Mergers and Acquisition

  • A merger can be defined as the combination of two companies of roughly equal size, pooling their resources together into a single business.
  • The shareholders/owners of both premerger companies have a share in the ownership of the merged business and the top management positions after the merger.
  • In contrast, an acquisition, or take-over, occurs when one company acquires from another company either a controlling interest in the company‚Äôs shares or a business operation and its assets. The management control of the company, or business, will also be taken over.
  • The distinction between mergers and take-over is not always clear.
  • The techniques used for mergers are often the same as those used in take-over. As the term M&A is used quite loosely, it is often not differentiated.
    The differences between the two relate mainly to:
    (i) The relative size of the individual companies;
    (ii) Management control of the combined business; and
    (iii) Ownership of the combined business.

 

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