Mergers & Acquisitions - what is the difference?
Mergers & Acquisitions - what is the difference?
Mergers and Acquisitions (M&A) is the area of corporate
financing, management and strategy dealing with purchasing and or joining with
other companies. It is an umbrella term for various transactions such as
mergers, acquisitions, consolidations, tender offers, purchase of offers and
management acquisitions. In mergers and acquisition two companies are involved
but in merger two companies are combined in one and in acquisition one usually
larger company buys another smaller company.
From a legal point of view, a merger is a legal consolidation of
two entities into one entity, whereas acquisition occurs when one entity
takes ownership of another entity's stock, equity interests or assets. From a
commercial and economic point of view, both types of transactions generally
results in the consolidation of assets and liabilities and liabilities into one
entity and the distinction between a merger and an acquisition is less clear.
Even though they are used as synonyms they are not the same thing. In a merger
new company is created were both companies are theoretically equal
so sometimes it is called 'merger of equals'.
Merger also means new ownership and management and the new stock
is issued. With acquisition new company doesn't emerge but target
company becomes a part of acquiring company. Acquisitions are sometimes
known as hostile takeovers and they carry negative connotation so
sometimes acquisition may be called a merger even if it technically
isn't. Real difference is in how the acquisition communicated and perceived by
the target company, it's board of directors, managements and employees.
The acquiring company can buy target company with cash, stocks
or both combined. The special type of acquisition is reverse merger. It is a
deal that enables a private company to become publicly traded in short
amount of time. Private company acquires a public shell with little assets and
no operation and in that way reverse merges into a public company.
Mina Mar Group provides comprehensive consulting services in the
merger and acquisition sector. We specialize in reverse mergers, matching
emerging growth companies that are looking to become publicly traded with
appropriate shell companies. We provide guidance on all the aspects of reverse
merger process, from initial introductions through the actual closing of the
deal.
MinaMarGroup.com
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