`R.B.

INSTITUTE OF MANAGEMENT STUDIES

QUESTIO N ANSHWER OF CRV
YEAR 2020-2021
FACULTY NAME: MR.NIKUNJ THAKKAR

MODULE:01

Q-1 Define Corporate Restructuring and Explain Merger, Divesture & Demerger.

Ans: Meaning of Corporate Restructuring:

 Corporate restructuring can be defined as any change in the business capacity or portfolio
that is carried out by an inorganic route or change in capital structure of company that is
not part of its ordinary course of business or any change in the ownership of or control
over the management of the company or combination thereof.
 To restructure means the purposeful process of changing the structure of an institutional
company, an industry, a market the world economy.
 Tata Steel had taken the services of 3 international consultants namelyMcKinsey & Co,
Arthur D Little and Booz Allen & Hamilton to enable itto become it globally
competitive.It sold of its cements division, had VRS & modernised its plants
andthereafter became the lowest cost producer of steel in the world.
Meaning of Merger
 Merger refers to a situation when two or more existing firms combine together and form
a new entity.
A merger may occur in two ways:
 (i) Merger through absorption : Absorption is combination of two or more companies in
to an existing company All companies except one lose their identity in merger through
absorption.Exmaple: TCL is acquiring company (Buyer ) survived after merger with TFL
( Tata Fertilizers Ltd) ,an aquired company (seller) ceased to exist.TFL transfer its
assets ,libilities and shares to TCL
 (ii) Merger through consolidation: A consolidation is a combination of two or more
companies in to new company. In these types of merger, all companies are legally
dissolved and new entity is created. ample: Hindustan instruments ltd and Indian
Reprographic Ltd to entirely new company called HCL Ltd.
Meaning of Divesture
 A Divestiture involves the sale of a portion or segment of the company you an external
party
 Such sale may cover assets, product lines, subisidiary or the divisions of undertaking.
Meaning of Demerger.
 The separation of a large company into two or more smaller organizations, particularly as
the dissolution of an earlier merger.
A demerger can take place through a spin-off by distributed or transferring the shares in a
subsidiary holding the business to company shareholders carrying out the demerger. The
demerger can also occur by transferring the relevant business to a new company or business
to which then that company's shareholders are issued shares of.[1] In contrast,divestment can

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 also "undo" a merger or acquisition, but the assets are sold off rather than retained under a
renamed corporate entity.

Q-2. .Meaning of Coporarate restructuring and types of corporate restructuring.

Meaning of Coproarte Restructuring.

 Corporate restructuring can be defined as any change in the business capacity or portfolio
that is carried out by an inorganic route or change in capital structure of company that is
not part of its ordinary course of business or any change in the ownership of or control
over the management of the company or combination thereof.
 To restructure means the purposeful process of changing the structure of an institutional
company, an industry, a market the world economy.

Forms of Corporate Restructuring

A) Merger
 It involves combination of all assets ,liabilities ,loans and business of two or more
companies such that one of the survies.
  Merger means a combination of two companies to form a new company,
 "Merger is an act or process of purchasing equity shares (ownership shares) of one or
more companies by a single existing company."
B) Acquisition
 Acquisition is an attempt or process by which a company or individual or a group acquire
control over another company called Target Company.
 Acquiring control over a company means acquiring the right to control its management
and policy decisions.
 Company is managed under the supervision of its board of director and all policy
decisions are made by the board,acquring control can also be defined as acquiring the
right to appoint majority of the director of a company.
C) Takeover
 If a company purchase the shares of another company by giving advance information to
its management regarding purchase of shares its called takeover.
 So take over it an acquisition of shares carrying voting rights in company with a view to
gaining control over the management of the company.
D) Tender offer
 In corporate finance, a tender offer is a type of public takeover bid.
 The tender offer is a public, open offer or invitation (usually announced in a newspaper
advertisement) by a prospective acquirer to all stockholders of a publicly
traded corporation (the target corporation) to tender their stock for sale at a specified
price during a specified time, subject to the tendering of a minimum and maximum
number of shares.
E) Assets Acquisitions

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 Assets acquisition implies buying the assets of another company. Such assets may be
tangible assets like: a manufacturing unit of the firm or intangible assets like brand, trade
mark etc.
 In the case of assets acquisitons,the acquirer company may limit its acquisitions to those
parts of the firm which match the needs of the acquire company.
F) Joint Venture
 In the case of joint venture two companies enter into an agreement and accumulate
certain resource with a view to achieve a particular common business goal.
 Example: In order to manufacture automobiles in india,Daewoo motors and DCM Group
entered in to joint venture programmed.
G) Spin off:
 A Spin off a type of transaction in which a company distributes all the shares owned
by it on its subsidiary to its own share holde.Such distribution of shares among the
sharholder is made on prorata basis.
 A spinoff is the creation of an independent company through the sale or distribution of
new shares of an existing business or division of a parent company. 
In a spin-off, the parent company distributes shares of the subsidiary that is being spun-
off to its existing shareholders on a pro rata basis, in the form of a special
dividend
H) Split offs:
 A new company is created in order to take over operations of an existing division or unit
of a company.
 A portion of the existing shareholders of the company obtains stock in the subsidiary in
the exchange of the parents company
 Example: The Board of director of Dabour india ltd decided to split off the Pharma
Segment and transfer it to new company for the financial year 2002-03
 The FMCG business which would remain within Dabour India Ltd,would concentrate on
its core competencies in personal care Health care and Ayurvedic Specialties.
 The New Pharamceutical company Dabour Pharma Ltd will focus on its expetise in
Apollopathic Oncology.
I)Divestitures:
 A Divestiture involves the sale of a portion or segment of the company yo an external
party
 Such sale may cover assets, product lines,subisidiary or the divisions of undertaking.

J) Anti-Takeover defenses:
 It is technique followed by a company to prevent forcefully acquiring of it management.
 With the high level of hostile takeover activity in recent years, various companies are
resorting to the strategy of takeover defense.
 A takeover is a form of an acquisition, wherein the company offers a bid for the purchase
of a certain block of the equity of another company (target) to exercise complete control
over its affairs. Practically, the acquirer must buy at least 51% or more paid up equity of
the acquired company to enjoy full control over its operations.
K) Buy Back shares:
 It involves repurchasing its own shres by a acompany from the market.

