Difference between M & A through an Example each

Mergers and acquisitions are two of the most misunderstood terms in the corporate world. Both names are frequently used to refer to the merger of two businesses, but there are significant distinctions in how and when they should be used.

Mergers occur when two different organizations join their forces in order to form a new, unified entity. An acquisition, on the other hand, refers to the taking over of one entity by another. It may be necessary to accomplish mergers and acquisitions in order to broaden a company's reach or obtain market share in order to increase shareholder value.

In this post, you will find an example of each, merger and acquisition, to help you better grasp the differences between the two types of transactions.

HDFC limited and HDFC bank:?On 7th April the Hindustan Development Finance Corporation and HDFC Ltd announced a merger of the two corporations, which will be one of India's most significant transactions in the financial sector. According to current estimates, the merger will be completed within 18 months, assuming all regulatory approvals and other standard closing requirements are met.?Upon hearing that their companies were merging, the stock prices of both companies increased dramatically, increasing by more than 7 percent in the first hour of trade..

Following regulatory approvals and other usual closing conditions, the acquisition is likely to close in 18 months, according to HDFC Bank.

After completion of the transaction structure, an amalgamation between HDFC Limited (India's largest home finance firm) and HDFC Bank (India's largest private sector bank by assets) is expected to take place in the near future. HDFC Limited has an asset under management of Rs 5.26 trillion, while HDFC Bank has a market capitalization of Rs 4.44 trillion.

According to the swap ratio, HDFC Limited shareholders will receive 42 HDFC Bank shares in return for 25 HDFC Limited shares. HDFC Bank shares will be issued in exchange for HDFC Limited shares.

Following the merger, HDFC Limited's investment in HDFC Bank will be terminated, and public shareholders will become the sole owners of HDFC Bank. HDFC Limited is the parent company of HDFC Bank. According to the corporation, HDFC Bank is held by the investors of HDFC Limited, who possess 41% of the bank.

The following are the benefits that both companies will receive from the merger: Both firms will be able to take advantage of their distribution networks in urban, semi-urban, and rural areas in order to expand their consumer base as a result. In addition, the combined balance sheet of Rs 17.87 trillion and net value of Rs 3.3 trillion will allow for better underwriting on a larger scale than was previously achievable.

Zomato Acquired Uber Eats:?In 2020, a regulatory filing in one of Uber's key international markets revealed that the American ride-hailing giant has sold its food delivery operation in India to a local competitor, Zomato, for $206 million.

Earlier that year, Uber announced that it had sold the India portion of its Uber Eats food delivery service to Zomato for a 9.99 percent interest in the loss-making Indian food delivery firm. The financial parameters of the deal, which some Indian news agencies said to be worth $350 million, had not been disclosed by the two corporations at press time. Later that year, TechCrunch reported that Uber Eats' India operations, as well as a 9.99 percent investment in Zomato, were valued at approximately $180 million.

Specifically, according to the document, Uber got $206 million in "fair value of the consideration" from Zomato for the acquisition of Uber Eats' India business. This amount includes $35 million in "reimbursement of goods and services tax receivable from Zomato."

As a result of the transaction, the 11-year-old Indian company's valuation has been significantly reduced. It was previously valued at $3 billion when it announced a $150 million new investment earlier this year, according to reports.

According to an interview with the Indian news agency PTI conducted in December, Deepinder Goyal, co-founder and chief executive of Zomato, stated that his firm was in the process of raising as much as $600 million by the end of January. The remainder of the capital has not yet been secured by the company. A representative from Zomato declined to comment.

The withdrawal of Uber Eats from India has resulted in a duopoly in the local food delivery industry between Zomato and Swiggy, which received $113 million in an ongoing round last month and has funded an additional $113 million since then. Swiggy, according to industry estimates, is the most successful meal delivery company in the country.

While both businesses are working hard to discover a road to profitability in India, they are continuing to spend more than $15 million each month to attract new customers and keep the ones they already have satisfied.