What is Mergers and Acquisitions

Used interchangeably. Specifically, mergers point to a combination of two firms, often comparable in size and strength, in which one ceases to exist legally or both are dissolved with the establishment of a new, combined organization. Acquisitions include the purchase of another firm’s assets or stock, in which the acquired firm becomes the part of the other firm and either loses its legal status or continues to exist as a legally owned subsidiary.

The buying, selling and combining of different companies, often companies that produce similar or competing products or services. This is a tool used to enable a company to grow rapidly without having to construct an expanded business entity. Mergers and acquisitions typically reduce the amount of competition in an industry. The difference between a merger and an acquisition is that a merger is often undertaken consensually, while an acquisition may be the result of a takeover of one company by another.

Strategic decisions of business combinations which determine aggregations of distinct business entities into a single entity. Mergers and acquisitions affect not only capital structure and governance characteristics but also the composition and value of patrimonial assets of entities involved.

types of corporate reorganization in which two or more entities merge to form one entity. Mergers occur when two or more entities agree to combine their assets and liabilities in order to form a new entity. Acquisitions, on the other hand, entail one entity acquiring the assets and liabilities of another.

Are consolidations of firms or assets through various types of financial transactions ( Hayes, 2005 ). In acquisition one company purchase the majority of the share capital (>50%) or a whole legally independent organization, so that the economic independence of the acquired company is lost. In merger two or more legally independent companies combine to one, so that a new legal entity is formed and joint action is achieved ( Malik et al., 2014 ).