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  Shares may be repurchase by following either tender offer method or through open
market method.
L) Exchange offers:
 Exchange offers generally provides one or more classes of securities ,the right or option
to exchange a portion or all of their holding for a different class of securities of the firms
 Exchange offered helps companies to change its capital structure while holding
investment details.
 A offer made by a company to give one security in returnfor another security. Most
commonly, for various reasons a company will offer to give shares of a
certain held company if the shareholders will return shares of another held company. An
exchange offer can also be performed on other securities, such as bonds.

Q-3. What is Motives of Corporate Restructuring.

A Motives behind Exapnsion

 Growth: Every company wants to grow and corporate restructuring provides way for the
companies to throw off cash flo beyond its internal needs,
 Technology: Technology plays an important role as a driver in expansion strategy.
 Product advantges and product differentiation: : This is important reason gives for
expand of business.
 Government policy: Different regulations, tax burden and other restrictions imposed by
the government also induce increase size .
 Exchange rate: This reason is specially identified with expansion leading to
interantional mergeres.
 Political stability: Political stability the frequency with which change government ,the
order of transferring power and change the policy .
B. Motives behind control

 Improving leverage ratio: To reinforce effective control capital structure of the firm is
changed.

 Utilization of surplus cash: In order to increase shareholders return and finally the
wealth of the shareholder the firm may undertake the strategy of distributing surplus cash
and the firm is able to enhance the earning per share.

 Enhancement of voting power: Another important motives control is enhancing

controlling power of promoters without spending own money.

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  Anti takeover defense:: The large premium involved in the repurchase tender offer may
convey information to non isder.

C. Motives behind Contraction

 Improving performance: The accountability created by restructuring through demerger

often improves performance and investors also benefit from the grater visibility of the
demrged entities to analysis and the public.
 Booming independence: Demerger is intended to promote independence as the separate
company can soperate freely at its own discretion.
 Increase value: Demerger represents harvesting value by unlocking the hidden value.
D. Motives behind change ownership structure
 Mamoeuvring levergae:The most important reason for changes in ownership structure
whether debt preferred stock is exchanged for common stock or conversely common
stock .
 Alternation in the control structure: Restructuring of this kind is aimed at changing the
control structure of the firm. By repurching substantial percentage of shares or by initial
public offering the firms want to reshuffle the voting rights of the shareholder to change
control pattern of the firms.
 Change the nature of the firms: If a firm wants to come out from the regulations of
security and exchnage board of respective country it may prefer that small group of
investors will buy the entire equity interest.

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Q-4. What are the Barrier of Corporate Restructuring.

Ans:

Barrier of Corporate Restructuring.

 Changes in competitive situation :Because of foreign competition, accelerated rate of

technological change& competitive pressures faced globally. To focus on core competencies by
divesting non-core businesses; these disinvestments can have attractive valuations

 Changes in Govt. policies :Major changes in MRTP Act, FEMA, Industrial licensing,

setting up of Competition Commission of India, etc;Size no longer is a constraint; growth
strategy is based on competenciesand not govt. licenses;
 To enter international markets :This is especially in the face of quota & other
restrictions besides theeffects of globalization
 To reduce cost:
Reducing the cost structure via a host of organisational,portfolio and
financial restructuring is essential to make firms cost competitive/ profitable.

Q-5.What is Meaning of Merger and types of Merger.

Meaning of Merger

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  Merger refers to a situation when two or more existing firms combine together and form
a new entity.
 A merger may occur in two ways:
 (i) Merger through absorption
 (ii) Merger through consolidation
Exmple:
 In June 2011, Adani acquired the Australian Abbot Point Port for 1.9 billion dollars. With
this deal, the revenues from port operations are expected to almost triple from 110
million Australian dollars to 305 million Australian dollars in 2011. According to Adani,
this was amongst the largest port deals ever made.
 Airtel-Telenor merger
 Vodafone-Idea merger
 Snapdeal and Freecharge 
 Flipkart and Myntra
Types of Merger
 Horizontal Merger
 Vertical Merger
 Conglomerate Merger
 Triangular Merger
 Forward Triangular merger
 Reverse Triangular merger
 Purchase Merger

Horizontal Merger

 It is merger occuring between companies producing similar goods or offering similar

services.
 Such companies that are direct competition and share the same product lines and markets.
 This types of merger occurs frequently as aresult of larger companies attempting to create
more efficient economic scale.
 Horizontal companies permits the surving company control grater share of the market and
it is hopped gain economic scale.
 The merger of HP and Compaq are examples of horizontal merger.
 Facebook and Instagram
 Disney-Pixar

Vertical Merger

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  Vertical Merger is a merger between companies in the same industry, but at different
stages of production process. In another words, a vertical merger occurs between
companies where one buys or sells something from or to the other.
 A vertical merger (also called vertical integration) is a merger between a manufacturer
and a supplier. 
 For example, Pepsi’s merger with restaurant chains that it supplies with beverages is a
vertical merger.
 XYZ Ltd. is a textile manufacturer. ABC Ltd. is the supplier of cotton to XYZ Ltd. since
many years. XYZ Ltd. and ABC Ltd. decide to merge their business.
Triangular Merger
 We can see that both the business entities are involved in the different stages of the
production process. The reason for merging is to bring efficiency in operations by cutting
the extra costs and increase the profits of both the businesses.
 A Triangular merger refers to the acquisition of a local company throgh a share swap
with local subsidary that is wholly owned by a foreign buyer.
 A simple words, a foreign company buys a local company by exchanging the shares of its
subsidiary located in country of local company.
Forward Triangular Merger.
 In the the forward triangular merger, the acquired company merges with and into
a merger subsidiary of the acquiring company, with the merger subsidiary surviving
the merger. The forward triangular merger can be contrasted with the reverse triangular
merger in which the acquired company survives the merger.
Reverse Triangular Merger
 In reverse Triangular merger,the merger proceeds in the same manner as triangular
merger except the subsidiary is merged in to target corporation.
 The Outstanding shares of the stock of the subsidiary ,all of which are owned by the
acquiring corporation are convert.
Purchase Merger
 This kind of merger occurs when one company purchases another. The purchases is made
with cash or through the issue of some kind of debt instrument.
 Acquiring companies often prefer this types of merger because it can provide them with a
tax benefit.

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Q-6.What are the motives behind merger.

Operating Motives.

