-border acquisitions.
Data source: Mergermarket Report –Asia on the Buyside: The Key to Success, Aug 2010

Successful Cross-Border Deal Factors

Data source: Mergermarket Report –Asia on the Buyside: The Key to Success, Aug 2010

Issues in Cross-Border M&A

Common challenges include:
- Legal problems
- Accounting issues
- Weak understanding of acquired business fundamentals
- Technological differences
- Strategic issues
- Fundamental differences across countries
- Tendency of overpay
- Failure to integrate
- HR issues

Case Study: Tata - Corus Deal

Tata Steel Limited (TSL) acquired Corus Group Plc, becoming the fifth largest steel producer globally.
There was a strong cultural fit between the two organizations, with shared emphasis on continuous improvement and ethics.

Case Study: Daiichi - Ranbaxy

Ranbaxy Laboratories Limited: India’s largest pharmaceutical company, producing generic medicines.
Daiichi Sankyo Company: Established in 2005 by merging two leading Japanese pharma companies.
The Daiichi Sankyo acquisition of Ranbaxy:
- The transaction involved Daiichi Sankyo acquiring the entire shareholding of the Sellers in Ranbaxy and then seeking majority ownership.
- The price was Rs 737 per share, with a total transaction value between US3.4bntoUS3.4 bn to US3.4bntoUS4.6 bn.
- The post-closing valuation of Ranbaxy was US$8.5 bn.

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Description

This quiz covers the procedural aspects involved in fast track mergers, including the declaration of solvency, convening meetings for members and creditors, and the filing of confirmation orders. It also touches upon the complexities and implications of cross-border mergers and acquisitions.