This article is written by Gurkaran Babrah, a first-year B.A. LLB law student at Symbiosis Law School. Noida. This article provides an overview of mergers & acquisitions happened in the year 2019.
Introduction to Mergers & Acquisitions
Merger and acquisition is a very general term that is widely used to describe the consolidation of companies or assets. The term M&A also refers to the desk at the financial institutions that deal with such activity. Mergers and acquisitions are the kind of transactions which comprise of ownership of companies, large business organisations, or their major operating units. These are merged, consolidated or transferred to other entities. As the situations in the market are not static, the business strategy keeps changing according to the situations.
M&A allows enterprises to downsize, grow or change the nature of their business. In legal terminology or from a legal point of view, the merger is nothing but a legal consolidation of two different companies or entities. Mergers usually happen between two companies or organisations which are generally of the same size, and which recognise the advantages and disadvantages of each other.
Usually, the terms of the mergers are mutually and fairly agreed by the companies merging and they become equal partners of the newly merged company. Daimler-Benz and Chrysler is a good example. They ceased to exist independently when they merged together and formed a new entity called Daimler-Benz.
Whereas an acquisition is different from mergers. The acquisition is when one company purchases another company’s shares to gain control over that company. If a company gains more than 50% of another company’s shares and other assets then it gives the acquirer the right to make all decisions regarding the newly acquired assets without the approval of the company’s stakeholders.
Laws regulating M&A
There are a number of legislations, government regulators and agencies which control the mergers and acquisitions in the country. All these are mentioned below:
- The Companies Act, 2013
- The Competition Act, 2002
- The Foreign Exchange Management Act, 1999 (in cases of cross border mergers)
- Security Exchange Board of India (substantial acquisition of shares and takeovers) Regulations, 2011
- The Income Tax Act, 1961
- The Indian Stamp Act, 1899
Government Regulators and Agencies
- National Company Law Tribunal (NCLT)
- Competition Commission of India (CCI)
- Reserve Bank of India (RBI)
- The Income Tax Department (ITD)
- Securities and Exchange Board of India (SEBI)
- Registrar of Companies and Regional Director under Ministry of Corporate Affairs
In 2019 there were several M&A transactions throughout the year. Some of the biggest mergers and acquisitions of 2019 are listed below:
Fidelity National Information Service is a company at the international level which provides financial services, technology, and outsourcing services. It is headquartered in Florida, US. FIS provides payment processing and banking services, banking software and outsourcing of associated technology. It has a portfolio of different products for financial services including both investment and retail banking.
Whereas the Worldpay group was earlier known as RBS world pay. This is also a payment processing company and was listed on the London Stock Exchange.
In March, FIS which is a global leader announced a deal of $35 billion to acquire Worldpay. Worldpay process more than 40 billion transactions across 140 countries and 120 currencies. This is one of the biggest deals in the technology industry.
TATA STEEL’S acquisition of stakes in BHUSHAN STEEL
Tata steel limited is an Indian steel company. It was founded by Jamsetji Tata and was established by Dorabji Tata in 1907. It started producing steel in 1912 and by 1939 and it became the largest steel plant in the British empire. It further launched its moderation and expansion programs in 1951 and upgraded itself to 2 million metric tonnes per annum. It is headquartered in Kolkata, West Bengal.
Tata steel today is one of the top steel-producing companies globally with annual crude oil delivery of 27 million tonnes. It is the second-largest steel producing company in India if measured by domestic production with an annual capacity of 13 million tonnes. Now tata steel operates in more than 26 countries with its key operations in India, the United Kingdom and the Netherlands gives employment to approximately more than 80,000 people. It’s one of the largest plants is located at Jamshedpur, Jharkhand.
Whereas Bhushan Steel was established on January 7, 1963. It was earlier known by the name of Jawahar Metal Industries. In 1947, Brij Bhushan Singal and his sons Sanjay Singhal, Neeraj Singal and associate companies took over the management of the company by acquiring the entire stake.
