A Private Merger and Acquisition is a corporate restructuring tool that helps private business organizations to expand and diversify their scale of operations and to achieve other underlying objectives. A private merger means an arrangement whereby one or more existing companies merge their identity into another to form a new entity that may or may not be one of those existing entities. In laymen terms, it is a combination of two or more entities into one by accumulation of assets and liabilities of both the organizations. There are varied objectives of mergers such as, economies of scale, acquisition of technologies, access to varied sectors and markets, reduction in cost etc.
A private acquisition or takeover is the purchase by one person, of controlling interest in the share capital or of all or substantially all of the assets and/or liabilities, of the target. An acquisition can be be friendly or hostile and may be structured either by way of agreement between the majority shareholders or purchasing of shares from an open market or by making an offer for acquisition of the target’s shares to the entire body of shareholders.
With a few variations, the private merger and acquisition activity in India during the period from 2015-2019 has been quite strong. During this period, India has witnessed around 3,600 private acquisition and merger deals with an approximate value of more than USD 310 billion. Many sectors such as industrial goods, energy, telecom & media represented more than 60% of deals by volume and value. Some of the world’s most talked about deals include Walmart’s USD 16 billion acquisition of Flipkart (2018), the USD 13 billion acquisition of Essar Oil by a Rosneft-led Russian consortium (2017), and Adani Transmission’s USD 3 billion acquisition of Reliance Infrastructure’s integrated.
The current government’s reform agenda and the policies are more likely to formulate and encourage foreign investments. There is also an increase in the private Merger & Acquisition activity in India due to the new bankruptcy law and the faster pace of approvals initiated by the government as part of its ease of doing business in India campaign and the relaxation in Foreign Direct Investment norms. However, with the phase of recent geo-political events such as the US-China trade war, the Brexit situation in Hong Kong or the the drone strike on Saudi Arabia’s oil facilities indicated a dawning recession and India started sinking in deal making in the third and fourth quarters of 2019. In addition, the COVID-19 outbreak has equally disrupted the world in 2020 has not left the Indian economy untouched. Several private merger and acquisition deals in India have been stalled in the wake of this pandemic including the much-anticipated privatization of Air India and Bharat Petroleum Corporation Limited. But as the world will be able to retrench the spread of COVID 19 and lift the lockdown across the world, countries will expect from their governments to propose policies to revive the economy and help revive merger and acquisition activities.
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