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Mergers, Acquisition, take over Amalgamation &

Consolidation
1. One plus one makes three: this equation is the special alchemy of a
merger or an acquisition. The key principle behind buying a
company is to create shareholder value over and above that of the
sum of the two companies. Two companies together are more
valuable than two separate companies - at least, that's the
reasoning behind M&A with a desire to have an edge over
competitors.
2. Mergers, acquisitions, takeovers, and amalgamations have become
essential components of business restructuring. The process brings
separate companies together to form a larger enterprise and
increase economies of scale.
3. Absorption is a condition in which two or more companies come
together to perform operations in an existing company whereas in
case of consolidation, companies come together and create a
completely new entity for their combined operations.
Merger
Merger is defined as combination of two or more companies into a
single company where one survives and the other lose their
corporate existence. The survivor acquires all the assets as well as
liabilities of the merged company or companies. Generally, the
surviving company is the buyer, which retains its identity, and the
extinguished company is the seller.
Forms of Integration
Statutory merger
The acquiring company acquires all of the target’s assets and
liabilities. As a result, the target company ceases to exist as a
separate entity.
Subsidiary merger
The target company becomes a subsidiary of the purchaser.
Consolidation
Both companies cease to exist in their prior form, and they come
together to form a completely new company.
Acquisitions
1. A corporate action in which a company buys most, if not all, of the
target company’s ownership stakes in order to assume control of
the target firm.
2. Acquisitions are often paid in cash, the acquiring company’s stock
or a combination of both.

3. Acquisitions can be either friendly or hostile. Friendly acquisitions
occur when the target firm expresses its agreement to be acquired,
whereas hostile acquisitions don’t have the same agreement from
the target firm and the acquiring firm needs to actively purchase
large stakes of the target company in order to have a majority
stake.
4. In either case, the acquiring company often offers a premium on
the market price of the target company’s shares in order to entice
shareholders to sell.
Takeover
In business, a takeover is the purchase of one company (the target) by
another (the acquirer, or bidder).
Friendly takeovers
Before a bidder makes an offer for another company, it usually first
informs that company’s board of directors. If the board feels that
accepting the offer serves shareholders better than rejecting it, it
recommends the offer be accepted by the shareholders.
Hostile takeovers
A hostile takeover allows a suitor to bypass a target company’s
management unwilling to agree to a merger or takeover. A takeover is
considered “hostile” if the target company’s board rejects the offer,
but the bidder continues to pursue it, or the bidder makes the offer
without informing the target company’s board beforehand. A hostile
takeover can be conducted in several ways. A tender offer can be
made where the acquiring company makes a public offer at a fixed
price above the current market price. An acquiring company can also
engage in a proxy fight, whereby it tries to persuade enough
shareholders, usually a simple majority, to replace the management
with a new one which will approve the takeover. Another method
involves quietly purchasing enough stock on the open market, known
as a creeping tender offer, to effect a change in management. In all of
these ways, management resists the acquisition but in is carried out
anyway.
Reverse takeovers
A reverse takeover is a type of takeover where a private company
acquires a public company. This is usually done at the instigation of
the larger, private company, the purpose being for the private
company to effectively float itself while avoiding some of the expense
and time involved in a conventional IPO.