Acquisition can be undertaken through merger or takeover route. Takeover is a general term used to define acquisitions only and both terms are used interchangeably. A Takeover may be defined as series of transacting whereby a person, individual, group of individuals or a company acquires control over the assets of a company, either directly by becoming owner of those assets or indirectly by obtaining control of management of the company.
Takeover is acquisition, by one company of controlling interest of the other, usually by buying all or majority of shares. Takeover may be of different types depending upon the purpose of acquiring a company.
- A takeover may be straight takeover which is accomplished by the management of the taking over company by acquiring shares of another company with the intention of operating taken over as an independent legal entity.
- The second type of takeover is where ownership of company is captured to merge both companies into one and operate as single legal entity.
- A third type of takeover is takeover of a sick company for its revival. This is accomplished by an order of Board for Industrial and financial Reconstruction (BIFR) under the provision of Sick Industrial companies Act, 1985. In India, Board for Industrial and Financial reconstruction (BIFR) has also been active for arranging mergers of financially sick companies with other companies under the package of rehabilitation. These merger schemes are framed in consultation with the lead bank, the target firm and the acquiring firm. These mergers are motivated and the lead bank takes the initiated and decides terms and conditions of merger. The recent takeover of Modi Cements Ltd. By Gujarat Ambuja Cement Ltd. was an arranged takeover after the financial reconstruction Modi Cement Ltd.
- The fourth kind is the bail-out takeover, which is substantial acquisition of shares in a financial weak company not being a sick industrial company in pursuance to a scheme of rehabilitation approved by public financial institution which is responsible for ensuring compliance with provision of substantial acquisition of shares and takeover Regulations, 1997 issued by SEBI which regulate the bail out takeover.