 This refers to cost saving through economics scale of increased sale or profit.
Financial Motives:
 High debt capacity, better use of idle cash, set off loss against profit.
 HUL acquired Lakme ,it helped HUL to enter the cosmetic Market through established
brand
Acquiring New Technology:
 To upgrade techonolgy,a company need not always acquire techonology.by buying
another company with unique techonology,the buying company can maintian or develop
competitived.edge
 Example: Blackberry and Treo which can incorporate cell phone capability and email
connectivity in one device, palm pilots and tablet laptos.
 Improved Profitibility:
 Company explore the possibilities of a merger when they anticipates of that it will
improve profitability.
 Entry in to New Markets.;
Company can individually enter in to market but may have to face stiff competition from
the existing company and they have to battle. here merger route is adopted
Exmple: hutch and Vodafone
 Access to Fund:
Company finds it difficulty to access fund from the capital market. This weakness
deprived the company of fund to pursue its growth objectiveness effectively.
 Tax Benefit:
Merger are also adopted to reduce tax liabilities.By merging loss Making company with
high tax lability can set off loss against target company profit.

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Q-7. What is the Process of Merger.
Ans:

Planning Phase
A) Developing Plan
 Identify a target firms that fits into strategice goal of the company and increase net
cashflows and reduce risk.
 Develop business paln and effectively commnication the vision and mission of the firms.
• Industry where company desire to compete.
• Determine how to compete effectively
• Determining mission statement of the company.
• Setting obectives intended to be attained.
• Selecting the obejctive
B) Develop Acquisition Plan
 Internal analysis completed and the company feels that the time is right for a merger and
acquisition strategy
• Key objectives
• Resource constraints
• Appropriate tactic for implementing for the proposed transactions.
• Schedule or time table for completing the process of acquisition.
Implementation Phase.
1) Search Companies for Acquisitions:
 The Company starts searching for potential acquisition candidates.
 The Search Process involves establishing a primary screening process based on factor as
industry, size of transaction. Etc.

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  The Search strategy includes the use of databse ,law firms ,investment bankers and
broker etc.
2) Screen and Prioritize Potential candidates.

 The Screening may done on the basis of Market Segments,Product line ,firm’s prfitability
,degree of leverages,market share etc.
3) Initial Contact with target company

 This step is one the acquirer meets the target company and put forth the proposal of
acquisition.
 The method of establishing contact with the target company differs from case to case.
 Discounted cash flow method.
 Book Value Method
 Market Value Method.
4) Negotiate Deal

 Under this step Purchase consideration is determined.

 Total purchase consideration is the value of cash, stock ,new debts issues and non
financial assets.
 Net Purchase Price: This is the total purchase price plus other assumes liabilities
5) Develop integration Plan

 Help acquirer determine the maximum price he can offer to the target company for the
deal.
6) Obtain Approval and close deal.
 The acquirer and target company need to secure the consent of shareholders, regulatory
authorities, and third party consent.
 Documents include:
 Purpose of acuisistion
 Purchase Price
 Mode of Payment of purchase price.
 Details of Liabilities and assets taken over,

7) Implement integration:

 Mergers and acquisitions are inititated with the hope that the combined entity
would generate synergies.

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Q-8.Reasons for Failure of Merger.
Ans:

 Unrealistic Price Paid for Target

Price Paid to the target company is much more than what should have been paid and shareholder of
target company get benefited and acquirer company ‘s shareholder get loss.

 Difficulties in cultural integration

 Every merger invlove comibining of two or more different companies.These entity reflect
different corporate culutre ,style of leadership ,different employee expectation and functional
difference

 Overstated Synergies.
 Merger and acuisitions are looked upon as important of creating synergies through increased
revenue,reduce cost,rdeuction in net working capital and improvement in the investment,
 Inconsistent Strategy
 Entities that fails to assess the strategies benefits of mergers face failure.
 Regulatory Issues:
If any shareholder are not in favor of the merger ,they might create legal obstacles and slow
down the entire process.
 HR Issues
HR Issues like communication, imposition of new corporate culture and identity this create
uncertainty anxiety among the company employees.

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Q-9. What is Meaning of Reverse Merger?
Ans:
 A reverse takeover (RTO) is a type of merger that private companies engage in to
become publicly traded without resorting to an initial public offering (IPO).
 Initially, the private company buys enough shares to control a publicly traded company.
 The private company's shareholder then exchanges its shares in the private company for
shares in the public company. At this point, the private company has effectively become a
publicly traded company.
 Reverse meger is quicker, easier and cheaper route to becoming a public company.

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Q-10. Exmples of Merger and Acquisition in india.

 Tata Steel-Corus: Tata steel purchasing 100 % stake in the Corus group .
 Vodafone –Hutch : vodafone bought the controlling interest of 67 % held by Li- shing
Holdings in Hutch –Essar for $11.1 billion.
 Hindalco-Novelis: Hindaclo industries a kumar Mangalam Birla led Aditya Birla group
aquired Copper Major Candidan company Novelis Inc.
 Ranbaxy –Daiichi Sankyo: Japanese drug firms Daiichi Sankyo acquired a majoirity
stake of More than 50 % in domestic Major Ranbaxy for Over $ 4 billion.
 ONGC- Imperial energy: ONGC Made takeover offer to Imperial Energy Plc for $ 2.8
billion.
 HDFC Bank – Centurion Bank of punjab: HDFC Bank acquisition of Centurion Bank
of Punjab for $ 2.4 billion

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Q-11. What is Meaning of Due Diligence and Types of Due Diligence.
Ans:
Meaning of Due Diligence.
 Due Diligence is the process of investigation conducted by parties involved in a business
transactions.
 Due diligence is an investigation of a business or person prior to signing a contract, or an
act with a certain standard of care.
 The most intense reviews usually occurs between signing of the letter of intent and the
execution of the definitive purchase and sale documents.
 Due diligence is an investigation or audit of potential investments. it serves to confirm all
material facts in regards to a sale.
 Process of investigation performed by investors in to details of potential investments,
such as examinations of operations and management and the verification of material facts
is due diligence.
Types of Due Diligence
A) Financial Due Diligence
 Financial due diligence analyzes ,qualitatively and quantitatively how organization
performed financially to get sense of earning on normalized basis.
 Financial due diligence analyzes the assets and liabilities to be acquired.
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  Financial due diligence include central and state taxes have been filed appropriately by
the seller.
B) Strategic Due diligence
 Strategic due diligence considers an acquisitions in the context of its industry and check
what is benefit of the organization acquisitions.
 For examples: for a manufacturing company, how is the organization positioned within
their customer supply chain
 What does it currently manufactures?
 Who does it sell to?
 Aht do you know about the customers.
C) Operational due diligence
 Operational due diligence looks transaction to determine what the buyer can do to
improvements in productivity and profitability.
 This include examining work centers, material flows, scrape generation and inventory
levels.
E) Human Capital Due diligence
 The effectiveness of the HR practices being adopted, and the perception of the company
in terms of performance capabilities, can truly make the difference in the overall
effectiveness and efficiency of the project.

