Mergers and acquisitions (M&A) refer to the strategic business activities where two companies come together through either a merger or an acquisition. We aim at conducting the activities with the goal of achieving specific business objectives, such as expanding market share, entering new markets, gaining access to new technologies, enhancing operational efficiencies, or achieving cost savings.
A merger involves the combination of two or more companies to form a new entity. In a merger, the companies involved typically pool their assets, liabilities, human resources, and operations to create a single, larger entity. Mergers are often classified into different types based on the relationship between the merging companies:
– Horizontal Merger: Two companies operating in the same industry and at the same stage of the production process combine. This is often done to achieve economies of scale, increase market share, or reduce competition.
– Vertical Merger: Two companies operating at different stages of the supply chain, such as a manufacturer merging with a supplier or distributor. Vertical mergers aim to improve coordination and control over the supply chain.
– Conglomerate Merger: Two companies from unrelated industries merge to diversify their operations and reduce risk. This type of merger is often pursued to expand the company’s portfolio.
An acquisition involves one company (the acquiring company or acquirer) purchasing another company (the target company). The target company may become a subsidiary or part of the acquiring company’s operations. Acquisitions can be friendly, where the target company agrees to the acquisition, or hostile, where the acquiring company pursues the acquisition against the wishes of the target company’s management.
– Asset Acquisition: The acquiring company purchases specific assets and liabilities of the target company, rather than acquiring the entire company. This type of acquisition allows the acquiring company to select which assets and liabilities to acquire.
– Stock Acquisition: The acquiring company purchases most shares or ownership stakes of the target company. This type of acquisition provides the acquiring company with control over the target company’s operations.