B E N C H M A R K I N T E R N AT I O N A L
DEFINING MERGERS & ACQUISITIONS
DEFI NI NG MERGERS & AC QUI S I TIONS Mergers and acquisitions describe the consolidation of two or more companies into one entity with the objective of maximising wealth and creating more value. Mergers and acquisitions occur with the aim of creating synergy value, which could be in the form of higher revenues, lower operating costs or lower cost of capital.
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MERGERS
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A merger is when two companies combine to form a single entity. There are several different types of mergers – vertical, which is where the two companies are at different stages of production or different stages of the value chain; horizontal, which is two companies in the same industry; and conglomerate, which is two companies from unrelated industries. Mergers can occur through consolidation or through absorption.
ACQUISITIONS Acquisitions are different to mergers in that one company is purchasing most or all of another company’s shares to gain control
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of it. Purchasing more than half of a company’s stock and other assets allows the buyer to make decisions about these newly acquired assets without the approval of the company’s other shareholders. The acquiring company needs to be resilient enough to adapt to changing business dynamics.
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You can learn more about mergers and acquisitions by visiting the blog of Benchmark International.