M&A IDT implications
August 3, 2013
Merger & Acquisition
Issues & Developments
WIRC OF ICAI – AHMEDABAD BRANCH
Speaker: Ravi Mehta,
Partner – Transaction Tax,
Ernst & Young LLP
►
Modes of M&A in India & its key drivers
►
Basic M&A Concepts and some of their Tax &
Agenda
Regulatory aspects
►
Certain tax developments esp impacting
cross-border M&A
►
Page 2
Case - Studies
Overview - Modes of M&A in India
M&A
Internal
Restructuring
Acquisitions
Business
Purchase
Share
Purchase
Buyback
Merger / Demerger
Capital
Reduction
Amalgamation
Financial restructuring/ Enhancing stake/repatriatio n
Consolidation of businesses / entities Demerger
Slump Sale /
Itemised Sale
Focus on core business /sell off non core business Page 3
Focus on inorganic growth
/strategic or non strategic investments
Enhancing stake/repatriatio n
Focus on core business /hiveoff of non core business /monetize
Legislative framework of M&A
Tax regulations Companies
Act
Accounting
Implications
Stamp duty Exchange
Control
Competition
Act
FDI
Indirect tax SEBI
Every M & A action has a tax/ regulatory reaction
Multiple laws affect the business reorganization
Page 4
Key M&A Concepts
Page 5
Merger
Concept
►
Absorption of one company by another or amalgamation of
Pre-merger scenario
two companies to form a new company
►
Involves transfer of entire property, liabilities and employees
Shareholders X
Shareholders Y
Co X
Co Y
of amalgamating company to the amalgamated company
►
Amalgamated Co issues its shares to the shareholders of amalgamating cos
►
►
Swap ratio - Valuations
Transferor company is automatically wound up and no separate liquidation proceedings are required
►
High Court driven process - Section 391-394
►
Post-merger scenario
Requires approvals from the Board of Directors, shareholders
Merger & Acquisition
Issues & Developments
WIRC OF ICAI – AHMEDABAD BRANCH
Speaker: Ravi Mehta,
Partner – Transaction Tax,
Ernst & Young LLP
►
Modes of M&A in India & its key drivers
►
Basic M&A Concepts and some of their Tax &
Agenda
Regulatory aspects
►
Certain tax developments esp impacting
cross-border M&A
►
Page 2
Case - Studies
Overview - Modes of M&A in India
M&A
Internal
Restructuring
Acquisitions
Business
Purchase
Share
Purchase
Buyback
Merger / Demerger
Capital
Reduction
Amalgamation
Financial restructuring/ Enhancing stake/repatriatio n
Consolidation of businesses / entities Demerger
Slump Sale /
Itemised Sale
Focus on core business /sell off non core business Page 3
Focus on inorganic growth
/strategic or non strategic investments
Enhancing stake/repatriatio n
Focus on core business /hiveoff of non core business /monetize
Legislative framework of M&A
Tax regulations Companies
Act
Accounting
Implications
Stamp duty Exchange
Control
Competition
Act
FDI
Indirect tax SEBI
Every M & A action has a tax/ regulatory reaction
Multiple laws affect the business reorganization
Page 4
Key M&A Concepts
Page 5
Merger
Concept
►
Absorption of one company by another or amalgamation of
Pre-merger scenario
two companies to form a new company
►
Involves transfer of entire property, liabilities and employees
Shareholders X
Shareholders Y
Co X
Co Y
of amalgamating company to the amalgamated company
►
Amalgamated Co issues its shares to the shareholders of amalgamating cos
►
►
Swap ratio - Valuations
Transferor company is automatically wound up and no separate liquidation proceedings are required
►
High Court driven process - Section 391-394
►
Post-merger scenario
Requires approvals from the Board of Directors, shareholders