The Beginners Guide To Finances (Chapter 1)

Merger VS Acquisition.

The term merger and acquisition has been rampant lately, however, little did people know about their differences, for instance, the term merger means that, it is merging two organizations into one, while the term acquisition means acquiring which is to takeover something. Merger and acquisition is also 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.

The meaning of the terms acquisition is that, having the chance to buy one organization using the other. There are only two approaches in an acquisition, it can only be either a friendly approach or a harsh one. It is very important for you to know that in a hostile approach, the bidder will still continue to seek it even if the company or the target has already disagreed, while in a friendly approach of acquisition, then the executives of a company would prefer to continue the negotiation. Usually larger company takes over the smaller company. It has been known that the larger companies overtake the smaller ones, however, it is not the process all the time since there are times where the smaller ones are overtake those big companies. The acquisition where the smaller companies overtake the bigger ones are called as the reverse merger.

A merger is said to be when two organizations agree on the decision of being one; it’s the mutual decision. In a merger, organizations agree to be as one organization and continue as one rather than as two separate organizations. It has also been known that the stocks of the newly merged organizations due to merger, are being issued, however, their stocks before they were even merged with each other are being 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. However, the vertical merger means that the two companies of different product line have already dealt with each other that their products could enhance the value of a company, thus, resulting to a 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. Nevertheless, it can also be referred to as purchase mergers depending on how the merger has been financed.

Smart Ideas: Tips Revisited

Why No One Talks About Finances Anymore