MERGERS AND

ACQUISITIONS
MERGER

A merger is where two or more businesses

join forces to become one organization.
After the merger, each of the businesses and
their shares will no longer exist. Instead a
new legal entity has been formed.
AQUISITION

 An acquisition is the purchase or takeover of

another business, so that the organization
becomes the legal owner and controller of
the business they have acquired. This can be
expensive as the acquiring company will be
paying for the net assets, goodwill and brand
name of the company they are buying.
TYPES OF MERGER AND
AQUISITION
 Horizontal merger
 Vertical merger
 Conglomeration merger
 Forward Merger
 Reverse Merger
HORIZONTAL MERGER

 Thisoccurs when two companies that are in

direct competition with each other in the
same product lines and markets decide to
merge.
VERTICAL MERGER

 Thisoccurs when a supplier company,

mergers with a company that they supply
goods or services to ie supply and customer
decide to merge. An example of this is a
pizza restaurant chain merging with the
company that supplies them with pizza
bases.
CONGLOMERATION MERGER

 Iftwo companies that do not have a common

business area merge together this is called a
conglomeration.
FORWARD MERGER

Mechanism
Acquirer
 The target merges into the acquirer

Taxability

Merger  Forward merger would be taxable in

the hands of the target since the
same would be considered as asset
sale by the target to the acquirer

Target  Shareholders would be taxable on

the amount distributed at the time of
liquidation of the target
REVERSE MERGER

Acquirer Mechanism

 The acquirer merges into the target

Merger Taxability

 Reverse merger would be treated as

as stock acquisition by the acquirer
since the shareholders of the
acquirer get stock in the target
Target