They both entered into an agreement and signed a deal. Tata steel acquired 72.65% of Bhushan steel’s stake for 35.200 crores. T V Narendran Tata Steel’s Global CEO & MD who chaired the meeting briefed the members on the corporate insolvency resolution process of the company, its financial performance for the year ended March 31, 2018 and activities in connection with aligning the company’s operations with that of Tata Steel.
UBER buys ride-hailing rival CAREEM for $3.1 Billion
Ride-hailing major Uber buys out its middle east rival Careem, just before its much-anticipated IPO. The motive behind this deal was straightforward – to buyout rivals in geography, in other words, buy dominance in geography.
It was an important acquisition for Uber given it had to retreat from other geographies like China, Russia, and Southeast Asia. Careem is operational in 14 countries which means it gives Uber dominant access to a vast region. Uber CEO Dara Khosrowshahi said about the deal, “build new products and try new ideas across not one, but two, strong brands,”.
ULTIMATE SOFTWARE Acquisition at $11 Billion
Ultimate Software agreed to be acquired by a private equity group for $11 billion. The move will allow the cloud-based human capital management vendor to leave the pressures of Wall Street behind — at least for a while.
The Feb. 4 announcement was a surprise considering Ultimate appears to be thriving and has delivered steady year over year growth, said Holger Mueller, principal analyst for Constellation Research. “Usually private equity investors acquire troubled companies or those in transition but Ultimate is doing really well.”
The 29-year-old human capital management company, which provides a suite of tools including payroll, benefits management and talent acquisition, has more than 5,000 customers in 160 countries, and delivered $1.1 billion in revenues in 2018, up from $940 million in 2017. It dominates the market among mid-sized companies, and it has been expanding its client base to support larger global companies, making it increasingly competitive with Workday, ADP, and other industry leaders. This merger is one of the biggest deals in recent HR technology history.
NIMH with ICMR – NIOH
NIMH was established in the year 1990 by the Government of India. The registered office is located at Kolar gold fields, Karnataka. NIMH focuses on health issues and conducts applied research related to health activities. This Institute is also specialized in providing technical support to mining and mineral-based research works.
Whereas NIOH functions on a large scale like the health sector which further includes occupational hygiene and occupational medicine. Relating the working and performance of autonomous institutes, Expenditure Management Commission recommended, inter-alia, that- “Organisations with similar objectives can be considered for a merger to encourage synergy in operations and reduction in cost”. Therefore, it recommended the merger of NIMH with NIOH.
This merger will automatically manage all the working people with NIMH in NIOH in a similar post/pay scale and their pay will be protected. NIMH, ICMR, NIOH, MoM and Department of Health Research (DHR), MoH&FW will take required actions for affecting dissolution and merger/amalgamation of NIMH with NIOH.
SALESFORCE acquired Analytics Platform TABLEAU
Tableau helps people see and understand data. Tableau’s self-service analytics platform empowers people of any skill level to work with data. From individuals and non-profits to government agencies and the Fortune 500, tens of thousands of customers around the world use Tableau to get rapid insights and make impactful data-driven decisions.
Salesforce is a cloud-based customer relationship management (CRM) platform for supercharging every part of your company that interacts with customers — including marketing, sales, commerce, service, and more.
Tableau and Salesforce both entered into an agreement in which Salesforce will acquire Tableau in an all-stock, transaction pursuant to which each share of Tableau Class A and Class B common stock will be exchanged for 1.103 shares of Salesforce common stock, representing the enterprise value of USD 15.7 billion (net of cash), based on the trailing 3-day volume-weighted average price of Salesforce’s shares as of June 7, 2019.
DENA BANK, BANK OF BARODA, AND VIJAYA BANK
Vijaya bank was a public sector bank and had its corporate office in Bengaluru, India. Vijaya bank offered a wide variety of financial products and services to customers through its various channels of delivery. It was established by a group of farmers on 23 October 1931.
The bank was established on Vijayadashami and hence it was named Vijaya bank. The bank was headquartered in Mumbai (earlier known as Bombay) and has (1874) branches. It was founded in 1938 and nationalised in 1969 by the Indian Government. It was founded by the family of DevkaranNanjee under the name of Devkaran Nanjee Banking Company. It was incorporated as a public company in December 1939.
