Page 138 - DCOM208_BANKING_THEORY_AND_PRACTICE

Unit 8: Banking Systems

3. Advising on the issue of debentures for augmenting long-term requirements of working Notes
capital.
4. Assisting, coordinating and expediting documentation and other formalities for
disbursement.

Acceptance Credit and Bill Discounting

Acceptance credit and bill discounting connotes the activities relating to the acceptance and the
discounting of bills of exchange, besides the advancement of loans to business concerns on the
strength of such instruments, are collectively known as ‘Acceptance Credit and Bill of discounting.
In order to the bill accepting and discounting takes place on sound lines, it is imperative that the
firm involved commands a good reputation and financial standing.

Merger and Acquisition

This is a specialized service provided by the merchant banker who arranges for negotiating
acquisitions and mergers by offering expert valuation regarding the quantum and the nature of
considerations, and other related matters.
The various functions that form part of this activity are as follows:
1. Identifying organizations with matching characteristics.
2. Undertaking management audit to identify areas of corporate strength and weakness in
order to help formulate guidelines and directions for future growth.
3. Obtaining approvals from shareholders, depositors, creditors, government, and other
authorities.
4. Conducting exploratory studies on a global basis to locate overseas markets, foreign
collaborations and prospective joint venture associates.

5. Monitoring the implementation of merger and amalgamation schemes.
Merchant bankers provide advice on acquisition propositions after careful examination of all
aspects, viz, financial statements, articles of associations, provisions of companies act, rules and
guidance of trade chambers, the issuing house associations, etc.
There are many reasons for the recent trend towards mergers and amalgamations, such as:
1. Existence of excess unused manufacturing capacity of the purchasing company, which can
be utilized efficiently by taking over other units.
2. Lack of manufacturing space with the purchase company. The best solution may be to buy
the controlling interest in another company having excessive manufacturing space or
capacity.

Venture Financing

Venture capital is the equity financing for high-risk and high-reward projects. The concept of
venture capital originated in the USA in the 1950s, when business magnates like Rockefeller
financed new technology companies. The concept became more popular during the sixties and
seventies, when several private enterprises undertook the financing of high-risk and high reward
projects.

LOVELY PROFESSIONAL UNIVERSITY 133