Sources of Funds

If you are starting a business or trying to grow an existing business, you almost
certainly will need money. This money can come from many different sources. This
session will help you identify which sources are most appropriate for your business.
Roughly speaking, investments break down into two forms: debt and equity. You take
on debt when you borrow money from a lender, and pay interest on that investment.
You are required to repay the money with interest over time. Or, you can take on an
equity investment in which you sell a portion of the company to an investor in return
for cash or something else of value.
Most new businesses dont start with a bank loan. A survey reported that bank loans
comprised less than 15% of start-up capital. This number goes up to perhaps 40% with
existing companies with less than 20 employees. This does not mean that you should
not look for a bank loan, just that it is not the only source to consider.
Start-ups often find it easier to get money from individuals or groups of individuals,
while companies, which have a track record of success, are more apt to find an
audience with institutional lenders.
Here are some options for funding your small business. And remember, it is unlikely
that all the money will come from one source. It will probably come from several.
1. Personal savings
Keep in mind that most lenders won't finance 100 % of your business, so your first
source of capital will probably be a loan from yourself. Few businesses are entirely
funded by parties other than the entrepreneur. There are definite advantages for you
here: 100% control and ownership. You own the whole company, control the show,
and stand to reap the gains should your venture become valuable.
But there's a huge potential downside as well. Even the best-researched and well-run
startups involve risk. And you are putting your assets on the line. It is great to read
about risk-takers who take out loan on their homes and borrow from their gratuity
funds or loan on their gold to launch businesses that turn them into millionaires. There
are far fewer stories in the news about the many people who take great risks and fail.
And unfortunately, these stories are very real and very common. So while you need to
trust yourself, and take the leap, be sure to consider the risk of your venture carefully
when investing your own money.

Another form of personal debt is getting cash advances on your credit cards. This
option is very expensive and extremely risky. Credit cards should only be used for
short-term expenses, and not as a means to entirely fund a start-up business.
2. Family and friends
Borrowing from your friends and family is a good way for new businesses to get
money. It is not uncommon for relatives to give money to family members. However,
you risk alienating your family if the business falls on hard times and you have trouble
repaying the funds. Be sure that you have a written agreement regarding the amount
borrowed, the profit rate (if any) and how and when the loan is to be repaid. (Although
it is not a common approach here).
3. Banks
It has been reported that the most important factor in getting a small loan is the credit
worthiness of the borrower. If you dont have a good credit standing or do not have
any asset to pledge, clear up all your credit problems before you go to a bank for a
loan. Nowadays, this is usually expressed as your credit history. All banks are linked
to each other and state bank to share credit worthiness of consumers.
There are two basic types of loans you might want to consider
Business Loans
Most small business loans are secured with company or personal assets. Lenders
will usually ask for personal guarantees, as well as collateral from anyone who
owns more than significant percentage of the company. The bank's reason for
requiring collateral is, in part, to gauge whether you think your company is worth
the risk you are asking them to take. Business loans have more strict requirements
than consumer loans. For example, if your business is in tough financial times,
your bank may ask you to immediately pay off the full amount of the loan,
something that is unlikely to happen with a consumer loan.
Consumer Loans
Many small businesses are funded through personal loans or other loans based on
personal assets. Consumer loans, and personal loans - are easier to obtain than
business loans if you have a good credit history. Some banks don't mind if you take
a consumer loan and use the funds for business purposes, others will refuse to lend
to you if you tell them you need the money for business purposes. Keep in mind

that if you tell a banker a loan is for personal use and you use it for business that
would halt your loan decision.
Consumer loans require less paperwork than commercial loans, and the approval
process is much quicker. It is also unlikely that you would be asked to pay the loan
back in full if your business falls on hard times, something that can and does
happen with a business loan.
Prime Minister Youth Business Loan
The PM Youth Loan is a great opportunity for you to get loan at a great rate. The
loan is given at the subsidize rate and is available in all major banks. You just have
to show that you are not employed and you need a loan. They will ask for a
guarantor or a pledge and would extend you a loan of maximum of 2 million. You
cannot get cash in this scheme. You would get reimbursements or payments for
your business expenses.
Requirements
1. Business Plan
2. Guarantor/Pledge

4. Incubation Centers
There are many incubation centers in Pakistan working to boost local startups. The
centers help the startups by providing them with cash as well as office space. They
also bring with them expertise. Here is the list of all incubation centers in Pakistan:

NO INCUBATOR
.