It is an Indian multinational bank and it is the third-largest public sector bank. Vijaya Bank and Dena Bank have become a part of Bank of Baroda from April 1 and with the effect of the merger, it has become India’s largest bank. This merger will provide customers with access to a large number of branches. Bank of Baroda is expected to make more profits with its increased share in the market.
All the customers of the Dena Bank and Vijaya Bank now have access to around 104 overseas branches of the Bank of Baroda. As per the merger, the shareholders of the Vijaya bank will get around 402 equity shares of Bank of Baroda for every one thousand shares they possess.
The customers need not close their accounts and they can continue with the Vijaya Bank and Dena Bank. However, they are required to make cash and cheque deposits in the branch of Bank of Baroda Bank because it is the parent bank.
SACHIN BANSAL acquires CRIDS
Former Flipkart CEO Sachin Bansal has acquired Chaitanya Rural Intermediation Development Services Private Limited (CRIDS), a non-banking finance company (NBFC).
Bansal invested INR 739 Cr ($104 Mn) and took over as the CEO of CRIDS. In a media statement, Bansal said that this acquisition is his entry into the financial services world. He lauded the founders of the company to have built a great company that provides much needed financial access to the underserved audience which is left out of the formal market.
Currently, it has a presence in Karnataka, Bihar, Jharkhand, Maharashtra and Uttar Pradesh. Post-acquisition, the co-founders will continue in their respective roles of growing the existing business segments.
NVIDIA to buy MELLANOX for nearly $7 billion
NVIDIA and Mellanox today announced that the companies have reached a definitive agreement under which NVIDIA will acquire Mellanox. Pursuant to the agreement, NVIDIA will acquire all of the issued and outstanding common shares of Mellanox for $125 per share in cash, representing a total enterprise value of approximately $6.9 billion. Once completed, the combination is expected to be immediately accretive to NVIDIA’s non-GAAP gross margin, non-GAAP earnings per share and free cash flow.
The acquisition will unite two of the world’s leading companies in high-performance computing (HPC). Together, NVIDIA’s computing platform and Mellanox’s interconnects power over 250 of the world’s TOP500 supercomputers and have as customers every major cloud service provider and computer maker.
The data and intensity of modern workloads in AI, scientific computing and data analytics is growing exponentially and has put enormous performance demands on hyper-scale and enterprise data centres. While computing demand is surging, CPU performance advances are slowing as Moore’s law has ended. This has led to the adoption of accelerated computing with NVIDIA GPUs and Mellanox’s intelligent networking solutions.
Data centres in the future will be architected as giant compute engines with tens of thousands of compute nodes, designed holistically with their interconnects for optimal performance.
An early innovator in high-performance interconnect technology, Mellanox pioneered the InfiniBand interconnect technology, which along with its high-speed Ethernet products is now used in over half of the world’s fastest supercomputers and in many leading hyper-scale data centres.
With Mellanox, NVIDIA will optimize data centre-scale workloads across the entire computing, networking and storage stack to achieve higher performance, greater utilization and lower operating costs for customers.
“The emergence of AI and data science, as well as billions of simultaneous computer users, is fueling skyrocketing demand on the world’s data centres,” said Jensen Huang, founder and CEO of NVIDIA. “Addressing this demand will require holistic architectures that connect vast numbers of fast computing nodes over intelligent networking fabrics to form a giant datacenter-scale compute engine.
GOOGLE to acquire LOOKER for $2.6 billion
Google Cloud CEO Thomas Kurian has set out some serious goals for the company to catch up with the rivals AWS and Microsoft in the cloud space. One of the biggest announcements since he took over the company’s realm has come in the form of its plan to acquire business intelligence platform, Looker for a $2.6 billion in an all-cash deal.
The last big deal for Google Cloud was the $625 million deal which it paid for Apigee in 2016. “We are excited to welcome Looker to Google Cloud and look forward to working together to help our customers solve some of their biggest challenges,” said Sundar Pichai, CEO, Google.
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