Mergers and Acquisitions (M & A) Mergers and acquisitions (M&A) is an important area of corporate

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Mergers and Acquisitions (M & A) Mergers and acquisitions (M&A) is an important area of corporate finances, management and strategy dealing with purchasing the other company or joining the other company. Merger: Merger is a combination/consolidation of two companies to form a new company or entity. In a merger, two organizations come together to become a new business, usually with a new name. Because the companies involved are typically of similar size and stature, the term "merger of equals" is sometimes used. Acquisition: Acquisition is the purchase/ takeover of one company by another and establishes itself as the new owner in which no new company is formed. In an acquisition, on the other hand, one business buys a second and…show more content…
Types of mergers: 1) Conglomerate: A merger between firms that are involved in totally unrelated business activities. 2) Horizontal Merger: A merger occurring between companies in the same industry. 3) Market Extension Mergers: A merger takes place between two companies that deal in the same products but in separate markets. 4) Product Extension Mergers: A merger takes place between two business organizations that deal in products that are related to each other and operate in the same market. 5) Vertical Merger: A merger that joins two companies that may not compete with each other, but exist in the same supply chain. Types of acquisitions: 1) Asset Acquisitions: In an asset sale, individually identified assets and liabilities of the seller are sold to the acquirer. The acquirer can choose ("cherry pick") which specific assets and liabilities it wants to purchase, avoiding unwanted assets and liabilities for which it does not want to assume responsibility. 2) Stock Acquisitions: In a stock purchase, all of the assets and liabilities of the seller are sold upon transfer of the seller's stock to the acquirer. As such, no tedious valuation of the seller's individual assets and liabilities is required and the transaction is mechanically simple. Reasons for mergers and acquisitions: 1. to diversify or expand markets; 2. to acquire particular production technologies; 3. to take advantage of work forces with particular skills; or

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