Merge & Acquisition
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What is Mergers and Acquisitions?
What is Merges and Acquisitions?
The term mergers and acquisitions refers to financial transactions between companies or mergers of companies with substantial working capital of the companies. A company may acquire and take over outright another company, merge into a new company, acquire some or all of its substantial assets, sell its shares, or make a hostile takeover bid.Type of M & A
Merger
In a merger, the boards of directors of the two companies approve the merger and obtain the approval of the shareholders
Acquisition
In a simple acquisition, the acquiring company obtains control of the acquired company. This does not change its name or organizational structure. An example of this type of transaction is his 2004 acquisition of John Hancock Financial Services by Manulife Financial Corporation, with both companies retaining their names and organizational structures.
Takeover Offers
Takeover Offers are when a company offers to purchase the outstanding shares of another company at a price other than the market price. The acquiring company bypasses the management supervisory board and communicates the offer directly to the shareholders of the other company.
Acquisition of Assets
In an acquisition of assets, one company directly acquires the assets of another company. The company whose assets are being acquired must obtain approval from its shareholders. The purchase of assets is typical during bankruptcy proceedings, wherein other companies bid for various assets of the bankrupt company, which is liquidated upon the final transfer of assets to the acquiring firms.
Management Acquisitions
In a management acquisition, also known as a management-led buyout (MBO), a company’s executives purchase a controlling stake in another company, taking it private. These former executives often partner with a financier or former corporate officers in an effort to help fund a transaction. Such M&A deals are typically disproportionately financed using leverage and require approval by a majority of shareholders.