Q-12.What is Business Due diligence .

Ans:
 Business due diligence helps to explore management, market ,product and service
adopted by business in details.
A) Management
B) Product
C) Business Model
D) Market
A) Management
 Who are the founders and what are their background?
 Do they have relevant experience
 Do they have track record of success?
 What critical resources do they have access to do?
 Are they detail oriented.
B) Market:

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  The business proposal must show how it will serve a large, rapid growth market.
 The entrepreneurs must be able to clearly identify their target customers and define
strategic how they will reach them.
 Who are the user of the product and how many of them are there?
 How is the company positioned against competitive threats.
 Describes the competition?
 What are the market boundaries.
C) Product:
 The company must describe how their product/service will deliver to the customer .
 What customer problem is being solved?
 What unique technology and knowledge does the company have?
 Are there any strategic relationship?
 Does this product exhibit relationship?
D) Business Model
 What are the financial requirement like capital, investment, cash etc.
 What is the potential for recurring revenue?
 What are the anticipated Margins?
 What is the exist strategy?
 How company sell its product or services.
 What is the financial requirement?
Q-11. Whats are challagens of Due diligence.
Ans:
Capturing knowledge and experience:
 Efforts to enhance one’s learning curve become critical in facilitating the capture of
knowledge.
 It becomes necessary to have knowledge that narrow and deep to intimately understand
particular market and technology space.
Product research:
Often firms are focused on their core expertise and are not able to devote sufficient time and
resource to exploring new market spaces.
 They would like to devote resource to understanding new market space opportunities
through extending their knowledge and core competences.

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Q-13. What is Meaning of Divestitures
Ans:
 A divestiture is the partial or full disposal of a business unit through sale, exchange,
closure or bankruptcy. 
 The Sale of a part of firm to another company is referred to as a divestitures.
 The Firm sale a part ,receives the payment in cash, marketable securuity or a combination
of both.
Example:
 Company XYZ is the parent of a food company, a car company, and a clothing company.
If for some reason Company XYZ wants out of the car business, it might divest the
business by selling it to another company, exchanging it for another asset, or closing
down the car company.

Types of Divestitures

1) Voluntary Divestitures
 This is a process wherein the selling entity fees that a certain divison is not adding to its
profitability and is diverting the company ‘s attention from the more profitable divisions.
 To refoucus its attention on the profitable divisions,the company might decide to divest
the unprofitable division
2) In voluntary Divestitures

 When a firm is compelled to divest itself off a particular assets a result of a legal dispute
it is referres to involuntary divesititure
 Example: In june 1983 When Snta fe merged with southern pacific. However it was
followed by an antitrust Petition filed aginst the merger. In june 1987 the Inter State
commerce commission adjuged that the merger was against the competition, It was
believed that such a giant firm would reduce competiotion in the market. The ISCC
ordered Snata Fe-Southern Pacific to submit a Divestiture Plan Within 90Days.
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Q.14 .What is Meaning of Cross Border Merger and Problems accured in cross border
Merger.
Meaning of Cross Border Merger
Cross Border Mergers and Acquisitions. Cross border Mergers and Acquisitions or M&A are
deals between foreign companies and domestic firms in the target country. The trend of
increasing cross border M&A has accelerated with the globalization of the world economy.

Problems accrued in cross border merger

Cultural and Communication Obstacles. Cross-border transactions—inbound or out-bound—
present a unique set of issues that are compounded by the scale and geographic scope of the deal.
Even in this age of instant communication, parties to the deal often come from divergent cultural
backgrounds, have multiple language requirements, have different business practices, and are in
distant locales. Overlooking these issues can result in a failed deal or unsuccessful business
integration.

Employment and Labor. Labor and employment issues in cross-border transactions can be
quite complex because of the differences in local jurisdiction requirements or customs and
practices. The depth of challenges in this area can become compounded by the scale and
geographic scope of the deal. 

Tax and Accounting Considerations. Tax issues are typically critical to structuring the
transaction. Non-U.S. acquirers contemplating a dividend stream flowing from the U.S. target
need to structure the transaction to deal with withholding tax requirements and should consider
the possibility of utilizing a subsidiary located in a country that has a favorable tax treaty
network or other tax attributes that will minimize the taxes imposed on the dividends as they
cross borders
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Political Considerations. Identifying and evaluating the actual or potential political implications
should be accomplished in advance of initiating any M&A or strategic investment transaction.
This analysis should be as comprehensive as practical and must go beyond more obvious issues
such as whether the target company is in a sensitive industry or is owned/financed by a foreign
government. 

Transaction Structure. A variety of potential transaction structures should be considered when

developing the deal structure, especially in sensitive transactions. Choosing the right deal
structure is often critical to successfully closing the transaction and optimizing post-closing
integration and operations. 

Due Diligence. Wholesale application of the acquirer’s domestic due diligence standards to the
target’s jurisdiction can cause delay, waste time and resources, or result in missing key issues.
Due diligence methods must take into account the target jurisdiction’s legal regime and,
particularly important in a competitive auction situation, take into account the local customs and
practices. Making due diligence requests that appear to the target as particularly unusual or
unreasonable (not uncommon in cross-border deals) can easily cause a party to lose credibility.
Similarly, missing significant local issues for lack of target country knowledge can be highly
problematic. These issues can be typically addressed by engaging and soliciting input from
experienced local counsel.

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 Module:02

Q-1. Explain in detail various payment methods used in Mergers & Acquisition
Ans:

Merger Transactions, 2005 Cash only

Stock only
Cash and securities
Other securities

Cash
Payment by cash. Such transactions are usually termed acquisitions rather than mergers because the shareholders of the target
company are removed from the picture and the target comes under the (indirect) control of the bidder's shareholders.

Stock
Payment in the form of the acquiring company's stock, issued to the shareholders of the acquired company at a given ratio
proportional to the valuation of the latter. They receive stock in the company that is purchasing the smaller subsidiary.

Issue of debt:
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It consumes financial slack, may decrease debt rating and increase cost of debt. Transaction costs include underwriting or closing
costs of 1% to 3% of the face value.

Issue of stock:
it increases financial slack, may improve debt rating and reduce cost of debt. Transaction costs include fees for preparation of a
proxy statement, an extraordinary shareholder meeting and registration.

Financing options
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.  

Q-2.What are the provision for M&A Under Companies Act 2013.

