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An Ultimate Company Takeover Checklist – for a Successful Acquisition
Savvy Midha
| Updated: Nov 23, 2019 | Category: SEBI Advisory

An Ultimate Company Takeover Checklist – for a Successful Acquisition

In the present era of continuously growing competition, existing businesses has to face different challenges that questions their very existence. With the change in time, customer preferences also keep on changing. To meet such changes; corporate require to undergo structural modification such as a Merger, Amalgamation, or Takeover. A well-formed company takeover checklist can enable an Entrepreneur to restructure the entire framework of his organization by showing it a new wave of growth. This blog will help you understand the takeover process in better way. Also,it will guide you with a complete checklist that you should kept in mind before acquiring another Company.

What is Takeover? 

The Takeover is the business strategy through which the company acquires the management of another company with the main motive to gain control over the target company. The company takeover with the following purposes:

Takeover is the business strategy through which the company acquires the management of another company with the main motive to gain control over the target company. The company takeover with the following purposes:

  • Two Combined Company can reduce its fixed cost by combining duplicate departments; therefore, an overall reduction in cost with a relative increase in profit margin. 
  • There is an economy of the scope by increasing the scope of marketing and distribution of a variety of products
  • By absorbing a competitor, the company enhances its market share by attracting more customers
  • Companies achieve synergy of economies of scale by combining production facilities through the utilization of plants and resources.

Browse through our articles on services provided at Swarit Advisors, and just let us know if we can help you with your IPO or Comapny Takeover or SEBI Advisory Services.

Provisions governing Takeover in India

The following rules regulate the Takeover of the company:

  • Companies Act 2013
  • SEBI (substantial acquisition of shares & Takeover) Regulations 2011

Things to keep in mind while creating Company Takeover Checklist

Following are the analysis in three simple steps for evaluating the decision making for Takeover:

  • Planning: Start the acquisition process by analyzing the industry and firm information. Review the overall motive of its objectives behind amalgamating in the context of strength, weakness, and corporate goals. The company needs information such as management quality, market size, capital structure, etc., before deciding on the Takeover.
  • Screening of candidates: Search and scrutinize the suitable candidates for acquisition. In this process, the company short-lists the candidates amongst the options available as per its suitability. 
  •  Financial evaluation:Takeover is evaluated based on a financial point of views such as cash flows, the maximum price payable for Takeover, and the best method to finance the Takeover. For instance, the Target Company will not accept the offer below the market value of its share. 

Benefits of Takeover

To meet the level of competition in the economy, corporate undergo various strategies to enhance their market presence and value. Therefore amongst other, few common benefits of Takeover to the company are:

  • From Shareholder’s point of view: Shareholders want their investment to enhance with the acquisition. Shareholders gain the benefits of the Takeover through realizing monopoly profit, economies of scale, better investment opportunities, etc.
  • From a management point of view: Management concerns with improving the performance of the company along there remains the fear of losing control over the company due to other company gets involved after the Takeover. 
  • From the General Public point of view: the General public gets the benefits of employment generation by a combination of two companies, the availability of multiple products and services, etc.

Categories of Takeover

Following are the different type takeovers:

  • Friendly Takeover: As the name suggests, this Takeover occurs when Target Company is happy about the arrangement and gives its consent for Takeover. Friendly Takeover takes place when both the company agreed to the terms of Takeover through mutual consent of directors, shareholders, management, etc.
  • Hostile Takeover: Opposite to friendly Takeover, the target company doesn’t want the bidder to acquire the company. When the bidder company doesn’t back off and forcefully pursues the Takeover is known as a hostile takeover.
  • Reverse Takeover: When the Private Company purchases the publicly-listed company to float itself on the share market and go public without actually issuing IPO.
  • Backflip Takeover:When the Acquirer becomes a subsidiary of the target company is called backflip takeover.

Step by Step Procedure for Company Takeover

After completing the company takeover checklist, you can proceed to follow the process of Acquistion:

  • Acquirer passes the Board Resolution to bid for the shares of the target company
  • Acquirer applies to the commission for approving the authority to proceed with the takeover bid.
    • Application is accompanied by the following documents:
    • Takeover bid
    • Information memorandum
    • NOC from relevant government authority
  • Upon the receipt of approval, the authority proceeds with a takeover bid. The Acquirer has to file the proposed bid with a commission for its registration.
  • Once registered, Acquirer Company shall forward the takeover bid to the target company.
  • After the receipt of bid, target company consider the bid in properly held meeting and accepting more than 90% of the shares subjected to acquisition
  • Once the Takeover gets completed, the acquirer shall file within 7 days of the conclusion of the Takeover to the commission.

Conclusion

Our team of experts also provides assistance and professional guidance on other forms of arrangements such as a Merger, Amalgamation, and Takeover. We will guide you to form the perfect company takeover checklist to get assured success. Contact us for complete assistance of preparation of the bid to the filling of the scheme with the commission.

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Savvy Midha

Savvy Midha holds the degrees of B.Com(honors), LL.B and Company Secretary. She is an experienced Legal and Financial writer with expertise in research, drafting, and copy-writing.

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