MERGERS AND ACQUISITIONSIn simple terms, when two companies come together to form a new company, it is called a merger; whereas, when one company buys the other without any new company being created, it is called an acquisition. Technically, mergers occur between two companies of the same size. The shares of both companies are sold and new shares of the company are issued. For example, when Chrysler and Daimler-Benz merged, a new company called DaimlerChrysler was created. On the contrary, when a purchase takes place and the buyer "swallows" the target company in which it ceases to exist, we speak of an acquisition. How a deal is announced and whether the purchase is hostile or friendly is what determines whether it is considered a merger or acquisition. Mergers can be horizontal, vertical, cogeneric or conglomerate in nature. Horizontal mergers occur between companies in the same industry segment. A merger in the same industry but in different areas is called a vertical merger. Cogeneric merger is a type in which the two merging companies are linked in some way to business markets, production processes or required core technologies. When companies from different industrial sectors combine their activities, it is called a conglomerate merger. Acquisitions can be either pleasant or hostile. Mergers and acquisitions occur because, in tough times, companies hope to benefit from the acquisition of new technologies, staff reductions, faster economies of scale and better market reach and better visibility of the sector. This is the ideal scenario for a merger, but it is often the opposite case. Such synergy may well be on the minds of executives at both companies and may or may not create increased value. Regardless of the category of ...... middle of paper ...... leader to acquire Suzuki Powertrain India Ltd (SPIL). SMC holds a 70 percent stake in its subsidiary SPIL, while the rest is held by MSI. This merger is beneficial as it brings all Maruti Suzuki diesel engine operations under one management. This was done due to the increasing dieselization of the Indian market. This would help reduce costs and also provide more elasticity to respond to fluctuations in market demand. This would help create a coherent diesel strategy as it would create synergies in financing and capital. SPIL supplies 3 lakh diesel engines and transmissions to MSI every year. As per the agreement, the swap ratio has been fixed at 1:70, which means SMC will receive one MSI share of Rs.5 each for every 70 shares of Rs.10 each that it holds in SPIL. There would be no job losses due to this merger but the account books have been merged.