With lots and lots of economical, technological, and regulatory changes are taking place, it becomes inevitable for small firms/companies/business units to grow up rapidly without using enhanced resources like new technology, upgraded plant and machinery, latest knowledge updation, etc. Besides, globalization has also alluded business units to provide single window one step services at multi-locations reach with the cost and time effective aspects. The key determinants for success in the global market are the ability to achieve size, scale, integration and greater financial strength and flexibility, in the interest of maximizing overall shareholders value. Whatever is the fundamental objective, restructuring must form part of the business and corporate strategies aimed at creating sustainable competitive advantage for the firm. It is believed mergers and acquisitions (M&A) are strategic decisions leading to maximization of a company's growth by enhancing its production and marketing operations, enhanced competition, breaking of trade barriers, free flow of capital, globalization of business, etc. M&A is gaining importance day by day being the most common form of restructuring. Such a restructuring is adopted for achieving growth of business entity whether it is industry, corporate entity or a service sector organization. In this article various issues related to M&A accounting of corporate entity is discussed. A company's growth could also be achieved by utilizing the strengths of another company-be it financial or managerial or production capabilities or skilled labor-in achieving its growth and thus add to its shareholders' value. M&A is one of the methods of Assets Based (Portfolio) Restructuring adopted by company.
Acquisition
of companies/business units or merger with other companies
has been one of the most common ways of carrying out restructuring.
While acquisition of companies can be friendly or hostile,
merger invariably involves friendly pooling of interest, undertaken
by management of the companies of roughly comparable sizes.
However, in the Indian context the term merger is used to
denote consolidation of separate legal entities, not necessarily
of similar sizes, into one through a statutory process of
amalgamation. Since the motives of M&A are same and both
involve transfer of ownership and control of assets and rights
to manage corporate cash flows and the difference between
the two is very often a matter of technical detail, the term
M&A is often used interchangeably. Thus amalgamation is
blending of two or more existing undertakings into one undertaking,
the shareholder of each blending company becoming substantially
the shareholders in the company, which is to carry blended
undertakings. The essence of amalgamation is to make an arrangement
thereby uniting the undertakings of two or more companies
so that they become vested in, or under the control of one
company, which may or may not be the original of two or more
of such uniting companies. To give a simple example of amalgamation,
we may say A Ltd., and B Ltd., form C Ltd., and merges the
identities into C Ltd. It may be said in another way that
A Ltd. + B Ltd.=C Ltd. |