Ans:
 The Companies Act, 2013 (2013 Act) has seen the light of day and replaced the 1956 Act
with some sweeping changes including those in relation tomergers and
acquisitions (M&A).
 The new Act has been lauded by corporate organizations for its business-friendly
corporate regulations, enhanced disclosure norms and providing protection to investors
and minorities, among other factors, thereby making M&A smooth and efficient.
 Its recognition of interse shareholder rights takes the law one step forward to an investor-
friendly regime
Who can file the application for Merger & Amalgamation  propose: Section 230(1)
 An application for Merger & Amalgamation can be file with Tribunal (NCLT) National
Company Tribunal Law.
 Both the transferor and the transferee company shall make an application in the form of
petition to the Tribunal under section 230-232 of the Companies Act, 2013 for the
purpose of sanctioning the scheme of amalgamation.
Joint Application:
 Where more than one company is involved in a schceme, such application may, at the
discretion of such companies, be filed as a joint-application.

22
  However, where the registered office of the Companies are in different states, there will
be two Tribunals having the jurisdiction over those, companies, hence separate petition
will have to be filed.

Process of Merger and Acquisition as per companies Act 2013.

1. Format of Application
Application to the tribunal for Merger & Amalgamation will be submitted in form no. NCLT-
1 along with following documents:

a) A notice of admission in Form No. NCLT-2

b) An affidavit in form no. NCLT-6
c) A copy of Scheme of C&A (Merger & Amalgmation)
d) A disclosure in form of affidavit including following points Section 230(2)
–  All material facts relating to the company, such as
i. the latest financial position of the company,
ii. the latest auditor’s report on the accounts of the company and
iii. the pendency of any investigation or proceedings against the company.
2. Calling of Meeting by Tribunal:
 Upon hearing of the application Tribunal shall, unless it thinks fit for any reason to
dismiss the application, give such directions / order as it may think necessary in respect
meeting of the creditors or class of creditors, or of the members or class of members, as
the case may be, to be called, held and conducted in such manner as prescribed in rule 5 of
CAA Rules, 2016 as follow:
i. Fixing the time and place of the meeting or meetings;
ii. Appointing a Chairperson and scrutinizer for the meeting or meetings to be held, as the case
may be and fixing the terms of his appointment including remuneration;
iii. Fixing the quorum and the procedure to be followed at the meeting or meetings, including
voting in person or by proxy or by postal ballot or by voting through electronic means;
iv. Determining the values of the creditors or the members, or the creditors or members of any
class, as the case may be, whose meetings have to be held;
v. Notice to be given of the meeting or meetings and the advertisement of such notice.
vi. Notice to be given to sect oral regulators or authorities as required under sub-section (5) of
section 230;
vii. The time within which the chairperson of the meeting is required to report the result of the
meeting to the Tribunal; and
viii. Such other matters as the Tribunal may deem necessary
3. Notice of Meeting:
 The Notice of the meeting pursuant to the order of tribunal to be give in Form No. CAA-2. Rule 6

Person entitled to receive the notice The notice shall be sent individually to each of the Creditors or
Members and the debenture-holders at the address registered with the company. Section 230(3)

23
Person authorized to send the notice:

 Chairman of the Company, or

 If tribunal so direct- by the Company or its liquidator or by any other person
Modes of Sending of notice:
 By Registered post, or by Speed post, orby courier, or
 By e-mail, or by hand delivery, or by any other mode as directed by the tribunal
Documents to be send along with notice: 
 The notice of meeting send with
 (i) Copy of Scheme of C&A and
 ii) Following below mentioned details of C&A if not included in the said scheme:
a. Details of the order of the Tribunal directing the calling, convening and conducting of the
meeting:-
 Date of the Order;
 Date, time and venue of the meeting
b) Details of the company including:
 Corporate Identification Number (CIN) or Global Location Number (GLN) of the company;
 Permanent Account Number (PAN);
 Name of the company;
 Date of incorporation;
 Type of the company (whether public or private or one person company);
 Registered office address and e-mail address;
 Summary of main object as per the memorandum of association; and main business carried on by
the company;
 Details of change of name, registered office and objects of the company during the last five years;
 Name of the stock exchange (s) where securities of the company are listed, if applicable;
 Details of the capital structure of the company including authorised, issued, subscribed and paid
up share capital; and
 Names of the promoters and directors along with their addresses.
c.) Relationship in case of Combined Application: 

 if the scheme of compromise or arrangement relates to more than one company, then the fact and
details of any relationship subsisting between such companies who are parties to such scheme of
compromise or arrangement, including holding, subsidiary or of associate companies.

d. )Disclosure about effect of M&A on material  interests of directors, Key Managerial Personnel
(KMP) and debenture trustee.

e.) Details of Board Meeting:

 The date of the board meeting at which the scheme was approved by the board of directors
 The name of the directors who voted in favour of the resolution,
 The name of the directors who voted against the resolution and
 The name of the directors who did not vote or participate on such resolution

24
f.) Explanatory Statement disclosing details of the scheme of compromise or arrangement
including:
 Parties involved in such compromise or arrangement;
 Appointed date, effective date, share exchange ratio (if applicable) and other considerations, if
any;
 Summary of valuation report (if applicable) including basis of valuation and fairness opinion of
the registered valuer, if any, and the declaration that the valuation report is available for
inspection at the registered office of the company;
 Details of capital or debt restructuring, if any;
 Rationale for the compromise or arrangement;
 Benefits of the compromise or arrangement as perceived by the Board of directors to the
company, members, creditors and others (as applicable);
 Amount due to unsecured creditors. g. Disclosure about the effect of the Merger &
Amalgamation (C&A) on: Section 230(3)
 Key Managerial Personnel;
 Directors;
 Promoters;
 Non-Promoter Members;
 Depositors;
 Creditors;
 Debenture holders;
 Deposit trustee and debenture trustee;
 Employees of the company:
 Share holders of the Company

Q-3. What are SEBI Regulations for Buy back Securities Regulations
Ans:

 THE SEBI REGULATIONS 1998 ARE APPLICABLE TO COMPANIES WANTING TO BUY

BACK SHARES OR OTHER SPECIFIED SECURITIES LISTED AT THE STOCK
EXCHANGE.
Concept of Buy back:

25
  Buy Back is a financial restructuring through which a company purchases its own shares or other
specified secuirities.

 Company offers to take back its shares owned by the investores at a specified price generally
determined or arrived at on the basis of the average market price of the shares in the past few
month.

