What is a Merger & Acquisition?
Mergers and acquisitions (M&A) occur when corporations want to grow and expand their operations or market share without the risk and difficulty of internally developing the necessary business systems and infrastructure to do so. It is often quicker, simpler and cheaper to simply acquire or merge with an existing corporation in order to grow.
A merger is when two companies combine to form one new, larger corporation. An acquisition is when one corporation chooses to purchase and acquire another business by either blending it in with its existing corporate structure or by forming a new corporation that maintains some of the acquired business’s brand identify.
These terms are often made mention of in the daily news and business reports as they are a common and highly visible activity for large corporations to take part in. Mergers & acquisitions can have a significant impact on public daily life since they may affect how a company is managed, the products it offers, as well as the level of service it provides its customers.
Mergers and acquisitions can be quite complex depending on the mix of compensation that is being offered. They can be a purely cash deal, an exchange of securities or stock, as well as a combination of the two. Other financial instruments, such as mezzanine debt, may also play a roll.