This article throws light upon the top thirteen types of debenture. Here in this article we would try to analyze one such commonly heard fixed income instrument by the name debenture. A debenture is a type of corporate bond that is not secured by collateral or specific assets. If smaller company acquires the management control of the larger company and keeps its name for the combined entity is called reverse takeover. Takeovers are always a reality in the competing world of business. In other words, a merger is the combination of two companies into a single legal entity. Merger three basic structures, all of which involve statutory mergers in which sellers. Pdf theory and practice of mergers and acquisitions. How to differentiate between bearer debenture, mortgage. Types, regulation, and patterns of practice john c.
Researchers have had a great interest for many years in why companies prefer to grow by mergers, what kind of mergers they perform, which. Takeovers definition, types friendly, hostile, reverse. In todays dynamic economic environment, companies are often faced with decisions concerning these. It is a form of acquisition of a company rather than a merger. Chapter ii crossborder mergers of limited liability companies. Australia, for example, exhibited such a pattern, with deal volume growing starting in 2003 but. It takes place when private company with good prospectus and eager to raise finance will acquire public listed company. Mergers and acquisitions come in all forms and shapes. Merger and acquisition transactions depend a lot on the approval of a target company. A debenture may be defined as an instrument executed by a company under its common seal acknowledging indebtedness to repay the sum at a specified. Intellectual property assets in mergers and acquisitions wipo. Introduction deal volume in most regions of the world generally tended to follow the patterns in the united states and europe. How do different types of mergers and acquisitions facilitate strategic agility. Below we expand further on the different types of mergers and acquisitions.
Types of debentures on the basis of record point of view a. Mergers and acquisitions edinburgh business school. Like regular bonds, convertible debentures offer regular interest income through coupon payments and repayment of principal at maturity. A debenture is an instrument executed by the company under its common seal acknowledging indebtedness to some person or persons to secure the sum advanced. In case of debentures, the rate of debentures are fixed and known to investors. Its a financial instrument, which can be issued by companies, municipalities, states and sovereign government, to raise fund from the market for the purpose of funding projects and activities. This results in only one company remaining after the merger. It explains what you should know and understand about your own business, how to find out whether a merger could be beneficial, how to evaluate a business you hope to buy and staffing matters. Mergers and acquisitions continue to be a favored corporate development. Gaughan introduction fifthmerger wave ends in 2001 it was a international wave fourth merger wave ends in 1990s. However, statistic data show that mergers and acquisitions often do.
The amount due on debentures may be paid in installments, such as, application, allotment and calls. Mar 19, 2018 different types of shares and debentures by lawfarm team march 19, 2018 capital is needed by the companies, both private and public to increase their productivity or market reach or to purchase latest modern equipment and machines. The classification of the debentures can be done as redeemable, irredeemable, perpetual, convertible, nonconvertible, fully and partly secured, naked, first or second mortgage, fixed or floating rate, callable, putt able and zero coupon debentures. A company in india can issue secured or unsecured debentures. Unlike all mergers, all acquisitions involve one firm purchasing another there is no exchange of stock or consolidation as a new company. It is a debt security, under which the issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay them interest the coupon and or to repay the principal at a later date, termed the maturity interest is usually payable at fixed intervals semiannual, annual.
Debentures are generally freely transferable by the debenture holder. Issue and redemption of debentures 77 b zero coupon rate debentures. Debentures, respectively, for public distribution with restricted placement and distribution efforts, pursuant to cvm instruction 476 of january 16, 2009, as amended. Debentures are unsecured loans that are backed solely by the financial strength and credit rating of. Companies pay investors interest for the term of the debenture. A glance at any business newspaper or business news web page will indicate that mergers and acquisitions are big business and are taking place all the time. In the financial world, investors are usually on the lookout of regular fixed income on their investments. Debentures meaning, issue, features, types, advantages.
Debentures can be classified on the basis of security, record point of view, redemption, convertibility, and priority. Debentures are normally only issued by the largest and most creditworthy of debt issuers, whose ability to repay is beyond question. However, due to their conversion option, convertible bonds typically have lower coupons. Types of debentures debentures are categorized into the following types. Acquisitions a merger takes place when two companies combine together as. Need not get surprised, for compensating against no interest, companies issue them at a discounted price which is less compared to the face value of it. Tilburg university and european corporate governance.
