FASB ASC 810-10-05

There are certain benefits that derived from the merger, which would also boost the operations and financial performance of the organization.

This paper is about two companies that went through same type of change (merger and acquisition) with different outcomes. Merger is combination of two or more companies in which the assets and liabilities of the selling firms are absorbed by the buying firm. Although the buying firm may be a considerably different organization after the merger, it retains its original identity while Acquisition is the purchase of an asset or an entire company (Sherman, A. J., & Hart, M. A. (2005). Chapter 1: The Basics of Mergers and Acquisitions. In, Mergers & Acquisitions from A to Z. American Management Association International.).

Mergers and acquisitions include obtaining, offering, parcelling, and becoming a member of exceptional associations with tantamount accessories that may intensify their total benefits. The key wish of mergers and acquisitions is to make sure that various associations can improvement inside of their precise venture. They can do that without making an assistant, joint meander, or a baby aspect. A getting is a company motion where an association purchases yet another organization or business factor. It is notably a traditional that the acquirement is the time when a larger firm purchases a smaller organization. The higher organization will constantly obtain the organization strength of the tinier organization and preserve the name of the maintained association.

Merging with another organization has downfalls of destroying wealth from the merger. Considering the buying price is important when merging, spending too much on the merger will impound the value after the merger. Some mergers do not create wealth so capital is lost through the merger. There is no guarantee of financial gain and every formula considered with focus, just as with an acquisition. The final decision dictated by the variables. One company merging with another company takes the debt and losses of those companies in the new formed company.

Major changes have occurred for financial reporting for business combinations beginning in 2009. These changes are documented FASB ASC Topic 805, “Business Combinations” and Topic 810, “Consolidation.” These standards require the acquisition method which emphasizes acquisition-date fair values for recording all combinations.

(a) In a merger agreement, the assets and liabilities of the firm which is being acquired end up being absorbed by the buyers firm. A merger could be the most effective and efficient way to enter a new market without the need of creating

5. Merger/Final Agreement. This Agreement merges all prior agreements and understandings of the parties. This is the final Agreement of the parties and this Agreement contains all of the duties, obligations and rights of the parties. Any term or condition omitted from this Agreement (and which is not part of any schedule), is not intended to be a part of this Agreement. No oral agreements have been made except as set forth

Pikula (1999) observes that in merging two or more entities, the management of the companies must adhere to the Sherman Anti-trust Act which was established in 1890. This act was specifically established to prevent mergers from creating monopolies and cartels with an aim to exploit the consumers through determining prevailing market prices. If the merger results in a monopoly, it won’t be approved by the government. Employee contractual agreements must be considered before, during and after mergers. For the merger to go on seamlessly there should be shareholder approval. Initial approval by shareholders for the companies to consolidate their operations helps prevent conflicts from shareholders after the merger. Lastly, regulatory approval should be considered. The management must register the newly formed company. In addition, managers from the merging parties must consider agreements and contracts that the parties are engaging in as these will be transferred to the new company upon the merger.

A merger is a partial or total combination of two separate business firms and forming of a new one. There are predominantly two kinds of mergers: partial and complete. Partial merger usually involves the combination of joint ventures and inter-corporate stock purchases. Complete mergers are results in blending of identities and the creation of a single succeeding firm. (Hicks, 2012, p 491). Mergers in the healthcare sector, particularly horizontal hospital mergers wherein two or more hospitals merge into a single corporation, are increasing both in frequency and importance. (Gaughan, 2002). This paper is an attempt to study the impact of the merger of two competing healthcare organization and will also attempt to propose appropriate

A strength from performing a merger is the ability to acquire a company’s unused debt. “Some firms simply do not exhaust their debt capacity. If a firm with unused debt capacity is acquired, the new management can then increase debt financing, and reap the tax benefits associated with the increased leverage” (Keown, 2005, pp. 23-4). Another strength is enabling Baderman Island to remove an ineffective management strategy or team. Baderman Island has the option to decide who stays with the merged company, and who is out the door. Often times, a weak management leading team is the problem the organization has not evaluated for its mediocre success. “The merger of two firms can result in an increase in market or monopoly power. Although this can result in increased wealth, it may also be illegal. The Clayton Act, as amended by the Celler-Kefauver Amendment of 1950, makes any merger illegal that results in a monopoly or substantially reduces competition. The Justice Department and the Federal Trade Commission monitor all mergers to ensure that they do not result in a reduction of competition” (Keown, 2005, pp. 23-4).

When companies combine/merge the whole objective is to gain new opportunities, gain market share, grow the business, to become more innovative and to improve product offerings, utilizing/sharing the existing resources and data. From the case

The second type of combination is consolidation which takes place when a new corporation is created to absorb the operations of two or more existing corporations. The shares of the existing companies are retired, and the shares of the newly formed company will be allocated to those shareholders accordingly. Only the new corporation continues to exist as a legal entity.

The merger is a qualifying reorganization. It is a forward triangular merger, §368(a)(2)(D), because the parent (ODI) created a subsidiary (Atlantic) with the contribution of its stock (the ODI Nonvoting Preferred Stock), and then the target (CPI) merges into the subsidiary (Atlantic). CPI’s shareholders will receive the nonvoting preferred stock of ODI, and CPI will disappear. The requirements necessary under §368(a)(2)(D) is that the subsidiary acquires substantially all of the target’s assets, which will be 90% of net and 70% of gross. This does occur because Atlantic acquires all of CPI’s assets and liabilities. Typically, stripping off a target’s assets are prohibited, but in this case the subsidiary is acquiring the cash received from the sale of the tools division. Another requirement is that the target’s shareholders only receive stock of the parent and not the subsidiary, and in this case, the stock transferred to CPI’s shareholders are all ODI’s stock. Another requirement is that the target is merged into the subsidiary, which does occur; CPI merges into Atlantic and Atlantic survives. The final requirements are the judicial authority requirements. There is a continuity of shareholder’s interest test, just like required in a type “A” merger. Even though not all three shareholders of CPI receive shares of ODI, Harry’s and Teresa’s ownership is greater than 50% of CPI. Harry owns 60% (300/500) of CPI and Teresa owns 22% (110/500) of CPI. It also meets the

1. Which of the following situations best describes a business combination to be accounted for as a statutory merger?

B. Consolidation: when one firm controls another (e.g., when a parent has a majority interest in the voting stock of a subsidiary or control through variable interests (FIN 46R), their financial statements are consolidated and reported for the combined entity.