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This article is written by Meera Patel pursuing BA.LLB (Hons.) from Maharaja Sayajirao University, School of Law. This article extensively discusses some key mergers and acquisitions of Alphabet Inc. It also sheds some light upon the laws related to mergers and acquisitions in India as well as the USA.

Introduction 

The co-founders of ‘Google’, Larry Page, and Sergey Brin decided to establish a parent company of Google because these two ambitious gentlemen always dreamed of doing something out of the box in their professional journey to glory. They believe that all the companies are meant to change themselves along with time to keep up with the happenings around them but these changes usually end up doing some steady changes in the name of revamping but these two had a different idea in mind. They considered that the technology sector needs big changes that could bring about a revolution. The need for getting themselves out of their comfort zone is the only way out.

When they birthed their new company on 2.10.2015 which is known as Alphabet Inc., they wanted to operate efficiently by making the system cleaner and were ready to take more accountability. 

All about Alphabet Inc.

The Name Alphabet was given through the new chapter of Google because the word contains an extensive list of letters that displays language which is humanity’s most important innovation.  

Alphabet Inc. is an American based multinational conglomerate company which is based in California, USA. Larry Page and Sergey Brin remained the main controlling shareholders of Alphabet Inc. along with being the shareholders, they also served as board members and the employees at Alphabet.

Alphabet Inc. is a basic umbrella company which delivers a collection of other companies. Google is one of the biggest parts of the biggest companies out of all the other companies which create this company. Alphabet Inc. is technically a new and extensive version of the original Google but it lets companies that are off the beaten path become a part of their main product that is Google. In simpler words, non-related companies use Alphabet as a platform to manage and run themselves at an independent post.

Along with providing independence, Alphabet also allows independent businesses to thrive with strong leaders. These companies are allowed to pick the brains of the masterminds behind this entire project and along with that, have access to the facilities provided by Google as per their needs. Facilities include the management of the monetary resources and providing proper guidance for investment and execution of the particular business. It is trying to up its investment, venture, and capital game. 

Alphabet Inc. replaced Google Inc. which had been a public entity for quite some time now. Along with that, Google became a subsidiary of Alphabet. In regards to the technology sector, this company is the fourth-largest company based on revenue generation and it is also regarded as one of the most valuable companies ever.

History of Alphabet Inc. 

The founders of Google Inc. declared their new intentions to create a new public holding company on August 10, 2015, via a blog post on Google’s official blog. This parent company of Google consists of various other big companies such as:

  • Google (main shareholder)
  • Calico: An American research plus development biotechnology company
  • Private G: Private equity firm
  • GV: Also known as the Google Ventures, this company is an Alphabet Inc. affiliated investment firm
  • X Development: an American secret research facility founded by Google
  • Many others

The present Chief Executive Officer also known as the CEO of Google, Sundar Pichai is also serving the post of CEO of Alphabet Inc. and its subsidiary company, Google LLC.

The motivation and idea behind Alphabet Inc. were revealed by Eric Schmidt who was the former executive of Google. He stated that in a conference in 2017, the inspiration for Alphabet caught on with them because of Berkshire Hathaway, a company whose CEO was Warren Buffet, an American investor and also the 4th wealthiest person of the world. 

According to Eric Schmidt, who is a currently serving the position of a technical advisor emphasized on the fact that he was the one who encouraged Larry and his partner to understand the functioning of Berkshire Hathaway as that company was a company that held subsidiary made companies who ran their companies with the proper guidance of strong CEOs of the companies affiliated with Berkshire Hathaway.

Before this new venture became known to the world at large, Google was the sole owner of Alphabet but later on due to the reversal of the power dynamics after the placeholders subsidiary was designed to determine the proprietorship of Alphabet during which a new subsidiary was generated which eventually merged with Google. Due to the ownership reversal, all the stocks of Google were then converted to Alphabet Inc.

In addition to the fact that the Alphabet is the sole owner of all the stocks of Google, it also possesses all the stock price history of Google. It also runs all its trade-related transactions under Google Inc’s ticker symbol which is widely known as ‘GOOG’ AND ‘GOOGL’. Both these ticker symbols fall under the big league stock markets which include S&P 500 as well as NASDAQ-100. Since this happened, Google became one of the biggest and most favoured search engines. Google gave its share of nearly 87% of the global search market.

Besides this, Page and Brin, the founders of Alphabet Inc. collectively stepped down from their posts by giving Sundar Pichai, the CEO of Google, to take up the post of CEO of Alphabet Inc. while remaining the employees as well as majority vote shares of Alphabet.

What are mergers and acquisitions

In simple terms, mergers and acquisitions are a generic body that is usually used to express a simple amalgamation of various companies or their assets via different types of business deals, negotiations, transaction deals which inculcates acquisitions, tender offers, consolidations, management acquisition, or purchase of assets.

  • Mergers

A merger technically means that two companies and their shareholders decide and approve the combinations of both the companies. After the merger is signed with the acquired company, the main company wouldn’t operate individually any longer. But at the same time, it would become a part of the acquiring company. 

  • Acquisitions

In an acquisition, the acquiring company has the authority to prevail the majority stakes in the main (acquired) company. But along with that, the main company usually keeps its name, does not seemingly alter its legal system, and usually maintains its stock symbols after an acquisition of a different company.

