Mergers & Acquisitions-GOs

1. Mergers & Acquisitions-GOs -KK Sharma -Chairman ,KK Sharma Law Offices - ex DG, CCI31.10.2014WS for PS Reps Yangon, Myanmar

2. Session V • Anticompetitive effects of mergers • Effect on businesses of anticompetitive mergers • Implications of Global Mergers

3. What are M & As Merger Acquisition

4. Incentives for M & A • 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

5. Types of M&As

6. Horizontal Mergers-I • Most likely to raise competition concerns • Reduction in Number of Players • Concentration of Economic Power • Growth of monopoly power/ Dominance

7. 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

8. ‘Vertical 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: • Market Foreclosure • Facilitating co-ordinated behaviour in upstream/downstream markets

9. ‘Conglomerate Mergers’ • Most unlikely to result in any competitive injury. • Potential Competition concerns: • “Deep Pockets” Theory. • Entrenchment • Reciprocity • Bundling and Portfolio Effects • Multiple Market Strategies

10. 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

11. Anti-Competitive Effect of 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.

12. U.S. Standard Oil Co. • 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.

13. Elimination of Competitors • Competitors provide competitive restraint. Horizontal merger leads to elimination of competitors and concentration of market power in a few hands • DeustcheBorse/NYSE Euronext- Within the exchange traded derivative market, the of the two major competitors would enjoy 90% market share. Declared incompatible.

14. VERTICAL EFFECTS • 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

15. GLOBAL MERGER- ADVANTAGES • Multi-National Mergers can bring efficiencies and investment in an economy • Global mergers will also bring in new technologies to an economy

16. GLOBAL MERGER- DISADVANTAGES • 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

17. KK SHARMA LAW OFFICES, NEW DELHI CONTACT +91-11-26491137 E: globalhq@kkslawoffices.com kksharma@kkslawffices.com