Core concepts
- 01Types: Horizontal (same industry), Vertical (supply chain), Conglomerate (unrelated).
- 02Motives: synergy (cost/revenue), market power, tax benefits, diversification.
- 03Valuation: DCF, comparable company multiples, precedent transactions.
- 04Synergy = Value of combined firm − (Sum of standalone values).
- 05Defences: poison pill, white knight, golden parachute, crown jewel.
Flowchart
M&A Process | Identify target -> Valuation -> Due Diligence | Structure: Cash | Stock | Mixed | Approval (Boards, Shareholders, NCLT) | Integration & Synergy Realisation
Exam-critical pointers
- ⭐Bootstrapping EPS: acquirer with high P/E acquires low P/E target — accounting EPS rises but no real value.
- ⭐Buy-back vs Dividend — tax-efficient distribution in India.
- ⭐SEBI Takeover Code triggers at 25% (open offer for 26%).
- ⭐NCLT scheme of arrangement (Sec 230-232 Companies Act) for mergers.
Make it click