TRANSACTION ADVISORY
M&A activity in India has been growing rapidly over the past few years, aided by increased foreign investment and changes in Government policy. As deals grow in size and become more complex, the regulations surrounding M&A also grow more stringent. Both the target and the acquirer require expert guidance and advice on financial facets of the transaction and their implications for them.
There are several aspects that need to be considered before a merger or acquisition can be initiated and completed. Here are some of them >
This is the first and basic check that needs to be done. The financial statements of the company that is set to be merged or acquired needs to be minutely scrutinized, and this should be done for at least the previous three years.
Additionally, the company’s tax position and tax liabilities, employee liabilities, asset positions, etc. all need to be investigated by an independent third party
The entire gamut of regulatory and financial checks that are needed during any M&A or transaction require support from consultants that provide transaction advisory services.
The correct value of the company that is being merged or acquired needs to be ascertained so that the shareholders of the acquiring company do not get shortchanged with this transaction. Business valuations are required for various purposes including accounting, taxation, RBI/forex, fairness opinions, etc.
The Foreign Exchange Management Act governs all transactions involving the outflow or inflow of foreign currency. If an M&A deal involves a buyer or seller outside India, as per the FEMA provisions, a valuation needs to be done by an external expert to prove that there is no underpayment or overpayment.
CAT’s team brings its cross-cultural and cross-sector experience in transaction advice to the task, assisting clients with the following services:
- Lead advisory, target evaluation studies, fund raising
- Financial model building for companies looking to raise funds
- Financial due diligence for proposed transactions
- Tax due diligence for proposed transactions • General due diligence for a proposed transaction (encompassing financial, tax, legal and key operational aspects of the business)
- Valuation of business for transactions
- Valuation of business for regulatory purposes, e.g. for foreign exchange inflow/outflow (FEMA requirements), for Companies Act purposes and for shareholder protection purposes
- Valuation of business for tax purposes, e.g. capital gains tax for the seller, income from other sources for the buyer, etc.
- Determination of transaction structure and equity stake to be allotted to buyer based on valuations
- Tax planning for a transaction for both acquirer and target
- Valuation of intangible assets of a business, e.g. customer relationships, brands, technology, etc.
- Purchase price accounting for a transaction, i.e. determining the fair value of all assets and liabilities (including goodwill) of an acquired entity
- Ongoing valuation of business and/or assets on a periodic basis for financial reporting, mark-to-market measurements and impairment analysis
- Restructuring analysis and strategy
- Transition planning and guidance
