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WHAT IS MERCHANT BANKING
Merchant Banker has been defined under the
Securities & Exchange Board of India (Merchant
Bankers) Rules, 1992 as "any person who is
engaged in the business of issue management
either by making arrangements regarding
selling, buying or subscribing to securities as
manager, consultant, advisor or rendering
corporate advisory service in relation to such
issue management".
MERCHANT BANKING SERVICES

Issue Management Services ² to act as Book

Running Lead Manager/Lead Manager for the
IPOs/FPOs/Right issues/Debt issues
Project appraisal

Corporate Advisory Services

Underwriting of equity issues

Banker to the Issue/Paying Banker

Refund Banker
MERCHANT BANKING SERVICES (CONT.)
Monitoring Agency
Debenture Trustee

Retail Marketing of the issue through a strong

network of IBs/HNIEs/Corporates l investor.
Management of Capital Issues

Management of Buybacks, Takeovers and

Delisting offers
Private Placement of Debt and Equity

Mergers and Amalgamations

Loan Syndication
MEANING OF MERGER & ACQUISITION
Mergers & Acquisition have become very popular
throughout the world in the recent times. This
has become popular due to globalization,
liberalization, technological developments &
intensely competitive business environment.
Mergers and acquisition are a big part of
corporate finance world.
This process is extensively used for restructuring
the business organization
WHY MERGER & ACQUISITIONS
The practice of mergers and acquisitions has
attained considerable significance in the
contemporary corporate scenario which is broadly
used for reorganizing the business entities.
Indian industries were exposed to plethora of
challenges both nationally and internationally,
since the introduction of Indian economic reform
in 1991.
The cut-throat competition in international
market compelled the Indian firms to opt for
mergers and acquisitions strategies, making it a
vital premeditated option.
MERGER
The phrase ´Mergersµ refers to the aspect of corporate
strategy, corporate finance and management dealing with
the buying, selling and combination of different company
that can aid, finance or help a growing company in a given
industry, grow rapidly without having to create another
business entity.

In a merger, two companies come together and create a

new entity. There are mergers between equals and
unequals. But, In general there are mergers of equals
rather than mergers of unequals.

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1. Merger between Arcelor and Mittal Steel forming

Arcelor-Mittal.
2. Citicorp and Travelers forming Citigroup.
3. Ciba and Sandoz forming Novartis.
ACQUISITION
In an acquisition, one company buys another one
and manages it consistent with the acquirer·s
needs.
There are two major types of acquisitions: Those
involving acquisition and integration such as
made by Cicso Systems; and those involving
acquisition and separation such as between
Unilever and Best foods.
Thus, a merger or acquisition is a combination of
two companies where one corporation is
completely absorbed by another corporation.
The less important company loses its identity and
becomes part of the more important corporation,
which retains its identity
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It is an indispensable strategic tool for expanding product
portfolio·s, entering into new market, acquiring new
technologies and building new generation organization
with power & resources to compete on global basis.
With the increasing number of Indian companies opting for
mergers and acquisitions, India is now one of the leading
nations in the world in terms of mergers and acquisitions.
Today, because of the buoyant Indian economy, supportive
government policies and dynamic leadership of Indian
organizations, the world has witnessed a new trend in
acquisitions. Indian companies are now aggressively
looking at North American and European markets to
spread their wings and become global players.
Almost 85 per cent of Indian firms are using Mergers and
Acquisitions as a core growth strategy.
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The main objective of Merger & Acquisition transaction is
as follows:
‡ Proper utilization of all available resources.

‡ To prevent exploitation of unutilized and underutilized

assets and resources.

‡ Forming a strong human base.

‡Reducing tax burden.

‡ Improving profits.

‡ Eliminating or limiting the competition.

‡ Achieving savings in monitoring costs.


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‡ The main reason for failure of merger is non-integration

of human resources of both the transferor and transferee
company.

‡ It is also not successful because the merger of two

organizations is actually a merger of individual and groups
working in company which had a great impact on
individuals working in a company such as it creates ego
clashes among individuals working in a company.

‡ There is also failure of M&A when purchasers plans &

strategies are not clear to the employees of the acquired
firm.
TEN BIGGEST MERGER AND ACQUISITION
DEALS IN INDIA

Tata Steel acquired 100% stake in Corus Group on January 30, 2007. It
was an all cash deal which cumulatively amounted to $12.2 billion.

Vodafone purchased administering interest of 67% owned by Hutch-Essar

for a total worth of $11.1 billion on February 11, 2007.

India Aluminum and copper giant Hindalco Industries purchased Canada-

based firm Novelis Inc in February 2007. The total worth of the deal was
$6-billion.

