Mergers and takeover

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Mergers and takeover

In a general sense, mergers and takeovers or acquisitions are very similar corporate actions - they combine two previously separate firms into a single legal entity.

Significant operational advantages can be obtained when two firms are combined and, in fact, the goal of most mergers and acquisitions is to improve company performance and shareholder value over the long-term.

The motivation to pursue a merger or acquisition can be considerable; a company that combines itself with another can experience boosted economies of scalegreater sales revenue and market share in its market, broadened diversification and increased tax efficiency.

However, the underlying business rationale and financing methodology for mergers and takeovers are substantially different.

A merger involves the mutual decision of two companies to combine and become one entity; it can be seen as a decision made by two "equals". The combined business, through structural and operational advantages secured by the merger, can cut costs and increase profits, boosting shareholder values for both groups of shareholders.

A typical merger, in other words, involves two relatively equal companies, which combine to become one legal entity with the goal of producing a company that is worth more than the sum of its parts.

In a merger of two corporations, the shareholders usually have their shares in the old company exchanged for an equal number of shares in the merged entity. For example, back inAmerican Automaker, Chrysler Corp.

This has all the makings of a merger of equals as the chairmen in both organizations became joint-leaders in the new organization. The merger was thought to be quite beneficial to both companies as it gave Chrysler an opportunity to reach more European markets and Daimler Benz would gain a greater presense in North America.

A takeover, or acquisition, on the other hand, is characterized by the purchase of a smaller company by a much larger one.

Notes to editors

This combination of "unequals" can produce the same benefits as a merger, but it does not necessarily have to be a mutual decision. A larger company can initiate a hostile takeover of a smaller firm, which essentially amounts to buying the company in the face of resistance from the smaller company's management.

Mergers and takeover

Unlike in a merger, in an acquisition, the acquiring firm usually offers a cash price per share to the target firm's shareholders or the acquiring firm's share's to the shareholders of the target firm according to a specified conversion ratio. Either way, the purchasing company essentially finances the purchase of the target company, buying it outright for its shareholders.

In this case, this takeover was friendly, as Pixar's shareholders all approved the decision to be acquired. Target companies can employ a number of tactics to defend themselves against an unwanted hostile takeoverssuch as including covenants in their bond issues that force early debt repayment at premium prices if the firm is taken over.Mergers and Acquisitions.

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Mergers and takeover

Send it to Jeff Redd, WoodWire editor, . The Takeover Stock Report (TSR) is brought to you in live time throughout each trading day by Stewart Henry, LLC.

Since , TSR's attorney-editors have provided a unique blend of pertinent facts, industry research, legal analysis, and regulatory insight into the arena of publicly-traded companies involved in mergers and acquisitions.

Takeovers and acquisitions are common occurrences in the business world. In some cases, the terms takeover and acquisition are used interchangeably, but each has a slightly different connotation. Mergers and acquisitions (M&A) is a general term that refers to the consolidation of companies or assets through various types of financial transactions.

Securities Attorneys at Legal & Compliance, LLC- Securities Attorneys, Going Public Attorneys, OTC Markets Attorneys, Reverse Merger Attorneys and S Sep 07,  · The following are mergers under review by the European Commission and a brief guide to the EU merger process: APPROVALS AND WITHDRAWALS -- International Flavors & Fragrances Inc to acquire Israeli.

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