List of some well-known mergers and acquisitions of Alphabet Inc.

Alphabet Inc. is the parent company of Google, owns the largest subsidiaries with several other companies. As mentioned above, Google is the largest subsidiary of Alphabet while other smaller independent companies are individually owned by Alphabet Inc. It became the largest conglomerate company with a turnover of 1 trillion Dollars in July 2020.

Google products such as Google Search, Google+, Google Images, Google alerts, Google assistants, etc were formed and by the companies that Google acquired. For example:

  • What is widely known as Google Groups is originally the organization that provided services under the name of Usenet which also was the first acquisition of Google.
  • An acquisition of the Alphabet known as Dodgeball, which was a social networking company was later replaced by what is famously known as Google Latitude
  • Other such acquisitions include companies such as JotSpot which later on became Google Sites, a company known as the Video hosting services was converted into YouTube Next Lab and Audience, etc.

Listed below are various key mergers and acquisitions of Alphabet Inc.

  • Google declared its acquisition with YouTube for 1.65 billion dollars in Google Stock.
  • Google acquired DoubleClick for 1.65 billion dollars because Google wanted to strengthen web publishers and advertising agencies. This acquisition faced various opposition by its competitors such as AT&T and Microsoft.
  • In 2011, Google’s largest acquisition took place with a foreign company and they managed to acquire Motorola Mobility for a total of 12.5 billion dollars. Motorola Mobility was facing various patent problems with Apple and Microsoft at that time, therefore, due to this acquisition, Motorola got a protective blanket for their business and they were able to offer android products without any patent problems after that.
  • Waze, a navigation software, was acquired by Google for a total of 966 million dollars. Being a navigation app, the purpose of its features clashed with that of Google’s navigation app which is widely known as Google Maps. Therefore, their integration benefited both companies.
  • Recode, a technology news website was acquired by Google by 400 million dollars. 

Listed below are the names of a few companies that have formed mergers and acquisitions with Alphabet Inc.

  • Outride
  • Pyra Labs
  • Neotonic software
  • Sprinks 
  • Genius Labs
  • Picasa 
  • Ignite logic
  • Keyhole 
  • Where2
  • Dodgeball
  • BRUnet
  • allPAY
  • Adscape
  • YouTube
  • Skia
  • Measure maps, etc.

Laws related to merger and acquisition 

  • India

Mergers and Acquisitions in India fall under the Indian Companies Act, 1956 under Section 391 (this section deals with the compromise or make arrangements with various creditors and members of the merger or acquisition deals) and Section 394 (this section facilitates the reconstruction and amalgamation of interested companies). The procedure to instigate a merger or an acquisition is court driven only and even though it happens due to mutual interest, it cannot be legally procreated without involving the judge. Other than that, a merger or an acquisition should be sanctioned by a 3/4th shareholders or its alternative can be to acquire the approval of the creditors that are present at the particular board meeting.

According to the Companies Act, 1956, the prescribed time frame which is legally sanctioned by the courts to the interested companies is 210 days. This period begins from the day the parties sign the notice that acknowledged the Commission’s Orders. India specifically allows a considerably higher number of parties that can merge into a company. They merge companies and administer the companies while keeping in mind the values of the asset they bring to the table or the per annum income of the companies in question. India’s entry limit is comparatively higher than that of the European countries.

According to the recent modifications made in the Competition Act, 2002 the old system of the voluntary announcement has been replaced by the mandatory announcement system. This amendment was made concerning the fact that usually, with the voluntary announcement system many companies have been pointed out for practising monopoly after merging with different companies, therefore, the new laws allow the companies to choose to de-merge from the acquiring company.

Other than the above-mentioned pointers, the provisions under mergers and acquisition laws in India include the provision of tax allowances for mergers between any interested companies. These provisions are mentioned under the Indian Income Tax Act, 1955. These mergers and acquisitions are required to fill the criteria which are necessary for it to be allocated by the courts in India. These required criteria are mentioned under Section 2(19AA) and Section 2(1B) of the Indian Income Tax Act, 1955.

                 

USA

It is necessary to understand the laws related to mergers and acquisitions in the USA as Alphabet Inc. is a company based in California USA and all its major mergers and acquisitions are American Companies.

Section 7 of the Clayton Act (15 United States Code) states the antitrust laws that govern the merger and acquisitions in the USA. section 7 mainly deals with:

  • Mergers;
  • Consolidations;
  • Acquisitions that may help acquire a typical type of exclusive license to the IPR of the same.

Under Section 7 of the Clayton Act, the US government prohibits any kind of acquisition of mergers that magnify or maybe enhance the power of the market as according to them, the power that the market acquires is used to maintain the prices above-cut throat competition mark. 

The Hart-Scott-Rodino Antitrust Improvement Act, 1976 also known as the ‘HSR Act’ is a meticulous technical statute that is also considered as an acquisition under certain categories. 

The Exon-Florio Amendment is not technically an antitrust law in the USA but it could be counted as a law that was designed to become the security blanket for the security of the USA. Its basic functions are supposed to help the president to prohibit, suspend and/or rescind the transactions or bargains with foreign entities that could’ve had the potential of staging a permanent monopoly over the US businesses and could seriously impair national security.

All three statutes mentioned above hold significant meaning and process in the United States of America as they hold a very important position when it comes to the process of acquiring an acquisition or merger in the States.

References


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