Busfin 1 Flashcards
occurs when a buyer acquires all or part of assets or business of a selling entity, and where both parties are actively assisting in the purchase transaction.
Acquisition
occurs when two companies combine into one entity
Merger
is the joining together of two
corporations in which one corporation transfer
all its assets to the other, which continues to
exist. In effect, one corporations “swallows”
the other, but the shareholders of the
swallowed company receive shares of the
surviving corporation.
Merger = in corporate law
is a transaction that result in
the transfer of ownership and control of a
corporation.
When one company purchases another
company of an approximately similar
size. The two companies come together to
become one.
Two companies usually agree to merge
when they feel that they can do something
together that they can not do one their
own.
Merger
TYPES OF MERGER
Horizontal Merger
Vertical Merger
Conglomerate Merger
Concentric Merger
Statutory
Subsidiary
Consolidation
A merger that happens between
companies belonging to the same
industry. The companies have businesses
in the same space and are generally
competitors to each other.
- is a feature of an
industry which consist of a large number of
small firms or fragmented industry.
Examples: Boeing-McDonnell
Douglas.
Lipton India and Brooke Bond.
Bank of Mathura with ICICI Bank.
BSES Ltd with Orissa Power Supply Company.
Associated Cement Companies Ltd Damodar Cement.
Horizontal Merger
is a merger between
companies that produce different goods or
offer different services for one common
finished product.
The companies operate at different levels
in the supply chain of the same industry.
The motivation behind such mergers is
cost efficiency, operational efficiency,
increased margins and more control over
the production or the distribution process.
Vertical Merger
A merger between two companies
producing different goods and
services for one specific finished
products.
The merger of the firm that have
actual or potential buyer-seller
relationship.
Example- Car manufacturer
purchasing a tire company.
Vertical Merger
A merger between companies that operate in
completely different and unrelated industries.
A pure _______ merger is between companies with totally nothing in common.
A mixed __________ merger is between companies looking for market or product
extensions.
Conglomerate Merger
is between companies with totally nothing in common.
It involve firms with nothing common.
Pure conglomerate merger
is betweencompanies looking for market or product
extensions.
It involves firms that are looking for product extensions or market extensions.
Mixed conglomerate merger
A merger of firms which are into similar type
of business.
often called a congeneric merger, is the merging of firms that operate in the same industry but do not
have a mutual relationship (such as a buyer-seller relationship).
An example of a congeneric merger is Citigroup’s acquisition of Travelers
Insurance. While both were in the financial
services industry, they had different product
lines.
Another example is when an airline acquires a
tourism industry-related business or if a
newspaper merges with a TV channel.
A concentric merger
is one in which all the
assets and liabilities of the smaller company is
acquired by the bigger (acquiring) company.
As a result, the smaller target company loses
its existence as a separate entity.
Statutory Merger
is one in which the target
company becomes a subsidiary of the bigger
acquiring company. This happens because the
target company may have a known brand or a strong image which would make sense for the acquiring company to retain.
Company A + Company B = (Company A + Company B)
Subsidiary Merger
is one in which both
the companies lose their identity as separate entities and become a part of a bigger new company. This is generally the case with both
the companies being of the same size.
Consolidation Merger
