- KK Sharma -Chairman ,KK Sharma Law Offices - - PowerPoint Presentation

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

Mergers & Acquisitions-GOs

Session VAnticompetitive effects of mergersEffect on businesses of anticompetitive mergersImplications of Global Mergers

What are M & As

Merger

Acquisition

Diversification of trade and service activitiesAchieving optimum size of businessEnhance profitabilityWidening Customer baseEconomies of scale

Pooling resourcesDynamic efficiencyEscaping Gestation Period

Incentives for M & A

Types of M&As

Most likely to raise competition concernsReduction in Number of PlayersConcentration of Economic PowerGrowth of monopoly power/ Dominance

Horizontal Mergers-I

Horizontal Mergers-IIFactors for Anti-competitive effects’ Assessment: Homogeneity/ Heterogeneity of products/servicesC

o-ordinated Effects : Ability/ Inability to co-ordinate pricing/output decisionsUnilateral 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

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

‘Vertical Mergers’

Most unlikely to result in any competitive injury.Potential Competition concerns: “Deep Pockets” Theory.

Entrenchment

Reciprocity

Bundling and Portfolio Effects

Multiple Market Strategies

‘Conglomerate Mergers’

IMPACT ON BUSINESSES MERGERS EXEMPT FROM NOTIFICATIONNegligible Impact - Where mergers Are Between Small Enterprises- Small Mergers Not Subject to Review and Approval

SMALL MERGERS SUBJECT TO NOTIFICATIONNo effect on market unless mergers cause AAEC

Anti-Competitive merger have a lasting and permanent change than anticompetitive agreementsHorizontal Mergers may have an intent of reducing direct competitors and, hence, competitionPrice Increase- Increased market power may result in price increase of product or services.Anti-Competitive Effect of 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.

Competitors provide competitive restraint. Horizontal merger leads to elimination of competitors and concentration of market power in a few handsDeustche 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

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 RoyceVERTICAL EFFECTS

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

Multi-National mergers can also take away profits to a foreign countryOwnership of the acquired enterprise will flow out of the countryPerceived National Symbols may be considered as valuable by foreign ownersGLOBAL MERGER- DISADVANTAGES

KK SHARMA LAW OFFICES, NEW DELHICONTACT+91-11-26491137E: globalhq@kkslawoffices.comkksharma@kkslawffices.com