M&A Magazine

In May 2018, Greenply Industries Limited decided to demerge its Medium Density Fibre Boards (MDF) business, and now, the company will be left with only plywood business. What really is happening is that the two products both with almost similar raw material requirements and customer base, can do better as part of the same structure and organisation are getting separated. It will be interesting to see how the demerger will create value for all the stakeholders in the future without creating issues in overlapping in operations and transfer pricing. Through earlier demerger in 2013, Greenply demerged its Decorative Business (comprising of Laminates and Allied Products) into Greenlam Industries Limited . The Earlier Transaction To climb to the next level, Greenply demerged its decorative business into a separate entity called Greelam Industries . Table 1: Greenlam Financial Post Demerger of Decorative Business (INR Crores) Particulars FY 18 FY 14 Revenue 1,155 769 EBIT % 10...

Deep Industries Ltd (Deep) is a listed public company primarily in two business segments: (a) Oil and Gas Services Business comprising of air and natural gas compression services, gas dehydration, work over and drilling rig services and (b) Oil and gas exploration and production. Deep CH4 Private Limited (Deep CH4) is a promoter group company. At present, the company does not have any operating business. TRANSACTION Deep Industries (Demerged Company) will demerger its Oil and Gas Service business to Deep CH4 (Resultant Company). All Services business assets i.e. Rigs, Gas compressors Packages, Gas Dehydration Packages, employees with technical competence, existing contracts, other requisite assets & liabilities relating to services business shall be transferred to new entity Appointed date for the transaction is April 1, 2017. Share exchange ratio is 1 (one) fully paid up equity share of Rs. 10 each of the Resulting Company for every 1 (one) equity share of t...

In April this year, Wipro Limited decided to merge its wholly owned subsidiaries, which it acquired from NewLogic Technologies group in 2005 with itself. Wipro Limited (Wipro) , is a leading global information technology, consulting and business process services company. The company harnesses the power of cognitive computing, hyper-automation, robotics, cloud, analytics and emerging technologies which help clients adapt to the digital world. The company is globally recognized for its comprehensive portfolio of services and has 160,000 dedicated employees serving clients across six continents. Wipro Information Technology Austria Gmbh (WIT) , is a wholly owned subsidiary of Wipro Holdings UK Limited incorporated and domiciled in Austria. The company is engaged in the business of acquisition, holding and disposition of participation in other enterprises. The company's ultimate holding company is Wipro Limited. Wipro Technologies Austria Gmbh (WT) , based in Feldkirch...

The government in its zeal to address twin problem of divestments and fiscal deficit and at the same time exiting some loss making PSU which are cash guzzlers and value destroyers; comes out with an innovative idea. Here LIC becoming the core promotor of IDBI Bank is commercial decision or just mean to address above two problems only time will prove.  If LIC by putting professional management team can create structure which capture capabilities of both the organization i.e.  IDBI branch network and its employees and utilization huge cash generated on daily basis by LIC by grating higher returns than what LIC could make now. Nudged by the government, the insurance regulator (Insurance Regulatory and Development Authority of India) gave its approval to state-owned behemoth Life Insurance Corporation (LIC) of India to increase stake in the debt-ridden IDBI Bank from the current 10% to up to 51%. The decision has been severely criticised by several sections including empl...

Provisions of Compromises, Arrangements, Amalgamation and Reconstruction are dealt in the Companies Act, 2013 under sections 230-234. Amalgamations are also treated in the LLP Act. 2008. But there is no explicit mentions for dealing with merger of LLP into Company or other way around. We look at the decision of NCLT Chennai Bench which shall set a precedent in cases of merging of LLP into companies. M/s Real Image LLP vs. M/s Qube Cinema Technologies Pvt Ltd, NCLT Chennai Bench In a merger filing made before the Chennai Bench of NCLT, Judicial Member CH. Sharief Tariq was tasked with just one question, “...whether a Limited Liability Partnership (LLP) can be allowed to amalgamate with a private limited company under a scheme of amalgamation filed before the NCLT” Decision of NCLT, Chennai Bench shall set a precedent for such M&As going ahead. In answering the above question, Judicial Member observed that the legislative intent behind enacting both the LLP Act, 200...

What is Management Buy-out (MBO): In an ideal MBO , financial institutions or other fund lending institutions act like venture capitalist and support management of the company in buying out stakes from the promoter(s) of the company. This changes the control of the business. The entire business or a division may be bought out under an MBO deal on a going concern basis. The main ingredients behind the MBO are Company’s management creates and completes the deal Either sale of a division or sale of promoter’s stake Business is sold on going concern basis Control changes from the hands of promoter’s to management A third party, normally Financial Institution, backs up the management financially to buy out the controlling stake Rationale of MBO deal from existing promoter: The company intend to unlock the value of business by selling it which it considered as non-core Promoters are no longer interested in continuing the business or consider it a non-profitable and looking f...