CITY

DESCRIPTION

Lahore,
Punjab

The Social Innovation Lab's incubator, 'The

Hatchery' is Pakistans only social enterprise
incubator geared to the needs of passionate,
social innovators, big on ideas but lacking in

Social
Innovation Lab

NO INCUBATOR
.

CITY

DESCRIPTION

the means and experience necessary to realize

their vision. They use an indigenized
curriculum and 4-month mentorship program,
which combines humanistic perspectives on
poverty alleviation, rural development and
inclusive marketing with the latest insights on
sustainable business practices.
2

The Founder
Institute

Islamabad,
Karachi

Founder Institute offers a four-month part-time

program for new and early-stage entrepreneurs
that helps them develop their business ideas
and form a company. Among the key
requirements for graduation is the creation of a
fully operational company by the end of the
four-month program.

Telenor
Velocity

Islamabad,
Punjab

Velocity is Telenor Pakistan's initiative. The

digital incubator selects startups from their
network partners, who are usually other
incubators, and help the selected startups get
access to market, distribution, payment
gateways etc.

Revolt

Peshawar,
Khyber
Pakhtunkhw
a

Revolt is an intensive 3-months training

program with a curriculum specially designed
for up and coming startup founders to help
them take their ideas to the next level.
Peshawar2.0.org is the parent organization of
this startup training program.

Plan9

Lahore,
Punjab

Plan9 is a government-backed incubator that

was started by the Punjab Information
Technology Board. It is Pakistan's largest tech

NO INCUBATOR
.

CITY

DESCRIPTION

incubator.
6

The Nest I/O

Karachi,
Sindh

Represented by P@SHA and supported by

Google For Entrepreneurs and Samsung, The
Nest I/O is a technology incubator with a direct
incubation process of 4 months, after which
incubatees remain a part of NEST I/O as
"External Incubatees" for up to 12 months.

Invest2Innovat
e

Lahore,
Islamabad
and Karachi

An accelerator with an annual program, a

strong community of angel investors and a
team of 35+ local mentors ready to provide
consultancy, training and executive leadership
development.

LUMS Center
for
Entrepreneursh
ip

Lahore,
Punjab

Describing itself as "the nations most

comprehensive
experiential
development
platform for entrepreneurs", LCE is an equitybased incubator offering a co-working space at
LUMS, utilities, monthly stipend and access to
investors.

PlanX

Lahore,
Punjab

After the success of Plan9, the PITB began

Pakistan's largest technology accelerator. It is
responsible for advancing mid-stage startups.

10

Serendipity

Islamabad,
Punjab

Serendipity is an accelerator offering funding

support, networking and consultancy services
in Islamabad.

11

The Incubator

Topi,
Khyber

Ghulam Ishaq Khan Institute's "The Incubator"

focuses on providing office space, internet and

NO INCUBATOR
.

CITY

DESCRIPTION

Pakhtunkhw
a

computer facilities along with technical

assistance and mentoring for final year students
and fresh graduates.

12

Technology
Incubation
Center, NUST

Islamabad,
Punjab

An initiative of the National University of

Sciences and Technology, the TIC became the
first technology incubator of Pakistan in 2005.
It aims to provide entrepreneurs and teams the
required office facilities for maximizing their
abilities and sustainability.

13

Arpatech
Hatchery

Lahore
Karachi

Arpatech is one of the leading technology

services companies in Pakistan and The
Hatchery is their internal incubator. Startups
benefit heavily from the Arpatech Technology
Venture group and the strong associations the
company has with venture and private equity
groups in the US and Europe.

14

CED IBA

Karachi,
Sindh

The AMAN Center for Entrepreneurial

Development (AMAN-CED) at IBA aims to
support in the creation of new business, small
and medium. They provide education, on-thejob training, advisory services and seed money
to entrepreneurs.

15

Peracha
Organization

Karachi,
Sindh

Peracha Organization provides a three-month

program to enable startups to explore
fundraising, learn from mentors, and network
with and present their ideas to angel investors.

