How are Mergers Structured?
Mergers can be formed in a variety of ways, and the structure adopted is determined by the specific objectives and conditions of the organisations involved. Here are some common merging structures,
| Mergers Structure | Description | Example |
|---|---|---|
| Merger of Equals | Two businesses that are comparable in terms of scale and financial stability merge in order to establish an innovative consolidated entity. | The merger of Hindalco and Novelis. |
| Acquisition | A company (the acquirer) gains control by purchasing the assets or shares of a different business (the target). | The acquisition of Corus by Tata Steel. |
| Cash Merger | The target is obtained through a cash payment by the acquiring company to the shareholders of the target company. | The cash acquisition of Ranbaxy by Sun Pharmaceutical Industries. |
| Stock-for-Stock Merger | In return for the shareholders’ shares of the target company, the acquiring company transfers its own shares to the shareholders. | The stock-for-stock merger of Bharti Infratel and Indus Towers. |
| Cash and Stock Merger | As consideration, cash and stock are combined; the shareholders of the target company obtain both cash and stock. | The acquisition of Flipkart by Walmart with a combination of cash and stock. |
| Forward Merger | The acquiring company completely absorbs the target company, leaving only the acquiring company in existence. | The forward merger of Vodafone India and Idea Cellular. |
| Reverse Merger | A private company can become public without conducting an initial public offering (IPO) by acquiring a public company. | The reverse merger of Cairn India with Vedanta Limited. |
| Triangular Merger | The acquiring company establishes and merges with the target, resulting in the target receiving subsidiary shares. | The triangular merger of HDFC Ltd, HDFC ERGO, and HDFC ERGO Health. |
| Spin-off | A company’s business unit or division is segregated and transformed into a distinct, independent entity. | The spin-off of Adani Transmission from Adani Enterprises. |
| Divestiture | A company sells or liquidates some of its assets, divisions, or business units. | The divestiture of UltraTech Cement by Jaypee Group. |
| Joint Venture | Two or more companies form a joint venture to collaborate on a specific business initiative. | The joint venture between Bharti Enterprises and Walmart in the retail sector. |