MERGER AND AMALGAMATION OF

COMPANIES IN INDIA
Research Question

 Whether there is any impact on the performance of company due to merger or amalgamation

of companies.

 Whether employees of the company face any difficulty due to the merger or amalgamation of

companies

 Whether shareholder has any say in merger or amalgamation of companies.

 Whether companies have to take High court approval before merger or amalgamation of

companies.

 Whether an insolvent company can amalgamate in another company.

 Whether creditors approval is required for merger or amalgamation of companies.

Objective

The main objectives of the research are as follows:

 To study the impact of merger or amalgamation of companies on the economy of the country.

 To study the procedure to be followed by the companies for merger and amalgamation.

 To study the impact of merger or amalgamation on the shareholder of the companies.

 To study the impact of merger and amalgamation on the performance of the company.

 To analyze the equation of employees of the merged or amalgamated company.

 To study the capital structure of amalgamated company or merged company.

 To study the treatment of the capital of amalgamating company.

 To study the impact of amalgamating insolvent company with another company.

Hypothesis

 Performance of the company improves after merger or amalgamation.

 Employees face difficulty in engaging with the employees of the amalgamated company.

 Economy of the country develop due to mergers or amalgamation of the companies.

 Insolvent company revive due to the merger or amalgamation of the companies.

 Merger or amalgamation of the companies is a lengthy procedure.

 Capital of the company increased due to the merger or amalgamation of the companies.

 Dissenting shareholders have to sell their shares or accept the shares of the amalgamated
company.

Literature Review

Journals:

1. According to Amish Bharatkumar Soni, “Mergers and acquisitions in India and its
impact on shareholder’s wealth”, PP 79-86,
“Mergers offer an additional means of expansion, which is external, i.e. the productive
operation is not within the corporation itself………………………………………… In
both the hypothesis there is no significance difference between pre and post-merger
analysis of the company but it differs from the market return. So, as an investor for short
term they have to look in this strategic alliance and then develop their short term investment
strategies”.

2. According to Ms. Mani Arora & Mr. Anil Kumar, “A Study on Mergers and
Acquisitions – Its impact on Management and Employees”, PP 30-38,

“The terms merger, amalgamations, take-over and acquisitions are often used
interchangeably to refer to a situation where two or more firms come together and combine
 into one to avail the benefits of such combinations and re-structuring in the form of merger
………………………………………… Develop a new strategic plan and unified goals,
objectives, and overriding messages that reflect the newly formed organization.
Communicate even when there is nothing much to say. Silence erodes trust, and rumours
start when there is a lack of information”.

3. According to Mahesh Kumar Tambi, “Impact of Mergers and Amalgamation On the

Performance of Indian Companies”, PP 2-8,
“Mergers improves the performance of the company due to increased market power,
Synergy impact and various other qualitative and quantitative factors. Although the various
studies done in the past showed totally opposite results…………………………………
The impact of Mergers on Indian companies through a database of 40 Companies selected
from CMIE’s PROWESS, using paired t- test for mean difference for four parameters”.
4. According to Harpreet Singh Bedi, “Merger & Acquisition in India: An Analytical
Study”, PP 6-14,
“The process of mergers and acquisitions has gained substantial importance in today's
corporate world. This process is extensively used for restructuring the business
organizations. In India, the concept of mergers and acquisitions was initiated by the
government bodies…………………………………… Even though mergers and
acquisitions (M&A) have been an important element of corporate strategy all over the
globe for several decades, research on M&As has not been able to provide conclusive
evidence on whether they enhance efficiency or destroy wealth”.
5. According to K.Kalaichelvan, “Efficacy of merger and acquisition in Indian banking
industry”, PP 6-9,
“Restructuring of business is an integral part of the new economic paradigm. As controls
and restrictions give way to competition and free trade, restructuring and reorganization
become essential. Restructuring usually involves major organizational change such as shift
in corporate strategies to meet increased competition or changed market conditions………
More than ever, today mergers and acquisitions is an area of immense research potentials
to both academicians and practicing managers for over three decades”.
6. According to Dr. Snehalkumar H. Mistry, “Effect of Cross Border Mergers and
Acquisitions on Company Value Creation”, PP 7-15,
 “The corporate sector all over the world is restructuring its operations through different
types of growth strategies like mergers and acquisitions in order to face challenges posed
by the new pattern of globalization, which has led to the greater integration of national and
international markets………………………………………. Efficiency in terms of having
adequate fund to make timely payment of cost of debt capital is generally measured with
the help of interest coverage ratio, the lower the interest coverage ratio, the higher the
company's debt burden and there is a greater possibility of bankruptcy or default”.

7. According to Hiten Kotak, “Mergers and acquisitions: The evolving Indian

landscape”, PP 9-18,
“Merger and acquisition (M&A) is the path businesses take to achieve exponential and not
just linear growth and therefore continues to generate interest……………………………
Capital markets are always a key influencer in M&A activities. The action taken by Federal
Bank of USA is likely to affect worldwide capital markets, which would have to embrace
lot of volatility before things stabilise”.
8. According to Nishith Desai, “Mergers & Acquisitions in India”, PP 4-16,
“The term ‘merger’ is not defined under the Companies Act, 1956 (“CA 1956”), and under
Income Tax Act, 1961 (“ITA”). However, the Companies Act, 2013 (“CA 2013”) without
strictly defining the term explains the concept………………………… A joint venture is
the coming together of two or more businesses for a specific purpose, which may or may
not be for a limited duration. The purpose of the joint venture may be for the entry
of the joint venture parties into a new business, or the entry into a new market, which
requires the specific skills, expertise or the investment of each of the joint venture parties”.
9. According to Sanjeev Kumar Gupta and Dr. Sambit Kumar Mishra, “An overview
of mergers and acquisition”, PP 5-19,
“The main provisions related to the four components of Competition Act, 2002 are anti-
competitive agreement, abuse of dominance, combination regulation and competition
advocacy. The companies always use merger, a type of combination, as a business strategy
to grow and consolidate and to eliminate competition……………………… M&A create
synergies and economies of scale, expanding operations and cutting costs. Investors can
 take comfort in the idea that a merger will deliver enhanced market power. However, M&A
has to be augmented with the regulatory compliance in the country where M&A takes
place”.

Research Design

The study is primarily doctrinal and not empirical. The research is based on secondary sources
such as books, journals, articles etc. The research is based on the analysis of the secondary source
as aforesaid.
 NATIONAL LAW UNIVERSITY, JODHPUR

“Merger and Amalgamation of Companies in India”

Submitted to Submitted by
Ankit Srivastava Priya Ruhil
Associate Professor and Executive Director LL.M. I semester (corporate)
(NLUJ)
Enrolment no. 1101

Submission Date

15september 2018

NATIONAL LAW UNIVERSITY, JODHPUR

Summer Semester: July-Nov 2018