MERGER AND ACQUISITION IN INDIA EXPLAINED IN HINDI | Concept, Reason/Motives with Real Examples ppt

Summary

In this video, Sonu Singh explains the concepts of mergers and acquisitions in business, particularly focusing on the Indian market. He defines 'merger' as the process of two companies combining to form one entity, and 'acquisition' as one company taking control over another. The video explores the reasons behind these processes, such as eliminating competition, reducing tax liabilities, and establishing stronger market positions. Through examples of notable mergers and acquisitions like Vodafone-Idea and Walmart-Flipkart, Sonu illustrates the real-world application and benefits of these business strategies.

Takeaways

• 😀 Mergers and Acquisitions (M&A) involve the combination or acquisition of companies to form stronger business entities.
• 😀 A merger is when two or more companies combine to form a single entity, while an acquisition occurs when one company takes control of another.
• 😀 Mergers eliminate competition, which can lead to stronger market positions. An example is when Zomato and Swiggy combined their customer bases to dominate the food delivery sector.
• 😀 M&A help companies establish a bigger market share by combining resources, technology, and customer bases, thereby increasing competitiveness.
• 😀 Creating a stronger brand identity is another benefit of M&A, as demonstrated by the merger between Vodafone and Idea to compete with Jio.
• 😀 M&A can help reduce tax liabilities, especially when one company acquires another with significant losses, which can offset profits from the acquiring company.
• 😀 One reason for M&A is the need to face increasing competition in a market, such as the telecom industry in India where Vodafone and Idea merged to face Jio’s strong market entry.
• 😀 A key motivation for M&A is to create a more competitive position in the market. For instance, the merger between Flipkart and Walmart was intended to counter Amazon's dominance in the Indian e-commerce market.
• 😀 Companies engage in M&A to leverage market opportunities, such as Zomato acquiring a grocery delivery startup to expand beyond food delivery into grocery services.
• 😀 M&A help companies increase operational efficiencies, reduce costs, and improve their overall market strategies, making them better equipped to deal with industry changes.

Q & A

What is a merger and how does it work?

A merger is the process where two or more companies combine to form a single entity, often with one company's identity absorbing the other. The purpose is usually to increase market share, eliminate competition, or create a stronger brand presence. In a merger, the companies combine their resources, customers, and management under one unified structure.

What does 'acquisition' mean in a business context?

An acquisition refers to one company purchasing a controlling stake in another company. Unlike a merger, the acquired company does not necessarily change its name or identity but becomes part of the purchasing company's operations. The focus is on expanding market share or strengthening the acquiring company's position.

What are some common reasons for mergers and acquisitions (M&A)?

Common reasons for M&A include eliminating competition, expanding market share, creating a stronger brand, reducing tax liabilities, or acquiring new technologies. Companies often merge to combine resources and strengthen their position in the market.

Can you explain the concept of eliminating competition through a merger?

When two competing companies merge, they eliminate direct competition between each other. For example, if two food delivery services merge, their combined customer base and resources allow them to become more competitive against other market players, potentially reducing the overall competition in the industry.

How can mergers help companies reduce tax liabilities?

Mergers can help reduce tax liabilities by allowing a profitable company to absorb the losses of an acquiring company. In some cases, a company with accumulated losses can offset its taxable profits with the losses from the acquired company, thereby reducing the overall tax burden.

What is the difference between a merger and an acquisition?

In a merger, two companies combine into a single entity, often with one company's identity absorbed into the other. In an acquisition, one company takes control of another by purchasing a majority stake, but the acquired company's identity may remain intact. Mergers typically result in the formation of a new entity, while acquisitions may not change the identity of the acquired company.

What is an example of a major merger in India?

A significant example of a merger in India was between Vodafone and Idea. The merger allowed both companies to compete more effectively against new market entrants like Jio by combining their market share and customer bases, thus eliminating some of the competition in the telecom industry.

Why did Walmart acquire Flipkart?

Walmart acquired Flipkart to strengthen its presence in the Indian market and compete more effectively with Amazon. Flipkart provided Walmart with an established e-commerce platform in India, helping it to capture a larger share of the rapidly growing Indian online retail market.

How did Zomato benefit from acquiring Blinkit (formerly Grofers)?

Zomato's acquisition of Blinkit allowed the company to enter the grocery delivery market, expanding its offerings beyond food delivery. By acquiring Blinkit, Zomato gained access to a larger customer base in the grocery segment and a stronger presence in the quick commerce space.

What are the potential benefits of a merger for both companies involved?

The potential benefits of a merger include increased market share, a more competitive brand presence, cost savings through synergies, and a stronger operational framework. Both companies can leverage each other's strengths, such as customer bases, technology, and expertise, to improve their market position and profitability.