16

SMEDA

Lahore,
Punjab

The Small and

Medium Enterprises
Development Authority is an institution of the

&

NO INCUBATOR
.

CITY

DESCRIPTION

Government of Pakistan that provides technical

services, financial services and training services
to facilitate the development of small and
medium businesses in over 10 cities.
17

SEED
Incubation
Center

Karachi,
Sindh

Social,
Entrepreneurship
and
Equity
Development (SEED) is an enterprise
development organization and the SEED
Incubation Centre facilitates innovative
individuals with reasonably priced office space,
mentoring, training, start-up capital and also
introduces them to potential investors.

18

BIC
COMSATS

Islamabad,
Punjab

A project of COMSATS Institute of

Information
Technology,
the
Business
Incubation Centre was established to provide
help with legal, marketing and financial issues,
along with incubation facilities, logistics,
meeting rooms, office space, internet
connectivity and consultancy.

19

NSPIRE

Lahore,
Punjab

A fairly new incubator started by one of

Pakistan's leading technology companies
NetSol Technologies, NSPIRE has a 5-month
incubation period. Incubatees gain access to
NetSol's latest IT facilities, legal advice,
mentorship from highly credible mentors and
dedicated working space of maximum 4
persons (per team).

You can visit their website for detailed information and their requirements. I strongly
recommend you to get in contact with them and get benefit of the great opportunity.

5. Venture Capitalists
There are billions of dollars in venture capital available to a wide range of
businesses at most stages of development. Venture capitalists are mostly interested
in companies that have a solid track record and are expected to grow by at least
20% a year. They also want to buy into the company, not just make a loan. In
addition to firm ownership, venture capitalists will also want management input in
the form of board seats or executive positions.
In general, the following characteristics are what venture firms are looking for:

Extraordinary growth potential

Management talent and experience
Proprietary products or services

Venture capital is out there. But, you must be able to show you've got a real winner.
You must do it without fluff or a "come on, dream with me" embellishment.
Therefore, you need a business plan. A good one that shows you've done your
homework and know the "lay of the land.
Angels
Angels are people with money who are looking for an investment that will give
them a better return than traditional investments. They provide sums of money in
the under-$200,000 range and tend to invest in their home country or region. There
are also funds who invest out of country. This person could be your next door
neighbor, your dentist, or a local business owner. Angels contribute capital to your
business in return for partial ownership or debt repayment. As such, the degree of
control and terms under which you receive seed money for your business will
depend on the arrangement made between you and your angel.
The key to finding an angel in your area is networking. While you may not have an
angel in your personal pool of contacts, by networking with others you can create a
word of mouth campaign that reaches the ears of private investors. Seek advice
from a financial analyst or other financial professional when considering this type
of financing assistance.
Grants
Grants are available most frequently to non-profit companies, although some grants
exist for "for-profit" companies. What is almost impossible to come by is a grant

for a business start-up. Most grants are made available for the development of a
product or service that will benefit the public or will generate a product or service
the government needs.
Some state and local governments have grant money, or act as clearing houses for
federal funds. Contact your state or local office of economic development to find
out about these possibilities. There are many international donor agencies, which
give grants for development related startups of social nature. Some of them are Aus
aid, US aid, DFID and other national and international donor agencies.

Business Exit
Entrepreneurs live for the struggle of launching their businesses. But one thing they often
forget is that decisions made on day one can have huge implications down the road. You
see, it's not enough to build a business worth a fortune; you have to make sure you have
an exit strategy, a way to get the money back out.
For those of you who like to plan ahead--and for those of you who don't but should--here
are the five primary exit strategies available to most entrepreneurs:
The Modified Nike Maneuver: Just Take It. One favorite exit strategy of some
forward-thinking business owners is simply to bleed the company dry on a daily basis. I
don't mean run it in the red--I mean pay yourself a huge salary, reward yourself with a
gigantic bonus regardless of actual company performance, and issue a special class of
shares that only you own that gives you ten times the dividends the other shareholders
receive. Although we frown upon these practices in public companies, in private
companies, this actually isn't such a bad idea. It's called a "lifestyle company."
Rather than reinvesting money in growing your business, in lifestyle companies, you
keep things small, take out a comfortable chunk, and simply live on the income.
Remember, money in the wallet is no longer money in the business. If you're in a
business that must invest to grow, taking out too much money can hurt you down the
road. Also, if you have other investors, taking too much can upset them. Imagine their
surprise when investors in a small business I once worked for received the company's
internal loan repayment spreadsheet, showing that the business owner was pulling out
bucks by paying his family exorbitant interest on loans while investor loans were repaid
at rock-bottom rates over as long a time period as possible.
If you think you're in business for the lifestyle, minimize your dependence on other
investors and structure the business to allow you to draw out cash as needed.
Pros