Indian pharma industry registered its first biggest in 2008 M&A deal
through the acquisition of Japanese pharmaceutical company Daiichi
Sankyo by Indian major Ranbaxy for $4.5 billion.
TEN BIGGEST MERGER AND ACQUISITION
DEALS IN INDIA (CONT.)
The Oil and Natural Gas Corp purchased Imperial Energy Plc in January 2009. The deal
amounted to $2.8 billion and was considered as one of the biggest takeovers after 96.8% of London
based companies' shareholders acknowledged the buyout proposal.

In November 2008 NTT DoCoMo, the Japan based telecom firm acquired 26% stake in Tata
Teleservices for USD 2.7 billion.

India's financial industry saw the merging of two prominent banks - HDFC Bank and Centurion
Bank of Punjab. The deal took place in February 2008 for $2.4 billion.

Tata Motors acquired Jaguar and Land Rover brands from Ford Motor in March 2008. The deal
amounted to $2.3 billion.

2009 saw the acquisition Asarco LLC by Sterlite Industries Ltd's for $1.8 billion making it ninth
biggest-ever M&A agreement involving an Indian company.

In May 2007, Suzlon Energy obtained the Germany-based wind turbine producer Repower. The
10th largest in India, the M&A deal amounted to $1.7 billion.
PRIMARY MARKET
Basically the primary market is the place where
the shares are issued for the first time. So when a
company is getting listed for the first time at the
stock exchange and issuing shares ² this process
is undertaken at the primary market.

That means the process of the Initial Public

Offering or IPO and the debentures are
controlled at the primary stock market.
UNDERWRITING
Underwriting is an agreement, entered into by a company
with a financial agency, in order to ensure that the public will
subscribe for the entire issue of shares or debentures made by
the company.
The financial agency is known as the underwriter and it
agrees to buy that part of the company issues which are not
subscribed to by the public in consideration of a specified
underwriting commission.
The underwriting agreement, among others, must provide for
the period during which the agreement is in force, the amount
of underwriting obligations, the period within which the
underwriter has to subscribe to the issue after being intimated
by the issuer, the amount of commission and details of
arrangements, if any, made by the underwriter for fulfilling
the underwriting obligations.
The underwriting commission may not exceed 5 percent on
shares and 2.5 percent in case of debentures. Underwriters get
their commission irrespective of whether they have to buy a
single security or not.
LEAD MANAGERS
Lead managers are independent financial institutions
appointed by the company going public to manage the IPO.
They are the main body responsible for most of the IPO
processing.
Companies planning for IPO (also known as Issuer
Company) first approaches or appoint lead managers. Lead
managers examine company documents including financial
documents, documents relating to litigation like
commercial disputes, patent disputes, disputes with
collaborators, etc. and other materials, in connection with
the finalization of the draft red herring prospectus for the
IPO.
Lead manages are responsible to #  
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  .
-/ and get it approve by SEBI. SEBI
contact lead managers for any irregularities or lapses in
RHP and ask them to clarify, add or review certain sections
of the document.
LEAD MANAGERS (CONT.)
Lead managers certifies to SEBI that all the
disclosers made in Draft Red Herring Prospectus are
true, correct, adequate and comply with SEBI
guidelines to help investors in making a well-
informed decision.
Issuer Company with the help of lead manger,
 , #    0, ""1  for
the IPO. Lead managers are responsible for
examining the worth of underwriters and there
capabilities to buy the shares and assure the same to
SEBI.
In brief Lead Manager·s responsibilities include,
initiate the IPO processing, write draft herring
prospectus and get it approve by SEBI, help company
in selling the IPO Shares and road shows, help
company in finalize the issue price, issue opening &
closing dates, listing date etc.
ISSUES IN PRIMARY MARKET
For Discussion
 2 UILDING
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PROCESS OF BOOK BUILDING

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PROCESS OF BOOK BUILDING (CONT.)
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BOOK BUILDING VS. FIXED PRICING
Initial Public Offering can be made through the fixed price
method, book building method or a combination of both.
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Price at which securities
Price at which the will be offered/allotted is
securities are not known in advance to
 
offered/allotted is known the investor. Only an
in advance to the investor. indicative price range is
known.
Demand for the securities
Demand for the securities
offered can be known
", offered is known only after
everyday as the book is
the closure of the issue.
built.
Payment if made at the
time of subscription Payment only after
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wherein refund is given allocation
after allocation.
GREEN SHOE OPTION
A green shoe option is a clause contained in the
underwriting agreement of an initial public offering (IPO).

The green shoe option, which is also often referred to as an

over-allotment provision, allows the underwriting
syndicate to buy up to an additional 15% of the shares at
the offering price if public demand for the shares exceeds
expectations and the stock trades above its offering price.

The green shoe option provides extra incentive for the

underwriters of a new stock offering.

In addition, these investment banks, brokerages and other

financing parties also often exercise the green shoe option
to cover some of the short position they may have created
in an effort to maintain a stable market after a new stock
begins to trade, as well as to meet aftermarket demand.