What is NBFC Takeover? – An Overview

Registered under the Companies Act, 2013, NBFC stands for Non-Banking Financial Companies. NBFC takeover implies acquiring or gaining control of one NBFC by another company. To captivate the management of the target company, an NBFC needs to go through the registration process under the act. NBFC's have financial services under its wings. Financial services that NBFC offers are asset financing, acquisition of shares, debentures, securities, bonds, and stocks, granting loans as well as advances, and investing in various commercial securities. NBFC is not only limited to previously mentioned points but also extend to providing credit facilities and working capital loans.

RBI is striving to make the road smoother for NBFCs. Consistent monitoring and shoring up of larger NBFCs are on the run to make them match pace with the global standards.

There are two different paths you can tread to begin your business venture in NBFC -

Incorporating NBFC under Companies Act

NBFC takeover of an already set business

Why Takeover of NBFC Gained Momentum in Recent Times?

From time to time, we keep on reading in the newspapers and watching on the T.V. about mergers and takeovers. In the world of corporate, Mergers and Takeovers are creating a lasting impact in the mind of people. RBI has laid down rules and regulations to facilitate the process of the takeover of NBFC's.

The non-banking financial company takeover revolves around two entities

Target Company An acquirer company is keeping its eyes on a 'to be acquired' company known as the Target Company.

Acquirer Company A company that has got the ability of acquiring the target company is renowned as Acquirer Company.

Types of NBFC Takeover

To touch new heights in today's rapidly emerging business world, the takeover of NBFC has become a widespread habit that companies are adopting.

NBFC takeover can be of two types

Hostile Takeover The name hostile takeover is itself indicating about this term. A Hostile takeover is a type of takeover in which the acquirer or acquiring company uses different tactics to gain ownership of the target or target company without the nod of the board of directors associated with that target company. During such kinds of takeovers, entities get involved in reaching out to shareholders by putting a tender offer on their table, and they even don't hesitate to indulge in a proxy fight to replace the management to get the acquisition accepted. For acquirers, the target company's board of directors’ support and approval doesn't matter at all.

Friendly Takeover A friendly takeover is a scenario that depicts the story of the acquisition of a target company by another company peacefully as this takeover is subject to the assistance and approval of the management and board of directors. The shareholders of the target company's say yes to the deal only if they feel that the price per share is better as compared to the current market price. Generally, a friendly takeover is likely to take place when the target companies are happy with the benefits that they have overseen during the prior analysis time frame. The benefits of the friendly takeover are not only limited to the better per-share price, but it's more and beyond that. The target companies get opportunities to fuel their business growth. Furthermore, they can explore different spheres of the market as well. In brief, a friendly takeover is all about mutual consent.

A Friendly Takeover has the Edge over the Hostile Takeover!

As it's a thing of common understanding that with consent peace comes and with disagreement disputes and battles comes, it's simple to comprehend the dominance of friendly takeover over the hostile takeover.

Unlike hostile takeover, in this type, the target companies don't go face to face with the bothersome disputes or issues.

It is a type of takeover in which the target company, as well as acquirer, actively participates in sketching the deal considering and prioritizing a sense of satisfaction for both.

And last but not least, the additional advantage of better price per share.