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INTRODUCTION TO MERGER AND ACQUISITION OF BANKING SECTOR MERGERS A merger occurs when two or more companies combines and the resulting firmmaintains the identity of one of the firms. One or more companies may merger withan existing company or they may merge to form a new company.Usually the assets and liabilities of the smaller firms are merged into those of larger firms. Merger may take two forms1.Merger through absorption2.Merger through c onsolidation. Absorption Absorption is a combination of two or more companies into an existing company. Allcompanies except one loose their identify in a merger through absorption. Consolidation A consolidation is a combination if two or more combines into a new company. Inthis form of merger all companies are legally dissolved and a new entity is created. Inconsolidation the acquired company transfers its assets, liabilities and share of the a cquiring company for cash or exchange of assets. ACQUISITION A fundamental characteristic of merger is that the acquiring company takes over theownership of other companies and combines their operations with its own operations.An acquisition may be defined as an act of acquiring effective control by onecompany over the assets or management of another company without anycombination of companies. TAKEOVER A takeover may also be defined as obtaining control over management of a company by another company. 1.1 DISTINCTION BETWEEN MERGERS ANDACQUISITIONS OF BANKS