Mergers and acquisitions are critical components of a company's growth strategy. A merger can help in filing product portfolio, improve profitability, and make leaps in market presence. In contrast to a takeover, where the acquiring company will purchase shares to assume control mergers are strategic and the value is difficult to measure including legal, accounting, and taxation aspects. Due diligence is an imperative part of M&A activity to make it successful. |
Merger transaction can be in stock, cash or both the two companies will formulate terms for combining into one entity. Valuations facilitate better negotiations presenting a full understanding of the deal terms including a deep risk analysis, environmental concerns, and other obligations. Merchant bankers and consultants process the details of this activity for a smooth execution. Valuations are utmost important reviewing historical background to know the present and future value of the company.
National Law Company Tribunal (NLCT) which was created as a regulator as per the provisions of the new companies Act for sanctioning mergers. With several noteworthy changes, the companies Act makes mergers smooth and transparent by streamlining the process. However, companies need multiple approvals from regulators due to which the activity is onerous. The Act also necessitates the services of a registered valuer, cat – I merchant banker for all types of corporate valuations including that of mergers. The consent of shareholders and creditors is essential, also approval from MCA, RBI, SEBI, list company in stock exchange, and competition commission is needed. The stock exchanges and SEBI are involved when the activity is between listed companies whereas RBI approval is mandatory when there is involvement of non-residents. The introduction of newer regulations also encourage a wider participation of the shareholders.
M&A advisory is a dedicated service provided by business consultants which includes obtaining regulatory approvals for the process. Merger amalgamation valuations is an even more specialized area of practice with only registered valuer permitted to carry this activity. The comprehensive report forms the basis of formulating the final scheme plan keeping in view objectives of both parties. Although, a merger evaluation can be carried by different approaches but in most cases, the goal is to estimate future cash flow making DCF the most often used method.
CCV Pvt limited is a registered merchant banker specializing in merger valuations and advisory. It has a professional team of merchant bankers ensuring most competent services following industry specific standards. CCV has emerged as a brand with many years of experience conducting complex assignments.
Conclusion: Valuations are an integral part of due diligence regarding a merger activity as per the regulations of Companies Act.
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