Merger Is The Combination Of Two Companies

997 WordsAug 15, 20144 Pages
A merger or acquisition is the combination of two companies. In a merger, one of the companies loses its identity completely and is absorbed by the surviving corporation. An acquisition occurs when one corporation acquires all the shares of another. Both corporations may continue to operate individually or may operate as a combination of both. What are the benefits of these transactions? Why would a company choose to merge with or acquire another company? Mergers and acquisitions, better known as M&A, is a “…term used to refer to the consolidation of companies” (Investopedia, 2014). “Mergers can allow companies to combine forces and stake out a greater portion of market share” (Alli, 2010). A company may choose to merge with or acquire another company for a multitude of reasons such as “…maximize[ing] shareholder value. (Ferris & Petitt, 2013)” An acquisition is usually “… part of a company 's growth strategy …” (Investopedia, 2014). An acquisition can either be a friendly or a hostile “take over”. In 2010, I was involved in a friendly acquisition of my employer, Isotek Corporation. When my employer was diagnosed with terminal cancer (sole owner/shareholder), he started the process of selling his business to Isabellenhütte. The sale was completed on January 5, 2010. Mergers can be vertical or horizontal. A horizontal merger is between two companies that make similar products and usually in the “same geographic area” (Phelps & Lehman, 2005). A vertical merger
Open Document