Who doesn't like seven figures of take-home pay?

Private jets are fun.

There's no need to think hard about getting out: Just pull out the money when you
need it.

Cons

The way you pull the money out may have negative tax implications. For
example, a high salary is taxed as ordinary income, while an acquisition could bring
money in the form of capital gains.

Without careful long-term planning, you may end up pulling out money now
you'll need later.

The Liquidation. Even lifestyle entrepreneurs can decide that enough is enough. One
often-overlooked exit strategy is simply to call it quits, close the business doors, and call
it a day. I don't know anyone who's founded a business planning to liquidate it someday,
but it happens all the time. If you liquidate, however, any proceeds from the assets must
be used to repay creditors. The remainder gets divided among the shareholders--if there
are other shareholders, you want to make sure they get their due.
Pros

It's easy and it's natural. Everything comes to an end.

There are no negotiations involved.

There's no worrying about transfer of control.

Cons

Get real; it's a waste! At most, you get the market value of your company's assets.

Things like client lists, your reputation, and your business relationships may be
very valuable, and liquidation just destroys them without an opportunity to recover
their value.

Other shareholders may be less than thrilled at how much you're leaving on the
table.

Mr. Cod simply vanished one day when the owner decided he was tired of it.
Selling to a Friendly Buyer. If Mr. Cod owner had asked, we might have wanted to buy
the business ourselves. You see, if you've become emotionally attached to what you've
built, even easier than liquidating your business is the option of passing ownership to
another true believer who will preserve your legacy. Interested parties might include
customers, employees, children or other family members.
The buyer needn't come from outside. You can also sell your business to current
employees or managers. Often in this kind of sale, the seller finances the sale and lets the
buyer pay it off over time. A hair stylist I knew learned a local salon owner was shutting
his doors and decided to propose a low-money-down deal to acquire the salon. The owner

still makes more this way than he would by closing, and the stylist gets to earn his way
into owning a business. It's a win-win for everyone involved.
The purest friendly buyout occurs when the business is passed down to the family. But
remember, the key to "family business" is the word "family." Is yours functional? No
sooner than you leave the family business to the kids, it's likely they'll end up fighting
over who got the larger share, who does or doesn't deserve the ownership they got, and
who gets the final word. They'll finger-point for a decade while the business slowly
declines into ruin, then blame you for not leaving clearer instructions. If you decide to go
this route, you've got a lot of planning to do before getting out.
Pros

You know them. They know you. There's less due diligence required.

Your buyer will most likely preserve what's important to you about the business.

If management buys the business, they have a commitment to making it work.

Selling to family makes good on that regrettable offhand promise made 30 years
ago, "Someday, son/daughter, all this will be yours."

Cons

You can get so attached to being bought by someone nice that you leave too much
money on the table.

If you sell to a friend, they'll be peeved when they discover they just bought the
liability for that decade's worth of taxes you forgot to pay.

Selling to family can tear the company apart with jealousies and promotions that
put emotion way ahead of business needs.

The Acquisition. The acquisition was invented so you can sell your business and leave
the kids money, still spoiling them rotten, but at least sparing the business from secondgeneration ruin. Acquisition is one of the most common exit strategies: You find another
business that wants to buy yours and sell, sell, sell.
In an acquisition, you negotiate price. This is good. Public markets value you relative to
your industry. Who wants that? In an acquisition, the sky's the limit on your perceived
value. You see, the person making the acquisition decision is rarely the owner of the
acquiring company, so they don't feel the pain of acquisition cost. Convince them you're
worth a billion dollars, and they'll gladly break out their employer's checkbook.

