Kapoor Merrytime Ltd. is a renowned name in naturally flavoured ice-creams made from fresh fruits and edible vegetables. The company has its presence in Maharashtra and Goa. Its ice-creams sell under the brand name Satvika. The company has a strong foothold in Maharashtra but is struggling for success in the Goa market. The reason is the presence of a successful local brand by Pastle Ice-creams Ltd. in the market. Pastle Ice-creams Ltd. is selling natural ice-creams with locally preferred flavours. Kapoor Merrytime Ltd. tried to negotiate its way but because of the goodwill of Pastle Ice-creams Ltd., it could not succeed in its efforts. Frustrated, Kapoor Merrytime Ltd. started buying the shares of Pastle Ice-creams Ltd. to gain control over the management of Pastle Ice-creams Ltd. (a) Identify and explain the type of business combination adopted by Kapoor Merrytime Ltd. (b) Explain any two advantages which Kapoor Merrytime Ltd. would have by adopting its designed strategy.

Question

Accepted Answer

(a) The type of business combination adopted by Kapoor Merrytime Ltd. is a **Hostile Acquisition**. A hostile acquisition is done by force, either by driving the target company into a state where it must accept or by buying a majority of its shares.

In this case, Kapoor Merrytime Ltd. tried to negotiate with Pastle Ice-creams Ltd. but failed because of the goodwill of Pastle Ice-creams Ltd. Frustrated, Kapoor Merrytime Ltd. started buying the shares of Pastle Ice-creams Ltd. to gain control over the management. This is典型的 of a hostile acquisition where the acquiring company bypasses the target company's management and directly buys shares from the open market to gain controlling interest.

(b) Two advantages Kapoor Merrytime Ltd. would have by adopting this strategy:

**Elimination of Competition**: By acquiring Pastle Ice-creams Ltd., Kapoor Merrytime Ltd. would eliminate its biggest competitor in the Goa market. Pastle Ice-creams Ltd. had been a successful local brand with locally preferred flavours, which was preventing Kapoor Merrytime Ltd. from establishing its presence in Goa.

**Instant Market Access**: Through this acquisition, Kapoor Merrytime Ltd. would immediately gain access to Pastle's established customer base, distribution network, and market presence in Goa. This is faster and less risky than trying to build market share from scratch in a market where a strong local competitor already exists.