Why Mergers and Acquisitions Matter

Judge judith k. fitzgerald

In the world of modern business in America, companies are consistently vying for relevance in the arenas in which they are playing. A company might start off with a big idea and begin with a bang. Then, after growing to a place where it can no longer exist on its own, that company might need to merge with another. It also might choose to be acquired by a company much larger, with the resources to be able to accomplish the vision that the original company first had in mind.

Mergers and acquisitions is a general term that refers to the coming together of two companies. Mergers and acquisitions is a relatively broad term referring to and including such things as consolidations, tender offers, a purchase of assets and even management acquisitions. Whatever the case may be, mergers and acquisitions involve two companies, and these cases are handled, more often than not, by a legal team who specialize in this area of law practice.

When it comes to mergers and acquisitions, the two terms are often used together in conversation as though they are almost identical. This, however, is not the case. In a merger, the company that is being acquired will cease to exist after the merger is complete and become a part of the acquiring company. This might take place because of bankruptcy issues that can be taking care of by a merger. Instead of filing for bankruptcy, a merger might be a better option.

An acquisition is an entirely different matter. In an acquisition, the acquiring company takes over a majority stake in the firm being acquired. The name and legal structure of the acquired company are not changed, but they are controlled by the company that has acquired them. What might change after the acquisition could be corporate compliance programs or other internal structures that affect the way day to day business is conducted.

While the practice of mergers and acquisitions happen all the time, the idea of a friendly merger of equals does not happen very frequently. It is not a common occurrence to see two companies that would benefit from combining forces. You will rarely find two companies equally willing to give up control. If this does happen, the stocks of the two companies get released and new stocks are put together under the new name of the combined entity.

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