A debenture is an instrument of debt executed by the company acknowledging its obligation to repay the sum at a specified rate and also carrying an interest. John akula types of acquisitions governed by state law. The term debenture is derived from the latin word debere which means to a money owing. In this article, we look at different types of mergers that companies can undergo.
Debenture is a security issued or allotted to the investor under the seat of the company who become creditors of the compan. Below is a screenshot of cfis mergers and acquisitions modeling course. The type of acquisition may often dictate the post merger integration approach and also the degree of integration. There are different types of debentures, which probably used now days for raising finance. The issue procedure with regard to debentures is the same as that of shares. This course deals with mergers, acquisitions and other corporate restructuring activities in an international context. Debenture stocks are an equity security, not a loan. They can be little intricate to understand all the legal and tax issues surrounding the deals. These types of debentures are secured against the credit on the actual property of the company. What is debenture and its types commerce and management. The interested investors, then, apply for the same.
Firstly, we should recognize that there are two parties sometimes more in the transaction. The companies act was, in many ways, perceived as a reaction to the satyam scam which uncovered several aspects of corporate fraud that inter alia diminished minority shareholder rights. Merger and acquisition activity mergers, acquisitions, joint ventures, divestitures is at an alltime high. Types of mergers there are five different types of. Whats the difference between mergers and acquisitions. May 05, 2015 debentures can be secured against the assets of the company or may be unsecured. Redeemable debentures carry a specific date of redemption on the certificate. Different methodologies and viewpoints within stakeholder theory and the resource dependence perspective are used for the analysis. Corporate debentures are debentures issued by companies and they are insecure in nature. Mergers, acquisitions, and takeovers have been a part of the business world for centuries. The change expense is the major distinction between the particular merger worth and also the merchandising value of the firm that can be of larger distinction.
These debentures do not carry a specific rate of interest. Details of debentures are documented in an indenture, which is a written agreement between the issuer and the holder. Accounting entries for issue of debentures capital accounting. Types of debentures basis redemption, convertibility. The procedure of issuing debentures by a company is similar to the one followed while issuing equity stocks. Bhg announces conclusion of debenture issue operation was completed on december 28, 2012 and involved the issue of seven thousand 7,000 debentures. So it is one of the sources to raise capital or make up the deficiency in the capital account. From a hostile takeover to a friendly merger or a strategic alliance there are many ways companies can combine forces in this article we look at four of the main types of mergers and acquisitions and provide a minicase study of a wellknown merger that did not turn out as planned. Even today, decades later, i refer to the commentaries in discussing the issues so well dealt with. The first study examines the impact of an acquisition announcement on a market. This is a type of business alliance are used by companies either to diversify or to grow their businesses.
Acquisitions are often congenial, and all parties feel satisfied with the deal. Takeovers, generally mean a company taking over the management of another company. Tilburg university the longterm operating performance of. Other convertible securities like warrants and convertible debentures are typically not given the right to vote in an arrangement, unless their rights. Let us look at the types of mergers and acquisitions, the ways the companies can do business combinations. These securities are repayable after a fixedperiod. Mergers and acquisitions edinburgh business school ix preface an understanding of mergers and acquisitions as a discipline is increasingly important in modern business. Secured debentures bear charge on certain assets of the company viz. Learn about the legal differences between a corporate merger and corporate acquisition, terms used when companies are either combined or. The company is legally bound to repay the principal amount to the debenture holders on. A company may increase part of its capital by obtaining loans. Mergers and acquisitions higher school of economics.
