Tax Aspects
Acquisition & Merger:
Why Mergers/Acquisitions
1)Market power & Size 2)Strategic Alignment 3)Value Differential 4)Tax Benefits 5) Superior Efficiency
Check List
Management
1) Management of both the companies shall consider the effects on business plans and strategies of the merger.
2) The merger should comply with the objectives and mission statements
3) Effect on direct and indirect taxation should be carefully assessed.
4) Local and global effect and reactiob from competitiors and Government.
5) Merger shold give some strategic and permanent benefits and not just administrtive and management benefits.
Due Diligence
A & M is a very important decision.No management should proceed without proper
detailed due diligence.This report from independent professional will enable the management to know what they are getting at what price.
Promoters Holding
Amalgmating companies should also think that takeover is also a possibility in future.
Hence mnagement should take proper safeguard to protect the interest in resultant company.Post merger holding should be well taken care off.
Synergies
Merger should generate some synergies.Merger make sense to all if and only if
post merger synergy = 1 + 1 > 2 .
Shareholders Value
Merger should be such that post merger shareholders value of both the companies should increase.
This can be through market price , higher dividend or higher profits.
Successful M or A always increase shareholders value in the long run.
Financial Reengineering
This is very important aspect. Post merger company should be able to raise money at competitive rates
and even better gearing is also possible. Even cost saving operational/managerial and marketing is possible.
Impact on Employees
Cultural differences should be carefully dealt with. After all human being run the company.
Any cultural and organisational differences kill the M & A synergy.
Companies Act
Chapter V of the Companies Act, SEBI guidelines and stock exchange listing agreements to be properly examined.
Tax Aspects
Issues of Capital gain , deemed dividend, expenditure, depreciation and carry forward of losses
should be properly examined. Any lapse or miscalculation may cost heavily.
