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-KK Sharma -Chairman ,KK Sharma Law Offices - ex DG, CCI 31.10.2014 WS for PS Reps Yangon, Myanmar Acquisitions- GOs

Mergers & Acquisitions-GOs. Anticompetitive effects of mergers Effect on businesses of anticompetitive mergers Implications of Global Mergers

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Page 1: Mergers & Acquisitions-GOs.  Anticompetitive effects of mergers  Effect on businesses of anticompetitive mergers  Implications of Global Mergers

-KK Sharma -Chairman ,KK Sharma Law Offices - ex DG, CCI 31.10.2014WS for PS Reps Yangon, Myanmar

Mergers & Acquisitions-GOs

Page 2: Mergers & Acquisitions-GOs.  Anticompetitive effects of mergers  Effect on businesses of anticompetitive mergers  Implications of Global Mergers

Session V

Anticompetitive effects of mergers Effect on businesses of

anticompetitive mergers Implications of Global Mergers

Page 3: Mergers & Acquisitions-GOs.  Anticompetitive effects of mergers  Effect on businesses of anticompetitive mergers  Implications of Global Mergers

What are M & As

CompanyA

CompanyB

CompanyC

Company X

CompanyY

CompanyX

Merger Acquisition

Page 4: Mergers & Acquisitions-GOs.  Anticompetitive effects of mergers  Effect on businesses of anticompetitive mergers  Implications of Global Mergers

Diversification of trade and service activities

Achieving optimum size of business Enhance profitability Widening Customer base Economies of scale Pooling resources Dynamic efficiency Escaping Gestation Period

Incentives for M & A

Page 5: Mergers & Acquisitions-GOs.  Anticompetitive effects of mergers  Effect on businesses of anticompetitive mergers  Implications of Global Mergers

Merger

Horizontal Vertical

Backward Integration

Forward Integration

Conglomerate

Types of M&As

Page 6: Mergers & Acquisitions-GOs.  Anticompetitive effects of mergers  Effect on businesses of anticompetitive mergers  Implications of Global Mergers

Most likely to raise competition

concerns

Reduction in Number of Players

Concentration of Economic Power

Growth of monopoly power/

Dominance

Horizontal Mergers-I

Page 7: Mergers & Acquisitions-GOs.  Anticompetitive effects of mergers  Effect on businesses of anticompetitive mergers  Implications of Global Mergers

Horizontal Mergers-II

Factors for Anti-competitive effects’ Assessment: Homogeneity/ Heterogeneity of

products/services Co-ordinated Effects : Ability/ Inability to co-

ordinate pricing/output decisions Unilateral Effects: Ability/ Inability to raise

prices post transaction Ease of entry/ expansion in the Relevant Market Whether either party is a potential failing

enterprise Likely Pro-competitive effects of the Merger

Page 8: Mergers & Acquisitions-GOs.  Anticompetitive effects of mergers  Effect on businesses of anticompetitive mergers  Implications of Global Mergers

No reduction in Number of players Efficiency enhancing- Unlikely to result in

competitive injury. Likely to produce injurious effects where

either party is dominant in the relevant market:

1. Market Foreclosure

2. Facilitating co-ordinated behaviour in upstream/downstream markets

‘Vertical Mergers’

Page 9: Mergers & Acquisitions-GOs.  Anticompetitive effects of mergers  Effect on businesses of anticompetitive mergers  Implications of Global Mergers

Most unlikely to result in any competitive injury.

Potential Competition concerns:

1. “Deep Pockets” Theory.

2. Entrenchment

3. Reciprocity

4. Bundling and Portfolio Effects

5. Multiple Market Strategies

‘Conglomerate Mergers’

Page 10: Mergers & Acquisitions-GOs.  Anticompetitive effects of mergers  Effect on businesses of anticompetitive mergers  Implications of Global Mergers

IMPACT ON BUSINESSES

• MERGERS EXEMPT FROM NOTIFICATION

• Negligible Impact - Where mergers Are Between

Small Enterprises- Small Mergers Not Subject to

Review and Approval

• SMALL MERGERS SUBJECT TO NOTIFICATION

• No effect on market unless mergers cause AAEC

Page 11: Mergers & Acquisitions-GOs.  Anticompetitive effects of mergers  Effect on businesses of anticompetitive mergers  Implications of Global Mergers

Anti-Competitive merger have a lasting and

permanent change than anticompetitive agreements

Horizontal Mergers may have an intent of reducing

direct competitors and, hence, competition

Price Increase- Increased market power may result in

price increase of product or services.

Anti-Competitive Effect of Mergers

Page 12: Mergers & Acquisitions-GOs.  Anticompetitive effects of mergers  Effect on businesses of anticompetitive mergers  Implications of Global Mergers

Before Merger Control was applicable in U.S.

U.S. Standard Oil Co. sought to restrict

competition by consolidating refineries

throughout the U.S. Into a mammoth

enterprise.

Prosecuted and divided into several distinct

companies in 1911.

U.S. Standard Oil Co.

Page 13: Mergers & Acquisitions-GOs.  Anticompetitive effects of mergers  Effect on businesses of anticompetitive mergers  Implications of Global Mergers

Competitors provide competitive restraint. Horizontal

merger leads to elimination of competitors and

concentration of market power in a few hands

Deustche Borse/NYSE Euronext- Within the exchange

traded derivative market, the of the two major competitors

would enjoy 90% market share. Declared incompatible.

Elimination of Competitors

Page 14: Mergers & Acquisitions-GOs.  Anticompetitive effects of mergers  Effect on businesses of anticompetitive mergers  Implications of Global Mergers

Primary fear is that where the vertically

integrated entity has market power, it may

foreclose the market or a source of supply

to its competitors.

GE/Honeywell- Vertical foreclosure concerns

arose since- among others- Honeywell was

the sole supplier to Rolls Royce

VERTICAL EFFECTS

Page 15: Mergers & Acquisitions-GOs.  Anticompetitive effects of mergers  Effect on businesses of anticompetitive mergers  Implications of Global Mergers

Multi-National Mergers can bring

efficiencies and investment in an

economy

Global mergers will also bring in new

technologies to an economy

GLOBAL MERGER- ADVANTAGES

Page 16: Mergers & Acquisitions-GOs.  Anticompetitive effects of mergers  Effect on businesses of anticompetitive mergers  Implications of Global Mergers

Multi-National mergers can also take away

profits to a foreign country

Ownership of the acquired enterprise will flow

out of the country

Perceived National Symbols may be considered

as valuable by foreign owners

GLOBAL MERGER- DISADVANTAGES

Page 17: Mergers & Acquisitions-GOs.  Anticompetitive effects of mergers  Effect on businesses of anticompetitive mergers  Implications of Global Mergers

KK SHARMA LAW OFFICES, NEW DELHICONTACT

+91-11-26491137E: [email protected]

[email protected]