If you choose the right acquirer, your value can far exceed what would be reasonable
based on your income. How do you select the right company? Look for strategic fit:
Which acquirer can buy you to expand into a new market, or offer a new product to their
existing customers? I recently read that a company that was acquired during the Internet
boom for $500 million when it was just 18 months old. He commanded a huge price
because his acquirer thought the acquisition gave them critical capabilities faster than
they could develop those capabilities on their own.
But acquisition has its dark side. If there's a bad fit between the acquirer and acquiree, the
combined companies can self-destruct. The acquired management team can end up
locked into working for the combined company, and if things head south, they get to
watch their baby implode from within.
If you're thinking of acquisition as your exit strategy, make yourself attractive to
acquisition candidates, but don't go so far as to you cut off your other options. One
software company knew exactly whom they wanted to sell to, so they developed their
product in a way that meshed perfectly with the prospective suitor's products. Too bad the
suitor had no interest in the acquisition. The software company was left with a product so
specialized that no one else wanted to buy them either.
Pros

If you have strategic value to an acquirer, they may pay far more than you're
worth to anyone else.

If you get multiple acquirers involved in a bidding war, you can ratchet your price
to the stratosphere.

Cons

If you organize your company around a specific be-acquired target, that may
prevent you from becoming attractive to other acquirers.

Acquisitions are messy and often difficult when cultures and systems clash in the
merged company.

Acquisitions can come with noncompete agreements and other strings that can
make you rich, but make your life unpleasant for a time.

The IPO. I've saved IPOs for last, because they're interesting, they're flashy, and they get
all the press. Too bad they make the lottery look good by comparison. There are millions
of companies in the world, and only few of those are public. And many public companies
weren't even founded by entrepreneurs but rather were spun out from existing companies.

If you're funded by professional investors with a track record of taking companies public,
you might be able to do it. Of course, the professional investors will also have diluted you
down to the point where you only own a tiny fraction of your company anyway. The
investors will make out great. And maybe, if you're the principle entrepreneur and have
done a great job protecting your equity, you'll make some money, too.
But if you're a bootstrapper, believing in a fair IPO is a touchingly naive act of faith.
Besides, do you have any idea what's actually involved in an IPO?
You start by spending millions just preparing for the road show, where you grovel to
convince investors your stock should be worth as much as possible. (You even do a
"reverse split," if necessary, to drive up the share price.) Unlike an acquisition, where you
craft a good fit with a single suitor, here you romancing hundreds of Wall Street analysts.
If the romance fails, you've blown millions. And if you succeed, you end up married to
analysts. You call that a life?
Once public, you bow and scrape to the analysts. These earnest 28-year-olds will study
your every move, soberly declaring your utter incompetence at running the business
you've built over decades. It's one thing to receive this treatment from your loving
spouse. It's quite another to receive it from Smith Barney.
In short, IPOs are not only rare, they're a pain in the backside. They make the headlines in
the very, very rare cases that they produce 20-year-old billionaires. But when you're
founding your company, consider them just one of many exit strategies. Realize that there
are a lot of ways to skin a cat, and just as many ways to get value out of your company.
Think ahead, surely, but do it with sanity and gravitas. And if you find yourself tempted
to start looking for more office space in preparation for your IPO in 18 months, call me
first. I'll talk you down until the paramedics arrive.
Pros
You'll be on the cover of Newsweek.

Your stock will be worth in the tens--or maybe even hundreds--of millions of
dollars.

Your VCs will finally stop bugging you as they frantically try to insure their
shares will retain value even when the lockout period expires (Warning: they won't
necessarily be looking out for your shares, too.)

Cons

Only a very few number of small businesses actually have this option available to
them since there are very few IPOs completed annually in the United States.

You need financial and accounting rigor from day one far above what many
entrepreneurs generally put in place.

Some forms of corporation--S-corps, for example--will require a reorganization

before they can be taken public.

You'll spend your time selling the company, not running it.

Investment bankers take 6 percent off the top, and the transaction costs on an IPO
can run in the millions.

When your lockout restrictions expire, your stock will be worth as much as a third
world hovel.