Condition of buy back shares

(1) The maximum limit of any buy-back shall be twenty-five per cent or less of the aggregate of paid-up
capital and free reserves of the company:
Explanation: In respect of the buy-back of equity shares in any financial year, the reference to twenty-
five per cent in this regulation shall mean its total paid-up equity capital in that financial year;
2) The ratio of the aggregate of secured and unsecured debts owed by the company after buy-back shall
not be more than twice the paid-up capital and free reserves.
3) All shares or other specified securities for buy-back shall be fully paidup.
(4) A company may buy-back its shares or other specified securities by any one of the following methods
 From existing shareholder or other specified security holder.
 from the open market through— i) book-building process, ii) stock exchange;
5) A company shall not buy-back its shares or other specified securities so as to delist its shares or other
specified securities from the stock exchange.
6) A company may undertake a buy-back of its own shares or other specified securities out of— (a) its
free reserves; (b) the securities premium account; or (c) the proceeds of the issue of any shares or other
specified securities:
(7) No company shall directly or indirectly purchase its own shares or other specified securities:

Module:03

Q-1.What is Meaning of Takeover and types of takeover.

Ans:

26
  A takeover is the purchase of one company (the target) by another (the acquirer, or bidder).
 Management of the target company may or may not agree with a proposed takeover, this has
resulted in the following takeover classifications

Types of Takeover

Friendly Takeover
 In case of Friendly takeover ,the promoters /Management of Target company are in principle,
agreeable to be taken over by the acquire and are willing to peacefully control over the target
company to the acquirer.
 Friendly takeover happens when the entire promotes group is willing to exist
 In case of the friendlly takeover, there is cooperation between the acquirer and the target
company.
 The target company shares the critical information required by the acquirer to carry out valuation
of the target company.
 It also facilitates due diligence by the acquirer and cooperates in carrying out legal formalities.
 A friendly takeover is an acquisition which is approved by the management of the target
company.
 Before a bidder makes an offer for another company, it usually first informs the company's board
of directors. In an ideal world, 
 Exmple: Tata steel’s acquistions of corus,the letter was also looking for a prospective aquirer who
was low cost procucer of steel
 They are willing to sell out to tata

Hostile Takeover
 Hostile takeover allows a bidder to take over a target company whose management is unwilling
to agree to a merger or takeover.
 A takeover is considered hostile if the target company's board rejects the offer, and if the bidder
continues to pursue it, or the bidder makes the offer directly after having announced its firm
intention to make an offer. 
 In case of mittal steels acquistion of Arcelor, the management of arcelor was strongly opposed to
the takeover by mittal steel whom they sneered at as company of Indians.
 A hostile takeover can be conducted in several ways. A tender offer can be made where the
acquiring company makes a public offer at a fixed price above the current market price. 
 Hence mittal had to resort to hostile takover
Bail out take over:

 Take over of a financially sick company by a financially rich company as per the
provision of sick industrial companies Act 1985 to bail out the former form losses.
Reverse Takeover:

27
  The final common type of take over is reverse takeover. This happen when a private
company buys a publicly traded company as means of accruing public status
without having to list itself.
Horizontal Take over:

 It is takeover of one company by another company in the same industry. The main
purpose behind this kind of takeover is achieving the economic of scale or
increasing the market share.
Vertical Merger:

 It is takeover by one company by its suppliers or customer .The former is known as

Backward integration and letter is known as forwad integration

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Q-2.What are takeover tactics.
 Ans: Tactics means method or approach of takeover.

Takeover Tactics
Dawn Raid

 A dawn raid is when a firm or investor buys a substantial number of shares in a company first
thing in the morning when the stock markets open. 
 A dawn raid is the purchase of a large number of shares or securities as soon as
the market opens, usually in a takeover effort.
 Let's say that Company XYZ owns 40% of Company ABC but wants to acquire a controlling
interest in Company ABC. Company ABC is trading at $5 a share.
 If Company XYZ wanted to make a formal offer to buy 51% of Company ABC, it figures
it will likely have to offer a 20% premium over the share price, or $6 a share, which could cost it
millions of dollars more.
Bear Hug:

 A bear hug is an offer made by one company to buy the shares of another for a much higher per-
share price than what that company is worth.
 A bear hug offer is usually made when there is doubt that the target company's management is
willing to sell.
 If the offer is really very good for the public shareholder’s interest,the board of director can not
reject it just protect the interest of the promotors of the target company.
Proxy Fight:

 The acquirer convinces majority sharholder to issue proxy right is his favor,so that he can remove
the existing director from the board of the target company and appoint his own nominees theryby
taking control of the target company

Defense tactics:
Crown jewels.

 The target company sells its higly profitable or attractive business to takeover bid less attractive
to the raider
 A takeover-defense tactic that involves the sale of the target company's prized and most coveted
assets - the "crown jewels" - so as to reduce its attractiveness to the hostile bidder.

Blank cheque

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 The target company makes a preferential allotment to existing promoters or friendly shareholder
to increase the control of the promoters group.
 The existing promoters of the target company would be hodling shares in excess of 15 %
 As per takeove regulations in india when the promoters holding are between 15 % and 55% ,they
can acuirer only 5% of the paid capital share capital in any financial year without making an open
offer.
Shark repellents

 Shark repellent is a slang term for any one of a number of measures taken by a company to fend
off an unwanted or hostile takeover attempt.
 In many cases, a company will make special amendments to its charter or bylaws that takeover
become expensive and impossible.
 Company appoint

Poison Poll

 The target company may issue right/warrants to the existing shareholder entitling them to
acquirer large number of shares in the event an acquirers stake in the company reaches a certain
level.
 Such right /warrants would be available eihter to a certain set of shareholder only or to all the
existing shareholder but not to the acquirer
Poison Put

 The tactics of leveraged recapitalization and leveraged cash out is called poison put by some
authors.
 A takeover defense strategy in which the target company issues a bond that investors can redeem
before its maturity date. A poison put is a type of poison pill provision designed to increase the
cost a company will incur in order to acquire a target company.
People pill

 The target company's management team threatens that, in the event of a takeover, the entire team
will resign.
 The purpose of a people pill is to discourage the acquiring company from completing the
takeover, by introducing the possibility of having to put together an entirely new
management team
Pacman

 The target company or its promoters start acquiring sizable holding in the acquirer
company threatening to acquirer raider itself.
Greenmail

 The target company or the existing promoters arrange through friendly investors to accumulate
large stock of its shares with a view to raise its market price.
 This make takeover very expensive for the acquirer

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 Greenmail is ude to describe an arrangement called target block repurchase with standstill
agreement.