Difference between shares and debentures with similarities. Debentures provide higher rates of financial return and are usually much more rewarding than government bonds or bank investments at the end of the lending period, issuing companies usually offer the choice of converting the debentures for shares stock or equity. But before moving towards the types of debentures, lets see what is debenture. Often in the newspapers we can see the terms debentures and bonds used in the same context. They can vary by a control degree of an acquired entity or by its purpose. If a rival makes revolution and may currently market vital resources those are of superior quality, shift is tough. Mergers and acquisitions are modes by which distinct businesses may. Turnover of acquired company executives is often high, so there is a risk of losing valuable knowledge capital in any merger or acquisition. Debentures may be secured or unsecured and companies frequently issue both kinds of debentures. Interest on debenture is payable even if there is a loss. Mergers and acquisitions are two different business combinations, although they are thought of as a generic term. Debentures are a type of debt instrument, similar to a bond, that companies issue in order to raise capital. Rule 1 of the companies share capital and debenture rules.
Merger and acquisition motives, types and strategies the. Mergers and acquisitions definition, difference, process. A merger refers to an agreement in which two companies join together to form one company. Section 4 acquisition of one company by another which holds 90 % or more of its shares. The holder of debenture has a lawful right to sell the possessions and recover the credit if the company does not refund the borrowed money at a particular period of time. The companies act, 20 companies act is one of the landmark legislations enacted in recent years to bring forth transparency, ease of doing business and protecting rights of minority shareholders. Bond issued by government do not have any risk of default. The company starts by releasing a prospectus declaring the debenture issuance. Planning, formulation and execution of various corporate restructuring strategies mergers, acquisitions, takeovers, disinvestments and strategic alliances, demerger and hiving off expanding role of professionals. In order to compensate the investors, such debentures are issued at substantial discount and the difference between the nominal value and the issue price is treated as the amount of interest. Nov 19, 2018 difference between shares and debentures last updated on november 19, 2018 by surbhi s nowadays, investment in shares and debentures has taken a dominant position in the society, as people of different ages, religion, sex, and race invest their hard earned money, with an aim of getting better returns.
Mar, 20 a debentures is a longterm debt instrument or security. Advantages and disadvantages of mergers and acquisitions. Mergers and acquisitions are the ways in which businesses get combined. Minor mergers and acquisitions erasmus university rotterdam. Following are some of the advantages of debentures. The major types of debentures can be studied as follows. Coates iv1 the core goal of corporate law and governance is to improve outcomes for participants in businesses organized as corporations, and for society, relative to what could be achieved. Mergers and acquisitions definition, types and examples. It is not rare to find companies merging together with each others consent. In an acquisition, as in some of the merger deals we discuss above, a company. This article looks at the main types of mergers and acquisitions and the motives of the participants in each case.
In this article we will discuss about the accounting entries for issue of debentures. Mar 04, 2011 even public company can collect money for financing its business by selling debentures in the market. Types of mergers a merger is a business transaction where an acquiring company takeovers the target company as a whole. Merger refers to the consolidation of two or more business entity to form one single joint entity with the new management structure, ownership and name capitalizing on its competitive advantage and synergies whereas acquisition is the case where one financially strong entity takeover or acquire less financially strong business entity by acquiring. Companies merge and acquire each other for many different reasons. Convertible debentures represent a loan to the issuing company which is paid back at maturity. Zero coupon debentures do not carry any coupon rate or we can say that there is a zero coupon rate. Debentures are creditor ship securities representing longterm indebtedness of a company. Nov 20, 2018 if the issuer of a debenture were to default, investors would be placed at the level of general creditors in terms of their ability to recover funds from the issuer. The bidding company is known as the acquiring company and the company which is being targeted for a possible merger or acquisition is known as the.
What is the difference between bond, equity, share, and. This is a debenture which can be converted into some other type of securities for example stocks. It also goes into the legalities involved in mergers and acquisitions. Types of debentures the following are the important types of the debentures of the joint stock. Following are the various types of debentures visavis their basis of classification. Registered debentures these are the debentures that are registered with the company. The resulting proceeds will be utilized to finance investments in the companys projects and the remaining balance will be used to strengthen working capital. In such a case, even debentures originally issued at a discount can be converted into shares on the basis of the nominal value of the debentures. Debentures meaning, issue, features, types, advantages, disadvantages the term debenture is derived from the latin word debere which means to owe a debt. In case, the debentures are due for redemption, conversion of debentures into shares, may be made on the basis of terms and conditions mutually agreed upon at the time of redemption. A debenture may, be defined as document issued by the company as an evidence of debt.