Vodafone India and Idea Cellular Merger: Vodafone will own
Cash[ edit ] Payment by cash. They receive stock in the company that is purchasing the smaller subsidiary. Financing options[ edit ] There are some elements to think about when choosing the form of payment.
When submitting an offer, the acquiring firm should consider other potential bidders and think strategically. The form of payment might be decisive for the seller. With pure cash deals, there is no doubt on the real value of the bid without considering an eventual earnout.
The contingency of the share payment is indeed removed. Thus, a cash offer preempts competitors better than securities. Taxes are a second element to consider and should be evaluated with the counsel of competent tax and accounting advisers.
If the issuance of shares is necessary, shareholders of the acquiring company might prevent such capital increase at the general meeting of shareholders. The risk is removed with a cash transaction.
Then, the balance sheet of the buyer will be modified and the decision maker should take into account the effects on the reported financial results. On the other hand, in a pure stock for stock transaction financed from the issuance of new sharesthe company might show lower profitability ratios e.
However, economic dilution must prevail towards accounting dilution when making the choice. The form of payment and financing options are tightly linked.
If the buyer pays cash, there are three main financing options: There are no major transaction costs. It consumes financial slack, may decrease debt rating and increase cost of debt.
Transaction costs include fees for preparation of a proxy statement, an extraordinary shareholder meeting and registration. If the buyer pays with stock, the financing possibilities are: Issue of stock same effects and transaction costs as described above.
Transaction costs include brokerage fees if shares are repurchased in the market otherwise there are no major costs. In general, stock will create financial flexibility. Transaction costs must also be considered but tend to affect the payment decision more for larger transactions.
Finally, paying cash or with shares is a way to signal value to the other party, e. The following motives are considered to improve financial performance or reduce risk: This refers to the fact that the combined company can often reduce its fixed costs by removing duplicate departments or operations, lowering the costs of the company relative to the same revenue stream, thus increasing profit margins.
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This refers to the efficiencies primarily associated with demand-side changes, such as increasing or decreasing the scope of marketing and distribution, of different types of products.
Increased revenue or market share: This assumes that the buyer will be absorbing a major competitor and thus increase its market power by capturing increased market share to set prices.) analyses the post-merger stock return performance of Indian banks & found that merger announcement in the Indian banking industry has positive and .
like to present the conceptual framework for mergers and acquisitions in India’s context. Procedures for merger, acquisition, and amalgamation of banking companies are clearly defined in section 44(A) of the Banking Regulation Act Motives for Mergers and Acquisitions in the Banking Sector Focarelli et al.
() assert that mergers and acquisitions in the banking sector are mergers and acquisitions in Malaysian banking system.
It was found that the attainment of higher efficiency and competitiveness were the main determinants for M&A deals between Malaysian banks. The Merger and Acquisitions in Indian banking sector were instigated on the recommendations of Narasimham committee II.
These recommendations were based on the idea that whole is greater than sum of its parts (force multiplier effect) and thus merger would enable better economic and commercial growth of the financial institutions and in turn, of the nation.
[ mergers in indian banking sector â€“ motives and benefits  Shobana.V.K and Deepa.N, ().
Fulfilment of merger motives - evidences from mergers and acquisitions in. The Indian economic environment provides an advantage to banks and also uniquely accretes value to M&A based transactions proving benefits to bidders unlike in other Bank M&A regimes in the USA.