Whiteknight

 A white knight is a friendly investor that acquires a corporation at a fair consideration with the

support from the corporation's board of directors and management. 
 The target company or its existing promoters enlist the services of another company or group of
investors to act as white knight who actually takes over the target company.
Golden parachute

 A golden parachute consists of substantial benefits given to top executives if the company is
taken over by another firm and the executives are terminated as a result of the merger or takeover.
 Golden parachutes are contracts given to key executives and can be used as a type of anti-
takeover measure, often collectively referred to as poison pills, taken by a firm to discourage an
unwanted takeover

31
Q-3.What is Mening of leverages and types of Leverages.
Ans:
Meaning
 When Compnay acquires another company using a siginficant amount of borrowd funds
such as bonds orloans to pay the cost of acquistion.the transaction is termed leverage.
 Example: HCA Inc was acquired in 2006 by Kohleberg Kravis Roberts & Co ,Bain & Co
and Merrill lynch which paid around $33 billion for the acquistion.
 An LBO often invloves a ratio of 70 % debts and 30% equity,although the ratio of debt as
high as 90 % to 95 % of the target companys capitalization .
 Leveraged Buy out is a” A financing technique of purchasing a private company with the
help of borrowed or debt capital”.
 LBO Means “ the acquisition ,financed largely by borrowing of all the stocks or assets,of
hither to public company by a small group investors”.
 LBO Means “ the acquisition of a compnay or divison of a company with a substantial
portion of borrowed funds.

Types of Levergaed Buy out.

Sponsored LBO:

 Under Sponsored LBOs ,the private equity firms offer to buy a controlling stake in a
company using leverage obtained from bank based on the financial of the company.
 This strategy is simple commit very little own money to purchase the business.
 This is secret behind the specific return for there is very little cash invested
Non Sponsored Lab

32
  This strategy is adopted in case of financial health busienss where the financing
techiniques are similar but the management gains operating control with around 85 % to
100 % ownership depedning on the situtation.
 These buyout are called non sponsered leveraged buy out.

Q-4. What is Meaning of Employees Stock Ownership plan.

Meaning of ESOP
 “ An ESOP is programme that allows employees to purchase stock in the companies thay
work for.
 It confers on employess the right to share in the wealth of the company and the right to
exercise some degree of control over the company affairs.
 ESOPs can improve employees work efforts, provide incentive for employees to stay a
company,and allow retiring owners to transfers shares of stock to employees.
 An employees stock ownership allows companies to share ownership with employees
wiithout requiring employees to invest their money
 With ESOP shares of the companies are contributed to an ESOP fund on behalf of the
employees.
 An employee stock ownership plan (ESOP) is a type of employee benefit plan which is
intended to encourage employees to acquire stocks or ownership in the company.

Micro Principle
 Productivity: Employees share ownership is identified as a means of enhancing
enterprise performance through promoting worker productivity.
 Saving: The long term shortage of saving in an ageing community ,seems to require the
development of more supplicated approach to national savings policy
 Investment: ESOP provide employees with a way of participating in buy in buy outs and
of financing in return for equity, the capital expansion of business.
33
  Human Resource Management: There is range of industrial relations or human
resource management rationales for employees share ownership.
 ESOPs is a means of increasing employees understanding how the company for which
they work ,operates and more broadly of absorbing principle on which the econoy
country is run
Macro Principle
 The purpose of the employees ownership is to provide a means by which the mass of
the employees can become direct co owner of the business where they work.
 ESOP preserves both of these principles. It does so providing Employees with the means
to purchase .

Types of ESOPS

1.Non Leveraged ESOP

 This first type of ESOP) does not involve borrowed funds to acquire the sponsoring
employer’s stock.
 It is funded by contributions of cash or stock directly from the employer sponsor. Shares of
stock contributed by the corporation are “newly issued shares.”
 New shares are issued to the ESOP and a deduction is taken by the corporation for their
appraised fair market value as of the date of contribution.
 Alternatively, cash can be contributed to the plan in annual discretionary amounts as cash flow
permits, to purchase shares at a later date, or simultaneously, from either the corporation or
from another shareholder.

2. Leveraged Buyout ESOP

34
 An “Issuance ESOP” uses financing to acquire newly issued shares from the employer
sponsor.
 The shares are allocated to the participants’ accounts as the loan is repaid.
 During this repayment, the shares are released from a special ESOP account, called a
“suspense account,” to the ESOP participants’ accounts according to formulas developed
by the IRS.
 The corporate advantages of an Issuance ESOP are that it creates tax advantaged
financing for purchasing capital goods, for expanding by merger or acquisition, or simply
by increasing capital formation.
 For whatever purpose, the principal borrowed to buy the stock effectively becomes tax
deductible by virtue of it being repaid via plan expense/contributions. The company is
therefore able to borrow money this way on a fully deductible basis.

35
Q-5. Advantages of Employee Stock Ownership Plan.

Ans:

Advantages of ESOP
 Capital Appreciation: Company sell some or all oe their equity to employees and by
doing so convert corporate and personal taxs in to tax free capital Appreciation
 Incentive Based Retirement : ESOP Provide cost effective plan to motivate employees.

36
  Tax Advantages: Enables tax advantaged purchasing of stock of retiring company
owner.
 Company Reduce its tax liability: A company can reduce its corporate income tax
based and increase its cash flow and net worth by simply issuing treasury stock.
 ESOPs give incorporation tax deductions with no cash expenditure.

Disadvantages of ESOP
 Liquidity: If the value of the stock appreciates substantially, the ESOP and or the
company may not have sufficient fund to repurchase stock.
 Complex: Theresa a lot to learn when setting up an ESOP and this can be a deferent for
Same.
 Excessive leverage: To initially implement an ESOP,The company may borrow money
from an institutional lender.
 Complicated Accounting: ESOP debt is recorded as employer debt and this can be tricky
for accountants to grasp.

Module:04
Q-1. Highlight the differences between the Pooling of Interest Method & Purchase Method
with respect to Accounting Standard 14.

37
 POOLING OF INTERESTS
Item PURCHASE METHOD
METHOD

Typically lower than purchase

Book Typically higher than pooling
method, as no goodwill asset is
Value method.
created.

Typically lower than the pooling Typically higher than purchase

Earnings method because pre-acquisition method because income
Trend income statements are not statements are combined
combined. retroactively.

Typically distorts growth

Typically more accurate than
perception of the acquiring
Sales the purchase method, as income
company, as much of its sales
Trend statements are combined
growth can be attributed to the
retroactively.
acquisition.

Typically higher than the

purchase method, as the income
Earnings Typically lower than the pooling
statement is combined for the
Per Share method.
entire reporting period, rather
than as of the acquisition date.

