Advisory on Mergers & Acquisitions

Growth Strategy

A Growth Strategy is a collection of business initiatives that seek the maximization of a company’s value within a period.

There are 2 ways to achieve growth of an existing business, namely Organic growth and inorganic growth. Organic business growth is achieved by using your existing resources to expand your business. On the other hand, inorganic growth is done through mergers, acquisitions, and takeovers.

Organic growth can be by way of investment in new product /market development, setting up a new facility, expansion of capacity, etc., As organic growth plan is on known  tracks, the entrepreneurs generally adopt this route in the earlier stages of an organisation. Once the organisation garners a sizeable market share and stability growing it further organically may become tough & at that stage an inorganic growth path is looked as the most suitable growth option.

Corporate M& A scenario Before 1990s

Until early ‘90s, Indian corporates were operating as independent islands with much shrouded targets/goals, and trying to manage their respective challenges well within their limitations.

Whenever any need would arise to reach out or access resources outside their base, they would be in the form of friendly acquisition or takeover option with familiar entities, happening within a coterie.
The roadblocks to a professional or a seamless need -based merger was, of course, regulations like the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP), Foreign Exchange Regulation Act, 1973 (FERA), Urban Land Ceiling and Regulation Act, 1976, etc, whose provisions were prohibitively strict, and did not allow the corporate to be too dynamic.

These harsh laws only resulted in hostile takeover bids in the cases of DCM and Escorts by NRI Swaraj Paul and by other NRIs who attempted arm twisting control mechanism through stock market.

Advent of Reforms and opening-up of M&A as avenues for growth

Post the liberalisation move sometime during late’90s, the shackles were loosened, and goals like “economies of scale”, “accessing new markets”, “access to otherwise unavailable resources”, and the like suddenly appeared achievable.

New gateway to opportunities were thrown open and the concept of M and A (merger and amalgamation) in the Indian corporate scenario became a reality, and picked momentum. Statistics indicate that the Year 2007 witnessed more than $100 million worth of M and A deals, which was 4 times the volume over the previous year. However, the hostile takeover story continued with L&T acquiring stakes in Mindtree Limited as late as in 2019.

Indians are known for their adaptation to metamorphosis and transformation, and the Indian corporate wielded the option of M and A to pursue their respective motives:

Exploring new markets,  Product extension, Strategic acquisition

Instead of increasing its own Debt or Equity portfolio, merger with a company or amalgamating with a company with such enhanced capacities

In M&A transactions, it is quite common that some companies arrange mergers to gain access to assets that are unique or to assets that usually take a long time to develop internally. For example, access to new technologies is a frequent objective in many mergers.

in terms of boosting the top line – that which enable revenue generating ability or rationalising the costs / resulting in economies of scale/ resource pooling/ access to new technology

Enhanced value booster for stakeholders / Better R and D capacity enhancement/ Acquisition of unique Ips/ Niche product or market accessability

Availing tax exemptions, amalgamating companies in the similar business with carry forward losses, merger through NCLT route

Conglomerates looking for multiple segment presence to boost their share prices, enabling vertical rise in top line revenues irrespective of lower margin businesses, to match market presence with their competitors/peers

To motivate performers within the organisation, the management may decide to reward them by sponsoring stakes in a new venture / subsidiary / SPV (Special purpose vehicle), and once performance parameters are achieved, to merge with the main entity at a decent valuation.

While the above discussion was on the positives, there are set of Negatives too:
  • Unethical intentions of the promoters and Flawed motivation levels
  • Unrealistic valuations not supported by commensurate performance post- merger
  • Cultural differences between the two companies surfacing post- merger
  • Abuse of taxation provisions
  • Scenario @ merger vs post- merger
  • Arm twisting by the acquirer company in respect of interference and disruption in the management of the target company’s affairs


Companies may find it unwieldy to manage too many verticals or business segments under a single roof, or may feel that certain activities have become “non-core” in due course, and may feel the necessity to hive off or spin off such biz segments into separate entities to bring about efficiency in operations, visibility and independent traction.

This concept was termed “Demerger”.

  • Focus on core competencies
  • Management accountability
  • Increase in market capitalisation
  • Tax advantages based on certain conditionalities
  • Focus on core competencies
  • Management accountability
  • Increase in market capitalisation
  • Tax advantages based on certain conditionalities

Reverse Mergers

Also referred to as “Reverse takeovers”, is considered an excellent gateway for private companies to go public,
  • Less costly than conventional IPOs
  • Access to multiple financing alternatives
  • Greater liquidity
  • Enables professional management
  • Probability of promoters losing control and importance
  • Additional compliance burdens and increased level of accountability

Role of HVCS

Conceptualising, Handling, Enabling and Managing M&A activity requires multiple capabilities and focussed efforts.

Typically, in present day environment, a CFO or any senior F and A executive  or even the entire F and A or secretarial team of a Corporate or a Group would be engrossed in addressing day-to-day challenges or involved in fire fighting acts, managing working capital shortages, MIS / bank related / other reporting requirements, regular statutory related compliances, etc.

Carving out quality time to focus on these one-time, specialised nature of work becomes almost an arduous task, and besides, owing to the limiting factors in terms of knowledge, capability, experience and willingness, may not enable required attention or desired levels of output.

HVCS boasts of a multi-disciplinary team comprising of Corporate strategists and governance specialists, Chartered accountants, Company secretaries, Law professionals, Cost accountants, IT specialists besides our firm professional arrangements with leading Merchant bankers and valuation professionals.

  • Understanding the rationale behind the M and A decision:
  • Our team would involve in deliberations with the management to understand the reasoning and the need to go in for the decision
  • Our team would frame the strategy and the step-by-step approach required to initiate the process, the resources required and the time line required for completion
  • If it would involve a process of “finding the target” i.e., looking out for an entity to be taken over or absorbed, the time line would be structured accordingly. Our team would negotiate and rope in an appropriate partner to be merged with the main entity. If the “target” is an entity within the group – an associate company, sister concern, etc the strategy and the time line would get shrunk to that extent.
  • “Charity begins at home”, goes the saying. Hence, before any due diligence process to be initiated on the target entity, the principal entity has to be placed under scanner and “made fit” for the M and A operation.
  • The next process is to initiate a DDR on the target entity – Legal, F and A, secretarial and any technical feasibility exercise if need be.
  • Valuation is another important component to be carried out for both the entities and swap ratio to be arrived at.
  • The decision regarding the type of merger : Horizontal/Vertical/Co-generic/Conglomerate
  • Structuring the business deal: After finalizing the merger and the exit plans, the new entity or the take over company has to take initiatives for marketing and create innovative strategies to enhance business and its credibility. The entire phase emphasize on structuring of the business deal.
  • Integration: This stage includes both the companies coming together with their own parameters. It includes the entire process of preparing the document, signing the agreement, and negotiating the deal. It also defines the parameters of the future relationship between the two. Cultural differences between the two entities need to be identified and bridged.
  • Operation of the venture: HVCS team would handhold the entire process and also the operation of the venture :Post M and A advisory:- This operation is attributed to meet the said and pre-defined expectations of all the companies involved in the process. The M&A transaction after the deal include all the essential measures and activities that work to fulfill the requirements and desires of the companies involved.

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