Trend of corporate mergers, acquisitions

PUBLISHED DEC 10, 2003 12:00AM Dawn News
During the last decade mergers and acquisitions (M&A) have acquired popularity and
mostly big corporations are merging. The trend is not restricted to a particular industry
and form 1994 to 1999 the value of total deal in the USA had progressed form $227
billion to $1.426 trillion in the year 2000 and to nearly $1.800 trillion after the year 2000.
There are pre-and post-sanction aspects of corporate mergers and acquisitions. In the presanction stage all the procedures and formalities for obtaining the sanction from
government are observed and followed. The post-sanction aspects of mergers starts with
the fulfilment of legal obligations, re-grouping of different departments for establishing
better operational control, re-organisation of financial structure, toning up production and
marketing departments, rationalising financial resources, installation of top management,
consolidation of operations, fulfilment of legal obligation etc.
Definition: M&As are separate terms although used collectively. It is a form of corporate
re-structuring. Merger is a union of two or more firms where one or both may lose their
original identity. It is an all-inclusive concept referring to business combination to form a
single new entity.
Merger is basically of two types: horizontal and vertical. Horizontal merger
involves union of two firms in the identical type of business (merger of two spinning
mills, mergers of two pharmaceutical firms making two identical products etc). Vertical
merger involves union of two firms engaged in different stage of production process
(merger of textile spinning company with a textile weaving unit or merger of an oil
refining company with an oil marketing company).
Merger is a combination of two or more companies into single entity whereby: the
survivor retains the identity and legal status (if any); survivor acquires the assets and
liabilities of the other identity; and the other entity lose their corporate and legal entity (if
any).

An acquisition (absorption and take-over) involves the purchase of an entity by

another. No new entity is formed and the entity continues to operate under the direction
and control of the acquirer. Acquisition may be affected by: an agreement with the
shareholders holding majority interest in the acquire companys management; purchase of
shares form open market; make/take-over offer to the general body of shareholders of the
company going to be acquired; purchase of new shares through private treaty; and by
acquisition of share capital of one company by issue of shares in cash, issue of loan
capital etc.
MBO: Management buyout (MBO) is a form of corporate disinvestment which is very
popular in UK, the USA and the European countries. Shareholders offer their equity to
the senior management executive or employees management group to pass on the
management to the company employees.
Senior management executives or employees finance the share purchase from their
provident fund or other benefits or pay in cash or a combination of benefit(s) and cash.
Such type of taker over are generally called employees stock ownership plan (ESOP)
which provide opportunity to employees to acquire ownership of a company. Employees
can also arrange funds from the market.
The example of ESOP in Pakistan is the Allied Bank LTD, the Millat Tractor LTD; the
Exxon Chemical etc.
Downside: A recent survey has concluded that only 45 percent of the merged companies
have over taken other companies in the relevant industry which reflects the dark side of
merger. It further means that 55 per cent of the merged companies did not perform well.
The latest survey of the KPMG discloses that two third of M&As had failed to achieve
their stated goals.
M7As are mostly done for the monopolistic power and the cost-saving mostly results in
the employees lay-off. Recent newspaper reports suggests that thousands of employees
lost their jobs due to M&As in Europe, Japan and the USA.
The concept of the M&A has become more pronounced recently and mostly
multinational corporations are merging but it is not confined to these corporations
alone. At international level it is not restricted to a particular industry e.g. (a) merger of
Dailmer/Chrysler; (b) service providers Price water house with Cooper & lybrand
(Chartered Accountants firms), (c) computer manufacturers: Texas instruments with Burr
Browns (d) Internet companies: America online/ nestcape/ net2phone. In April 2002
Hewlett Packard (HP) announced planned merger with Compaq.