38
Q-2. What is Meaning of Employees Stock Ownership plan

 Meaning of Business Valuation

 Valuation is the process of determining the current worth of an asset or a company;
there are many techniques used to determine value.
 Valuation is device to assess the worth of an enterprise so that the consideration
amount can be quantified and price of one enterprise for the other can be fixed.
 Such valuation helps in determining the value of share of the acquired and acquiring
company to safeguard the interest of the shareholder of both the companies .
 Methods of Business Valuation
1.Assets Based Approach
 An asset-based approach is a type of business valuation that focuses on a
company's net asset value (NAV), or the fair-market value of its total assets minus
its total liabilities, to determine what it would cost to recreate the business. 
 The purpose of this approach is to study and revaluate the companies assets and
liabilities obtaining the substance value.
 The substance value is thus estimated as assets minus liabilities.
 The basic idea is that the company’s value could be determined by looking at the
balance sheet.
There are two general methods for estimation of substance of assets,eihter collective
revaluation .
1. Balance sheet Adjustment
2. Book value is different from the market value or the liquidated ion value.
3. The appraiser must make certain adjustments according to the purpose of valuation.
4. Most common is to adjust assets.
5. The items to valuate are those on the balanchesheet include,financial
assets ,tangible propoerty,real estate,intangible real propoerty,current liabilities,
long term liabilities,contigent liabilities and special obligation
6. Book value is different from the market value or the liquidated ion value.
7. The appraiser must make certain adjustments according to the purpose of valuation.
8. Most common is to adjust assets.
9. The items to valuate are those on the balanchesheet include,financial
assets ,tangible propoerty,real estate,intangible real propoerty,current liabilities,
long term liabilities,contigent liabilities and special obligation
2. Income Based discounted Arrpoach
 The income approach is commonly called discounted cash flow approach.
 It is accepted as an approporaite method by business appraisers.

39
This approach constitutes estimation of the business value by calculating the present
value of the future benefits which the company are expected to generate
 Discounted cash flow tries to work out the value of a company today based on
projections of how much money its going to make in future.
 DCF analysis says that a cmpoany is worth all of the cash that it could make
available to investors in the future
 There are several mehtods of discounted cash flow analysis inclduing the dividend
discount model approach and cash flow to firm approach.
Steps in DCF analysis
1) Determination of the Forecast Period
2. Determine of Revenue Growth Rate
3.Forecasting Free Cash flows

3. Market Based Approach

 A market approach is a method of determining the appraisal value of an asset based
on the selling price of similar items.
 The market approach is a business valuation method that can be used to calculate
the value of property or as part of the valuation process for a closely held business.
 Additionally, the market approach can be used to determine the value of a business
ownership interest, security or intangible asset.
 Regardless of what asset is being valued, the market approach studies recent sales
of similar assets, making adjustments for differences in size, quantity or quality
 Market capitalization means number of outstanding equity share multiplied by
market price of shares.
 Market value of an assets or a security is the price at which is currently being traded
in the market.
4. Dividend Discounted Model
 Dividend discount model begin with the arguments that the value of an equity share
is net present value of dividends that investor would receive over the holding period
plus net present value of the price of the price he will realize at the end of the
holding period.

Importance of Business Valuation

 Valuation can serve many purpose-to establish a price, to help increase value, to aid
in estate planning, and to meet governmental requirement.

 With a variety of business and legal situations triggering the need to know the value
of business-strategic partnership, merger and acquisition of business, estate
planning,

40
Q.3 Explain the concept of Delisting. State the features of compulsory and voluntary
delisting

Meaning of Delisting
 Delisting is the process by which a listed security is removed from the exchange
on which it trades.
 A company can voluntarily ask to be delisted to become privately traded.
Otherwise, a particular stock may be removed from an exchange because the
company for which the stock is issued is not in compliance with the listing
requirements of the exchange.

Difference between voluntary delisting and compulsory delisting

S. Voluntary Delisting from all the

Criteria Compulsory Delisting
No Exchange(s)
1. Applicable Regulations 22 to 24 Regulations 5 to 21
Regulations
2. Initiative Any Recognized Stock Exchange Any Company can voluntarily apply to the
Action makes an order to delist the concerned stock exchange(s) for delisting.
equity shares of a company.
3. Grounds Delisting order can be made on The Company either for cost benefit, or to
the non-fulfillment of the listing comply with any of the rules and regulations
regulations of the respective etc may seek delisting from any of the
exchange and on any other exchange.
ground prescribed in the rules
made under section 21A of SCRA,
1956.
4. Public Notice Public Notice in this case be Public notice and all announcements be
given by the Exchange given by the Promoters of the company.
5. Approvals The Panel of Experts has to take The Company seeking voluntary delisting
the decision after giving a shall take the approval of the concerned
reasonable opportunity of being stock exchange(s) and also of public
heard to all the persons who may shareholders.
be aggrieved by the Delisting of
the company.
6. General No need of the General meeting Shareholders resolution to be passed
Meeting of the of the shareholders through Postal ballot.

41
 shareholders
7. Appointment The complete process is The complete process is monitored by the
of Merchant monitored by the Panel of Merchant Bankers
Banker Experts
8. Exit Price To be calculated by the The price to be determined on the basis of
Independent valuer at which the the past trading data or book values of the
Promoter should take the shares company by the promoters in consultation
from the Public shareholders. by the Merchant Banker
9. Reverse Book No bids are invited from the Complete process of Reverse Book Building
Building Shareholders for determination is to be completed for determination of the
process of the Final Price Final Price.
10. Debarred from The company/ The company can not relist its securities for
the securities Promoters/Directors are a period of 5 years.
market debarred from the securities
market for a period of 10 years

Advantages of Delisting

 Capital Savings - The costs of being a publicly traded company are substantial and are
occasionally difficult to justify with a low  market capitalization, especially after Sarbanes
Oxley laws called for increased disclosures. As a result, deregistering can save a company
millions and reward shareholders with a higher net income and earnings per share (EPS).

 Strategic Move - Company shares may be trading below intrinsic value, compelling the
company to acquire its own shares as a strategic move. This typically results in
shareholders being rewarded with substantial returns over the short term.

 Regulatory Concerns - Stock exchanges such as the Nasdaq and New York Stock Exchange have

minimum requirements to remain listed. If a company does not meet those requirements, it may be
forced to delist itself. Causes for delisting may include failure to file timely financial reports, lower-
than-required stock price, or insufficient market capitalization.In the end, companies can have a
clear bottom-line incentive for delisting their stock from public exchanges - it's not always a bad
thing.

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