Mergers and acquisitions Essay Example | Topics and Well Written Essays - 3000 words

Mergers and acquisitions - Essay Example HCL EAS Limited ("HCL EAS"), an indirect wholly owned subsidiary of HCL, for the entire issued and to be issued share capital of Axon at a price of 650 pence in cash per Axon Share (including the Interim Dividend of 2.25 pence announced on 26 August 2008) On 2 October 2008, the Axon Board announced that it had withdrawn its recommendation for the Infosys Acquisition and intended to recommend unanimously the HCL Offer On November 25, Axon approved the scheme of arrangement to implement its acquisition by HCL EAS. HCL got 99.9 per cent votes in its favor and the company acquired 34.7 million shares of the British firm On 15 December, 2008 HCL Technologies completed its ?441 million (around Rs 3,100 crore) cash offer Axon Group Plc. Deal Structure Analysis HCL EAS, an indirect wholly owned subsidiary of HCL Technologies which had been formed specifically for the purposes of making the offer, announced a cash offer to acquire the entire issued and to be issued share capital of Axon for ? 441.1 mn. HCL EAS is a private limited company incorporated in England and Wales and an indirect wholly owned subsidiary of HCL Technologies. Axon shareholders received for each Axon Share 647.75 pence in cash. Shareholders who were on the register of members of Axon on 24 October 2008 will also be entitled to receive an additional 2.25 pence for each Axon Share held by way of the Interim Dividend. Such Shareholders therefore received an aggregate of 650 pence per Axon Share. Financing arrangements: The cash consideration payable by HCL EAS under the terms of the HCL Acquisition was funded using a combination of the HCL Group’s existing resources and committed loan facility arranged by Standard Chartered for the purposes of the HCL Acquisition. New debt was given to HCL EAS pursuant to a... The paper affirms that there are many theories and motives that have given us useful reasons why mergers and acquisitions that take place. Williamson proposed the concept of transaction cost economics (TCE) through which an organization can find out ways of optimizing its activities so that the production and transaction costs are minimized. He proposed that it is generally cheaper to buy a generic product from an outsider which is having its core competency in the same area. However, firms might be interested in internalizing the above exchange. Therefore, firms might want to acquire other organizations. Another parallel theory that is often cited is the theory of resource dependence. It is proposed that organization exchange resources within their environment which include suppliers or competitors. Theorists claim that organizations go for acquisitions to take control over critical resources in order to decrease its dependence on outside. Mergers and acquisitions lead to organizati ons having access to critical resources thereby increasing their market power. Another motive in organizations going for mergers and acquisitions is the drive for organizations to acquire knowledge. Firms acquire or merge with other companies in order to take advantage of opportunities in organizational learning. This theory is based on the increasing importance of knowledge in achieving competitive advantage. Mergers are a preferred more of acquiring specific technical skills and capabilities that are difficult to buy.