The Key Differences Between Mergers and Acquisitions
Mergers and acquisitions can be a great way for companies to grow and become more successful. However, it is important to understand the key differences between these two types of transactions before embarking on either one.
There are a few key differences between mergers and acquisitions. First, in a merger, both companies join together to form a new company.
In an acquisition, on the other hand, one company buys another company and then absorbs it into its own operations.
Another key difference between mergers and acquisitions is how they are structured.
What is a Merger?
In a merger, both companies join together to form a new company. This is usually done in order to pool resources and create synergies that will help the new company be more successful than either of the two individual companies could have been on their own.
What is a Acquisition?
In an acquisition, one company buys another company and then absorbs it into its own operations. The main goal of an acquisition is usually to gain access to new customers, new markets, or new technology.
How are mergers and acquisitions structured?
Most mergers and acquisitions are structured as either stock transactions or asset purchases. In a stock transaction, the buyer acquires the target company’s stock from its shareholders. In an asset purchase, the buyer acquires the target company’s assets from the company itself. The choice of structure depends on a number of factors, including tax considerations, regulatory requirements, and the desires of the buyer and seller.
The choice of structure also has implications for the negotiation of the deal. In a stock transaction, the key issue is usually price, since the shareholders are selling their shares. In an asset purchase, there are a number of other issues to be negotiated, such as which assets will be included in the sale and how liabilities will be handled.
Ultimately, the structure of a merger or acquisition is something that should be determined by experienced legal and financial advisers. The decision should be based on a careful consideration of all the relevant factors, including the objectives of the buyer and seller, the tax consequences, and any regulatory requirements.
How are mergers and acquisitions financed?
In a merger, both companies typically contribute their own resources to finance the new company. In an acquisition, the acquiring company usually pays for the target company using its own resources, or it may take out loans to finance the purchase.
Mergers and acquisitions can be financed in several ways: all cash, all stock, or a combination thereof.
- In an all-cash deal, the buyer pays for the entire purchase price with cash on hand or cash generated from financing sources such as loans or bonds.
- In an all-stock deal, the buyer pays for the entire purchase price with shares of its own common stock.
- In a mixed deal, the buyer finances part of the purchase price with cash and pays the remainder with stock.
Shahara works with privately held buyers and sellers in all aspects of M & A transactions including Stock and Asset purchases, Joint ventures, Strategic Alliances, and Mergers. Click here to learn more about how The Wright Firm can represent your business in the merger or acquisition process, click here.
Related posts:
- Why Do Businesses Merge or Acquire Other Businesses?
- Why a Business Attorney is a MUST During Mergers & Acquisitions