On the average, seven to ten mergers were announced every day in the year 1999. During
1994 to 1999 the value of total M&A deal has progress&.from $227 billion to $ 1.426
trillion and in the year 2000 it has touched nearly $1.800 trillion, up to May :2000 M&A
was more pronounced in the area of (a) computer software supplies & services (1,511
deals), (b) communication (222 deals), (c) brokerage, investment and management
consultancy (210 deals), (d) electrical equipment (13 deals) etc.
In Europe, M&A is more pronounced in banking and financial sector which is true in the
case of Japan also due to large infected bank portfolio.
Pakistani scenario: In Pakistan mostly, there is merger in the same industry (horizontal
merger) and is confined mostly to multinational firms. There are instances of financial
sector merger as well. Instances of financial sector merger especially in leasing and
modaraba sector (In July 2002, Security Leasing Corporation LTD announced proposed
merger with Lease Pak LTD). Regulatory authorities especially the SBP may pursue
banks (especially smaller ones) to merge with bigger banks. If these institutions do not
merge the SBP and the SECP may force them to do so.
With the increased paid-up capital requirements of banks and leasing companies to
Rs1.00 billion and 0.3 billion respectively mergers and amalgamation in these two sectors
is imminent and already these are reports of merger of leasing companies with other
leasing companies and or banks. Insurance sector also may follow suit in order to meet
minimum capital adequacy requirement. Textile sector which almost handles 60 per cent
of Pakistans export merger is long over due. Recently the National Development Leasing
Corporation (NDLC) LTD announced merger with IFIC Bank (a Bangladeshi bank).
It is estimated that more than Rs200 billion is sunk in sick units which is a big problem
for Pakistan, these can be merged with good productive units where feasible. Corporate
Industrial Restructuring corporation (CIRC) can be of great help in this area. A
substantial tax advantage can be availed which allows accumulated loss of a sick
industrial unit to be set-off against acquirers income in the year of acquisition and two
following years.
Recently there-has been proliferation of merger and acquisition activities in
pharmaceutical industry owned by multinational companies. Boots (a UK company)
merged with the BASF (a German company), Well come pharmaceuticals (a UK-based
company), merged with Glaxo Pharmaceuticals, -SK&F with Beecham, knoll
Pharmaceuticals LTD, announced amalgamation with Abbott Laboratories (Pakistan)
LTD.

Pangs: Mostly merger(s) and acquisition(s) result into employees sacking. According to
the ILO, nearly 300,000 Jobs in Banking & Financial sector .of Europe vanished in the
year 2002 due to M&A. High paid jobs are being replaced by low paid/skilled jobs. Very
little attention is paid to humanitarian aspect - the effect of firing and job reduction which is one of the greatest social issue.
Why merger and acquisition mostly result in job reduction and widespread redundancies
has to be answered and solved by all the stakeholders (Regulatory agencies, business
community, trade unions, acquirer and acquiree and all the companies involved in merger
etc). In Asia merger(s) and acquisitions) is mainly driven by tough economic conditions.
Developing countries like Pakistan where already employment rate is around 7 per cent
should address redundancies issues more seriously as compared to developed countries
(Europe, Japan, U.S.A. etc). This may bring social as well as economic disaster if not
properly attended to.
Conclusion: M&As should be properly planned. The scheme should be properly
followed. They should be closely monitored by regulatory authorities (SECP, SBP in
Pakistan). Efforts should be made for avoiding formation of monopolies & cartels.
Human miseries (especially in developing countries) in the shape of unemployment
should be avoided as for as possible.

Eat Oye Has Been Acquired By German Company Food Panda

German company Food Panda has acquired Eat Oye which happens to be a top online
food delivery and restaurant reservation portal in Pakistan. According to Business
Recorder, the deal was signed on Tuesday, February 3, 2014 under which the ownership
of Eat Oye will shift to Food Panda Hello Food, a company owned by German giant,
Rocket Internet.
Nauman Sikandar (CEO) and Rai Umair (CTO) established a company Food Connection
Pakistan which attracted a good amount of funding and got incubation from Arpatech
even before starting as EatOye in early 2014. Nauman was a restaurant owner before Eat
Oye, a computer science and MBA degree holder while Rai Umair had 14 years of
experience in working for a tech industry. They were a perfect duo with the right
experience to start an online food platform.
Food Panda is expected to communicate the details of the agreement through an official
press release before the end of the week. It is expected that founding members will
continue to work with Food Panda under unified management. It is no doubt that Eat-Oye
will bring a substantial boost to the German company with its diverse mix of over 1,000
restaurant listings.
Stay tune with TechJuice for more information on the acquisition.