Know More About Merger & Acquisition.
The term “merger” literally means merging of two organizations into one; term “acquisition” means to takeover or something acquiring. However, despite the difference of the two terms, the two terms are sometimes combined and referred to as M&A. The concept behind this combining is a fact that the value of shareholder is above than that of the sum of two companies alone. Even if for a fact that the terms merger and acquisition are used alternatively, the two terms are still different from each other in terms of their meaning.
An acquisition means that, it is buying one organization by another. There are only two approaches in an acquisition, it can only be either a friendly approach or a harsh one. There are also times in a friendly acquisition where the executives of a company would just prefer to negotiate, however, if they are in a hostile approach, the bidder will still insist to seek it even if the company is already willing to disagree. Due to the size of companies, it has been known that the larger companies take over those smaller companies. However in some situations a smaller company might overtake the larger one and only keeping its name for the new firm which is the result of acquisition. You can call an acquisition as a reverse merger if the smaller companies overtake those bigger ones.
Mutual decision can also happen between two organizations and it is also referred as a merger since the two organizations agreed on a decision of being one. In a merger, organizations agree to be as one organization and continue as one rather than as two separate organizations. As a result the newly merged firm’s stocks are issued and stocks of old companies (the stocks of two companies before merging) are surrendered. There are different types of merger that can be a result, it actually depends on the nature of the company, the type of merger includes horizontal merger, conglomerate merger and the vertical merger. A horizontal merger means that the two companies have a competition in the same product line. If two companies of different product line agreed on a merger such that there products together enhances the company’s value is said to be vertical merger. Finally, you can call a merger as a conglomerate merger if the two companies have different product lines but still decides to merge with each other. It can also be called as a consolidation or a purchase merger.