Business Combinations

Question 1

What is a business combination?

Answer 1

Transaction or event where the entity obtains control of a business.

Transaction: Consideration was transferred
Event: Lapse in contract terms
Control: More than 50% ownership

Question 2

What are the legal form of a business combination?

Answer 2

Merger or consolidation: Reported as a single entity (both entities are brought together)

Acquisition: Consolidated statements (both entities survive)

Question 3

What is the difference between a legal consolidation and a legal merger?

Answer 3

Merger- Company A and Company B merge. End result Company A is the survivor.

Consolidation: Company A and Company B combine to form Company C.

Question 4

How do you obtain control of a business?

Answer 4

Buy it with contribution (money)
Lapse of an event (or contract)
Company requires a lot of stock and you get control