The Art of Mastering Finances
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. Moreover, there are some people who would call the two terms as M&A since the two terms are usually combined into one. It has been known that the combination of merger and acquisition or also known as M&A means that the value of shareholder is much greater than the value of the two companies when their sum is combined. Although the two terms are used alternatively, their meaning still have a difference.
An acquisition 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. Usually larger company takes over the smaller company. Nevertheless, this is not applicable at all times since there are times where the smaller companies are the ones who overtake the larger companies and it only keeps its name in order for the formulation of the new firm. The acquisition where the smaller companies overtake the bigger ones are called as the reverse merger.
However, there are also times where the two organizations would agree on a decision of becoming one, and it is called as a mutual decision between the two organizations. In a merger, organizations agree to be as one organization and continue as one rather than as two separate organizations. Due to the result of the merger or the merge between two companies, their stocks before they get the chance to merge with each other are being surrendered and the stocks of the newly merged firm are now being issued. Nevertheless, a merger can either be a conglomerate merger, a horizontal merger or a vertical merger, it only depends on the nature of the company if what type of merger suits it. It can only be referred to as a horizontal merger if the two companies have competed 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. At last, the companies that do not have similar product lines at all decided to merge; this type of merger is called conglomeration merger. It can also be called as a consolidation or a purchase merger.