Mergers & Acquisitions

FORMS OF BUSINESS COMBINATIONS

MERGERS

A merger is a combination of two or more businesses in which only one of the corporations survives. The other corporation ceases to exist and its assets and debt are taken over by the surviving corporation. Thus in a merger of Companies X and Y , company X may continue while Y ceases to exist.

The merger may occur in four ways:

Purchase of assets
Purchase of Common Stock
Exchange of Stock for Assets
Exchange of Stock for Stock

Consolidations

A consolidation is a combination of two or more businesses into a third entirely new corporation. The legal and financial characteristics of a consolidation are basically the same as those for a merger.

KINDS OF MERGERS

Horizontal Merger : This is the joining of two firms in the same areas of business. Examples would be the combining of two book publishers or two manufacturers of toys.

Vertical Merger : This is the joining of two firms involved in different stages of the production or distribution of the same product. Examples would be the combining of a coal company and a railroad that carries the coal or the joining of a typewriter manufacturer and a chain of office supply stores.

Conglomerate Merger : A conglomerate is a firm that has external growth through a number of mergers of companies whose businesses were not related vertically or horizontally. A typical conglomerate may have operating areas in manufacturing ,electronics,insurance and other unrelated businesses.

Acquisitions is the way for External Growth of the firm in which A firm takes over the operation of B firm.
Important terms in Acquisitions are takeover strategies,Pyramid,subsidiaries.

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